San Francisco Frontiers - Stock markets fall as central banks hike rates

The Bank of England and its peers in Switzerland and Norway further tightened their monetary policies, a week after the European Central Bank did the same.

Turkey's central bank, which for two years had followed President Recep Tayyip Erdogan's unorthodox policy of dealing with high inflation by cutting rates, changed course and nearly doubled its rate to 15 percent.

A day after data showed UK inflation remained at 8.7 percent in May, the Bank of England raised its key rate for a 13th consecutive time.

The hefty half-point increase brought the rate to five percent -- a 15-year high.

The size of the increase "has confounded market expectations", said CMC Markets UK analyst Michael Hewson.

"Today's move is tantamount to an acknowledgement that they have been materially behind the curve when it comes to the rate hiking cycle and will inevitably invite criticism that the MPC (monetary policy committee) in reacting now, is inviting a recession," he added.

Norway's central bank also chose a half-point increase, raising the rate to 3.75 percent as inflation was "markedly higher" than expected.

The Swiss central bank increased its rate by a quarter-point to 1.75 percent and warned of possibly more to come as inflationary pressure has increased.

Wall Street opened lower, though the tech-rich Nasdaq edged higher in early deals, while European stock markets were down in afternoon trades.

Markets had already reacted negatively to comments Wednesday from Federal Reserve chief Jerome Powell, who warned Congress that more rate hikes "may make sense" after the US central bank kept them unchanged last week.

Last week's pause, the first since March, had raised hopes that the Fed was close to calling it a day altogether, thanks to slowing price rises and a softer jobs market.

The expected increase in US rates has revived worries the economy will tip into recession.

While the Fed paused rate hikes last week, the European Central Bank joined Canada and Australia in hiking borrowing costs further.

Traders have also been worried about the health of China's post-Covid economic recovery and the response of policymakers.

The Chinese central bank slashed rates last week in efforts to kickstart the economy but a reduction of its main benchmark rate this week disappointed as it was smaller than expected.

The failure of Beijing to unveil any concrete policies to boost the stuttering economy has fed fears that the recovery from a Covid lockdown-induced slowdown has already come to an end.

- Key figures around 1355 GMT -

New York - Dow: DOWN 0.1 percent at 33,922.12 points

London - FTSE 100: DOWN 1.0 percent at 7,486.34 points

Frankfurt - DAX: DOWN 0.5 percent at 15,947.33

Paris - CAC 40: DOWN 0.9 percent at 7,194.40

EURO STOXX 50: DOWN 0.7 percent at 4,293.81

Tokyo - Nikkei 225: DOWN 0.9 percent at 33,264.88 (close)

Hong Kong - Hang Seng Index: Closed for holiday

Shanghai - Composite: Closed for holiday

Euro/dollar: DOWN at $1.0984 from $1.0990 on Wednesday

Pound/dollar: DOWN at $1.2761 from $1.2766

Dollar/yen: UP at 142.29 from 141.87 yen

Euro/pound: UP at 86.09 pence from 86.07 pence

West Texas Intermediate: DOWN 3.2 percent at $70.21 per barrel

Brent North Sea crude: DOWN 2.9 percent at $74.87 per barrel

burs-lth/jj

T.Martin--SFF