Closing summary
European stock markets are sliding, as investors digest the prospects of more aggressive rate hikes in the US and Europe, following comments from US Fed chair Jerome Powell and European Central Bank officials yesterday. Eurozone growth unexpectedly picked up in April while prices rose at a record rate, according to business surveys from S&P Global published today.
In London, the FTSE 100 index is down nearly 0.9% at 7,560, a 67 point loss, while the German, French and Italian markets have lost between 1.7% (Italy) and 1.9% (German). On Wall Street, the Dow Jones fell 350 points, or 1%, at the open, while the Nasdaq slipped 0.16% and the S&P 500 fell 0.75%.
The pound has tumbled to an 18-month low of 1.14% to $1.2878 against the dollar, and is down 1.06% to €1.1891 versus the euro. A sharp drop in British retail sales showed the impact of the cost of living crisis, driven by surging fuel and food prices.
Coupled with weaker PMI data for April and a slump in UK consumer confidence, the figures have led to expectations that the Bank of England will raise interest rates less aggressively.
Oil prices have fallen again, amid expectations of lower demand as the IMF slashed growth forecasts this week. Brent crude is down 1.4% to $106.73 a barrel while US light crude fell 1.7% to $102.08 a barrel.
The European Commission has urged citizens to drive less, turn their heating and air conditioning down and work from home three days a week, to reduce reliance on Russian oil and gas – and save households close to €500 on average.
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Thank you for reading. Have a lovely weekend! We’ll be back next week. – JK
Chris Williamson, chief business economist at S&P Global said:
Although still indicative of annualised GDP growth of approximately 3%, the April PMI surveys point to the upturn losing some momentum compared to the strong rebound seen in March, when services activity in particular had been buoyed by loosened pandemic restrictions in the US and abroad.
Many businesses continue to report a tailwind of pent up demand from the pandemic, but companies are also facing mounting challenges from rising inflation and the cost of living squeeze, as well as persistent supply chain delays and labor constraints.
These headwinds, plus increased concerns over the economic outlook and tightening monetary policy, meant business confidence about the outlook slipped sharply lower in April. However, with the overall pace of economic growth and hiring remaining relatively solid, for now the focus from a policy perspective is likely to remain firmly on the need to rein in the record high inflationary pressures signalled by the survey.
