Markets plunge amid Fed rate hike fears as FTSE closes in red
The FTSE 100 and European stocks finished in the red this Friday as a surge in consumer spending and inflation in January across the US sparked concerns that the Federal Reserve will stick to its hawkish stance for longer.
The FTSE 100 (^FTSE) lost 0.36% to close at 7,878 points, while the CAC 40 (^FCHI) in Paris lost 1.44% to 7,212 points. In Germany, the DAX (^GDAXI) retreated 1.45% to 15,251.
Across the pond, US stocks tumbled as the Federal Reserve's most closely watched inflation measure came in stronger than expected, in another sign that price pressures have become sticky into 2023.
The Dow Jones (^DJI) lost 1.16% to 32,770 points. The S&P 500 (^GSPC) tumbled 1.38% to 3,957 points and the tech-heavy NASDAQ (^IXIC) fell 1.90% to 11,369.
Today’s PCE release is bad news for the economy and the labor market. It increases the likelihood of a 50 bp hike in March, a larger and longer decline in business investment, and a larger pullback in hiring. https://t.co/lCMuJXULUV
— Julia Pollak (@juliaonjobs) February 24, 2023
The personal consumption expenditures price index increased 0.6% from a month earlier, the most since June. On an annual basis, the index rose to 5.4% from 5.3%, dashing hopes that price pressures might have eased.
🇺🇸A jolly January for #consumers
🚗Consumer spending +1.8% (strongest since Mar '21)
💵Disposable income +2.0%
⚠️Savings rate 4.7% (+0.2pt)
🔥 Headline: 5.4% y/y (+0.1pt)
🔥Core: 4.7% y/y(+0.1pt) pic.twitter.com/iOCl2grz56
— Gregory Daco (@GregDaco) February 24, 2023
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Back in London, British Airways owner IAG (IAG.L) was the biggest faller, losing 7, despite saying it swung to a full-year profit as international travel recovered from the COVID pandemic.
Outside the FTSE 100, Cineworld (CINE.L) shares nosedived 38% as equity holders face wipeout.
Read more: Consumer confidence makes surprise rebound amid cost of living crisis
The world’s second-largest cinema chain said that it had been approached by “a number” of potential suitors, but none of them had been willing to pay in cash to buy the whole business.
Meanwhile, Brent crude (BZ=F) slipped and was trading at around $82/barrel despite anticipated supply constraints as Russia prepares to cut production in March.
In Asia, Tokyo’s Nikkei 225 (^N225) rose 1.29% to 27,543 points, while the Hang Seng (^HSI) in Hong Kong lost 1.63% to 20,020. The Shanghai Composite (000001.SS) slipped 0.62% to 3,267 points.
Watch: Market doesn’t ‘really have a sense of itself’ amid Fed rate hikes, strategist says
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