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Global shares fall on inflation, central bank moves

Economy Mar 10, 2022 08:03PM ET
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2/2 © Reuters. FILE PHOTO: A customer hands over Russian rouble banknotes and coins to a vendor at a market in Omsk, Russia February 18, 2022. REUTERS/Alexey Malgavko 2/2

By Elizabeth Dilts Marshall

NEW YORK (Reuters) - Global share markets slid on Thursday as U.S. inflation hit almost 8%, making it almost certain the U.S. Federal Reserve will raise interest rates next week, and the European Central Bank sped up the end of its massive stimulus program.

Data showed U.S. consumer inflation running at a 7.9% annualized clip in February, the largest annual increase in 40 years.

Wall Street fell on the data because, while markets expect the central bank to raise the Fed funds target rate by 25 basis points at the conclusion of next week's monetary policy meeting, the CPI data suggested the FOMC could move "more aggressively" to curb inflation, as promised by Fed Chair Jerome Powell last week.

The ECB earlier in the session said it will stop pumping money into financial markets this summer, paving the way for an increase in interest rates as soaring inflation outweighs concerns about the fallout from Russia's invasion of Ukraine.

Talks between Ukraine and Russia on Thursday failed to bring any respite in the conflict, which has trapped hundreds of thousands of civilians in Ukrainian cities sheltering amid Russian air raids and shelling.

The euro retreated from overnight gains following the ECB announcement, and the dollar strengthened on the U.S. inflation report. The benchmark U.S. 10-year Treasury yield rose above 2% for the first time in two weeks.

Melissa Brown, managing director of applied research at Qontigo, said that some inflation can be beneficial to stock prices, but central banks have their work cut out for them managing inflation that is at multi-decade highs.

"We've reached that tipping point between good inflation and bad inflation. It is driving volatility higher, and the higher volatility typically drives away investors," Brown said.

"Sentiment is very uncertain. Now that we are where we are, can (central bankers) tread that fine line between managing inflation and not pushing us into recession?"

MSCI's gauge of stocks across the globe shed 0.19% at 5:12 p.m. EST (2212 GMT).

The Dow Jones Industrial Average fell 112.18 points, or 0.34%, to 33,174.07, the S&P 500 lost 18.36 points, or 0.43%, to 4,259.52 and the Nasdaq Composite dropped 125.58 points, or 0.95%, to 13,129.96.

The pan-European STOXX 600 index lost 1.69%.

The dollar index rose 0.554%, with the euro up 0.04% to $1.0987.

The yield on 10-year Treasury notes was up 6.3 basis points to 2.011% after hitting 2.021%, its highest level since Feb. 17.

Veneta Dimitrova, senior U.S. economist at Ned Davis Research, said that with the sharp rises in energy and other commodity markets due to the war in Ukraine, it will most likely take longer to reach peak inflation.

"This means higher inflation for longer and a treacherous policy path for the Fed ahead," Dimitrova, adding she expects the Fed to proceed with a 25-basis point interest rate increase next week.

"With all the geopolitical uncertainty and market volatility out there, the Fed doesn’t want to add to the uncertainty."

Oil fell in volatile trading after the United Arab Emirates backtracked on statements saying OPEC and its allies might increase output to help to plug the gap in exports from Russia. [O/R]

U.S. crude oil futures settled at $106.02 a barrel, down 2.47%, while the international benchmark Brent settled at $109.33, down 1.63%.

European Union leaders will phase out buying Russian oil, gas and coal, a draft declaration showed on Thursday, as the bloc seeks to reduce its reliance on Russian sources of energy, following a ban from the United States.

Global shares fall on inflation, central bank moves
 

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Comments (16)
Marco cuevas
Marco cuevas Mar 10, 2022 4:14PM ET
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Why cant the title ever be...,"short sellers take profit as inflation rises"
ferhad issa
ferhad issa Mar 10, 2022 10:43AM ET
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what about the crypto Dollar? it will be a solution to the inflation? thx
Tre Hsi
Tre Hsi Mar 10, 2022 10:43AM ET
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really, you think a "currency" that can fluctuate 5%+ on a daily basis is a solution to inflation?
Chad Richer Than You
Chad Richer Than You Mar 10, 2022 9:17AM ET
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Fake Chads are dead
Marco cuevas
Marco cuevas Mar 10, 2022 9:03AM ET
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Pathetic stop buying amazon you'll be sorry the stock basnt moved in 2 years!! What makes youbguys thinkbthis stock.split will move it wait till it splits thisbmarket sucs.
Kochar Bipin
Kochar Bipin Mar 10, 2022 5:58AM ET
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The Normandy format should be followed for the talks - with France and Germany making formal commitments instead of just assurances which were earlier provided by US Presidents (which were never honored by their successors).
jason xx
jason xx Mar 10, 2022 5:51AM ET
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If the United States and Nato showed even the tiniest bit of backbone and stood up to puketin instead of being petrified, the markets would skyrocket
gab nea
gab nea Mar 10, 2022 4:26AM ET
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putin and underling Lavrov's reputations are in the loo. another peacekeeping meeting sounds like a Turkey to me. just words!
Ken Roth
Ken Roth Mar 10, 2022 3:35AM ET
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So russian trolls and Z fans believe that you can invade any country you want, bomb their cities and remove children and civilians from earth and there are no consequences…..I dont think so. We are happy that we have frozen russian fortuned to pay for reconstruction of Ukraine. Unfortunately we cannot save the children and civilian that already dead
Nils Hullmann
Nils Hullmann Mar 10, 2022 3:35AM ET
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Putin enjoys 850 brand new MC Donalds Stores....
jason xx
jason xx Mar 10, 2022 3:35AM ET
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Russian media doesn't exist
Tre Hsi
Tre Hsi Mar 10, 2022 3:35AM ET
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Nils Hullmann  "Putin enjoys 850 brand new MC Donalds Stores...."   -  that's OK, McDonald would just take their compensation from the $300bn russian foreign reserve now stuck in western banks
Ken Roth
Ken Roth Mar 10, 2022 1:43AM ET
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All the russian money frozen in western banks will be used to repair Ukraine cities when war is over
Dave Jones
Dave Jones Mar 10, 2022 1:34AM ET
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Everything is awesome again!
John Thompson
John Thompson Mar 10, 2022 1:34AM ET
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Especially the price of a bottle of vodka hahaha
 
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