Markets in the world collapse alarmed by central banks and possible recession

World stock markets slumped on Thursday, most to three-month lows, alarmed by the willfulness of central banks against inflation and the possible recession that could be generated.

European indices closed in the red. The Paris stock market lost 2.39%, Madrid lost 1.18 and Frankfurt, London and Milan each fell more than 3%.

In wall streetthe industry index dow joneswhich lost almost 1,000 points, fell 2.41% and fell below 30,000 points for the first time since January 2021. nasdaqfell 3.08% and the expanded S&P 500 index fell 3.24%.

“It didn’t take long for wall street lose its enthusiasm of yesterday after (the announcements of the fed), as other major central banks are also becoming more aggressive in their own battles against inflation”, analyst Edward Moya of Oanda said in a note.

Following the Fed, the Bank of England also raised its main interest rate on Thursday, but only by 0.25 percentage point, as did the Swiss national bank, surprising investors.

“When people think about the impact of all central banks moving simultaneously” toward general tightening, “they say to themselves, ‘I’ve got profit left, let’s go for it,’ and start selling.”, said Maris Ogg, portfolio manager at Tower Bridge Advisors.

“With the Fed’s balance sheet shrinking (which started in June) and markets expecting another 0.75 percentage point increase at the next Fed meeting‘, operators wonder’if the Fed is wrong” and it is going too fast and too hard with its monetary tightening, commented Quincy Krosby of LPL Financial.

To fight inflation, the Fed on Wednesday announced a hike in its benchmark rates to a range of 1.5-1.75%, the biggest increase since 1994.

The central bank also specified that it anticipates other hikes in its rates in the coming months.

The fact that “the Fed is willing to accept a deterioration in economic conditions” scares investors, observed ActivTrades analyst Pierre Veyret.

With information from AFP