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Global stocks fall amid concerns over interest rate hikes

Global stocks were lower amid growth and interest rates hikes concerns. Photo: Angela Weiss/AFP via Getty
Global stocks were lower amid growth and interest rates hikes concerns. Photo: Angela Weiss/AFP via Getty (ANGELA WEISS via Getty Images)

Global stocks were trading in the red on Monday amid mounting concerns over global growth as most central banks keep raising rates to tame rocketing inflation.

In London, the FTSE 100 (^FTSE) retreated 0.2% in afternoon trade, France's CAC (^FCHI) tipped 1.9% lower and the DAX (^GDAXI) fell 2.3% in Frankfurt.

"While the next leg lower has had several false dawns in recent weeks, the selling across stocks now seems to be really gathering speed," Chris Beauchamp, chief market analyst at online trading platform IG, said. "Instead of some tentative buying, equities have been hit with a wave of fresh selling, as fears about a recession and the persistence of high inflation combine to spark a bout of fresh risk-off moves."

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The general summer lethargy also weighed on sentiment in UK markets, where further monetary tightening is also likely to continue.

Across the Atlantic, Wall Street indices fell as traders watch the Federal Reserve's tightening monetary policy path ahead of this week's Jackson Hole symposium.

Recent comments from central bank officials have put the prospect of more aggressive interest rate hikes into focus. Fed chair Jerome Powell is set to deliver his keynote address on Friday.

The benchmark S&P 500 (^GSPC) lost 77.94 points, or 1.8%, to 4153.54. The tech-heavy Nasdaq (^IXIC) slumped 2.1%, while the Dow Jones (^DJI) declined 1.5% at London's close.

Michael Hewson, chief market analyst at CMC Markets, said: "While inflation in Europe is showing little sign of slowing down, in the US there is some optimism that we may well have seen a short-term peak, after the equivalent US CPI measure saw a sharp decline.

"This optimism did prompt some speculation that this slowdown in inflation could prompt the Federal Reserve to soft pedal on its rate hiking cycle. This comes across as wildly optimistic if some of the recent commentary from senior Fed officials is any guide over the past few weeks, in a sign that perhaps markets don’t truly believe the messaging.

"As such, this week could well be a challenge for market sentiment, where there still seems to be a hard-core cohort who believe the Fed will start cutting rates sometime next year."

Read more: Pound drops amid weak consumer confidence and high public borrowing

Asian stocks were mixed overnight despite the People's Bank of China cutting its one- and five-year lending rates in a surprise move to boost the economy after the yuan slipped to a 23-month low.

"This latest tactic isn’t entirely a surprise, but it should act as a further indicator that the global economic stage is losing light," said Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown.

The Nikkei (^N225) closed down 0.5% in Tokyo, while the Hang Seng (^HSI) edged 0.4% in Hong Kong and the Shanghai Composite (000001.SS) bucked the trend, gaining 0.6%.

Watch: How does inflation affect interest rates?