San Francisco Frontiers - Stocks tank as central banks hike rates

One day after the Federal Reserve's biggest US interest-rate hike in nearly 30 years, the Bank of England raised its main rate to its highest level since the 2009 financial crisis.

The BoE hiked its rate by a quarter-point to 1.25 percent, its fifth straight increase, and warned that British inflation would soar further this year to exceed 11 percent.

The pound sank against the dollar following the announcement, but later recovered.

Adding to the sense of urgency, the Swiss National Bank (SNB) surprised the markets as it unexpectedly hiked rates for the first time since 2007.

"European bourses are tanking on recession fears as central banks act aggressively to tame inflation," City Index analyst Fiona Cincotta told AFP.

"While the move by the Fed was priced in, the SNB's hike was a shock that caught investors off guard. Harder and faster rate hikes from central banks mean that a recession will be hard to avoid."

Briefing.com analyst Patrick O'Hare said the SNB's move "reportedly got the market all worked up, but let's be clear, this particular move isn't the problem. The problem is that it is another example of a hawkish-minded monetary policy shift to fight inflation that isn't the exclusive domain of the Federal Reserve."

Frankfurt's DAX index and London's FTSE 100 were both down more than three percent in afternoon trades, while the Paris CAC 40 shed 2.6 percent.

Wall Street opened sharply lower, with the Dow, the broad-based S&P 500 and the tech-heavy Nasdaq all falling by more than two percent, a day after closing higher following the Fed's rate hike.

Asian markets mostly closed lower.

Markets have been pummelled this year as soaring consumer prices -- particularly on fallout from the Ukraine conflict -- have forced central banks to tamp up borrowing costs.

That has intensified fear that the world economy, which is still in recovery from the deadly Covid pandemic, could lurch back into a lengthy downturn.

Traders initially tracked Wednesday's strong performance on Wall Street as the US central bank move signalled it is intent on fighting runaway prices, but Fed boss Jerome Powell said such big moves would not be commonplace.

The size of the US rate hike had been expected after data showed inflation in the world's biggest economy at its highest since 1981.

Oil prices extended losses Thursday on demand worries caused by new Covid containment measures in China and news of surging US production.

- Key figures at around 1345 GMT -

New York - Dow: DOWN 2.4 percent at 29,925.81 points

London - FTSE 100: DOWN 3.2 percent at 7,044.60

Frankfurt - DAX: DOWN 3.2 percent at 13,058.47

Paris - CAC 40: DOWN 2.6 percent at 5,873.71

EURO STOXX 50: DOWN 2.9 percent at 3,431.70

Tokyo - Nikkei 225: UP 0.4 percent at 26,431.20 (close)

Hong Kong - Hang Seng Index: DOWN 2.2 percent at 20,845.53 (close)

Shanghai - Composite: DOWN 0.6 percent at 3,285.38 (close)

Euro/dollar: UP at $1.0461 from $1.0444 late Wednesday

Pound/dollar: UP at $1.2259 from $1.2180

Euro/pound: DOWN at 85.32 pence from 85.75 pence

Dollar/yen: DOWN at 132.70 yen from 133.84 yen

Brent North Sea crude: DOWN 1.7 percent at $116.48 per barrel

West Texas Intermediate: DOWN 1.9 percent at $113.12

burs-lth/pvh

M.Powell--SFF