Berliner TageBlatt - Wall Street attempts recovery from previous day's rout

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Wall Street attempts recovery from previous day's rout
Wall Street attempts recovery from previous day's rout / Foto: © AFP

Wall Street attempts recovery from previous day's rout

Wall Street stocks made modest gains Wednesday following the previous day's rout on stronger-than-expected US inflation data that sparked fears of a prolonged campaign of Federal Reserve interest rate hikes.

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The US inflation data still pulled European and Asian equities sharply lower, London the heaviest faller in Europe after news that UK inflation had slowed last month but remained close to a 40-year high.

The dollar edged down in choppy trade, as oil prices climbed.

US consumer price inflation (CPI) slowed slightly in August to 8.3 percent on an annual measure, but this trumped market expectations of about eight percent. Prices actually rose on a monthly comparison.

- 'Caught up' -

European markets are "caught up in the negative sentiment that has taken hold across global markets," said Victoria Scholar, head of investment at Interactive Investor.

"Hotter-than-expected US inflation figures prompted heavy selling on Wall Street" on Tuesday, she added, when the blue-chip Dow index tumbled almost four percent.

Global consumer prices have soared for months, exacerbated by Russia's invasion of Ukraine -- which has hiked energy and food costs -- as well as owing to supply chain strains and Covid lockdowns in China.

The Fed has already instituted two consecutive 75-basis-point hikes, and a third such move is widely expected at its meeting next week.

After the latest US inflation data, some investors are even predicting the next Fed hike could be a full percentage point.

Aggressive rate tightening by central banks worldwide is denting economic activity as consumers and businesses face higher loan repayments.

Investors "still appear to be in a state of shock, trying to process how high the Fed will go with its policy rate and how low the economy and earnings growth will go as a result of the restrictive policy," said market analyst Patrick O'Hare at Briefing.com.

In the UK, inflation slowed to 9.9 percent in August but remained almost in double digits.

The news boosted the pound on hopes of another interest rate hike next week from the Bank of England.

"There has been a fresh bout of anxiety on financial markets amid worries that inflation is still proving to be a formidable opponent to take down," said Hargreaves Lansdown analyst Susannah Streeter.

In Asia, Tokyo led the region's losses with the Nikkei plunging 2.8 percent.

Hong Kong stocks closed down more than two percent, with Chinese conglomerate Fosun hit hard by media reports that the group was under regulatory scrutiny.

But after slipping into the red early in the session, Wall Street stocks pushed modestly higher during morning trading on Wednesday.

A dip in US wholesale prices helped boost sentiment.

The drop "suggests that inflation pressures are moderating albeit not as quickly as one would like," said market analyst Michael Hewson at CMC Markets.

- Key figures at around 1330 GMT -

New York - Dow: UP 0.2 percent at 31,163.58 points

EURO STOXX 50: DOWN 0.5 percent at 3,567.56

London - FTSE 100: DOWN 1.5 percent at 7,277.30 (close)

Frankfurt - DAX: DOWN 1.2 percent at 13,028.00 (close)

Paris - CAC 40: DOWN 0.4 percent at 6,222.41 (close)

Tokyo - Nikkei 225: DOWN 2.8 percent at 28,818.62 (close)

Hong Kong - Hang Seng Index: DOWN 2.5 percent at 18,847.10 (close)

Shanghai - Composite: DOWN 0.8 percent at 3,237.54 (close)

Euro/dollar: UP at $0.9993 from $0.9970 late Tuesday

Pound/dollar: UP at $1.1564 from $1.1493

Euro/pound: DOWN at 86.39 pence from 86.75 pence

Dollar/yen: DOWN at 142.77 yen from 144.58 yen

Brent North Sea crude: UP 2.1 percent at $95.10 per barrel

West Texas Intermediate: UP 2.4 percent at $89.42 per barrel

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O.Bulka--BTB