AFP :
World stock markets fell Friday on fears the Federal Reserve will move more aggressively to tighten monetary policy to tame decades-high inflation.
London equities also slid as investors set aside rebounding 2021 economic growth to focus on shrinking December activity in the wake of the Omicron Covid variant.
The UK economy grew by a record 7.5 per cent last year to rebound from the pandemic crash, but shrank by a modest 0.2 per cent in the final month, official data showed.
In the eurozone, Frankfurt and Paris stocks banked lower, mirroring Asia after overnight Wall Street losses.
The euro retreated versus the dollar, while oil prices rose after the International Energy Agency lifted its world oil demand forecast.
“It’s been quite a week for the markets with a shock from US inflation growing faster than expected,” said investment director Russ Mould at stockbroker AJ Bell.
“Now we’ve got confirmation that Omicron tripped up the UK economy in December, albeit by a smaller amount than forecast.”
Wall Street equities tumbled on Thursday as
markets bet that the latest inflation data would spark swift action from the Fed.
The 7.5-per cent jump in US consumer prices last month was the fastest in 40 years and reinforced fears that the central bank is falling behind the curve in keeping it under control.
Sentiment was also hit by remarks from Fed official James Bullard, who said he wanted to see interest rates lifted one percentage point by the start of July.
The St Louis Fed boss said he was in favour of a 50 basis point lift next month-double the usual rise and the first since 2000 — and two more after that.
“I’d like to see 100 basis points in the bag by July 1,” Bullard, who has a vote on policy this year, told Bloomberg News. “I was already more hawkish but I have pulled up dramatically what I think the committee should do.”
He added: “I do not think it is shock and awe.
“I think it is a sensible response to a surprise inflationary shock that we got during 2021 that we did not expect.”
