London, Jan 24 (AFP/APP): Global stock markets fell sharply on Monday, spooked by geopolitical tensions in Ukraine and looming interest rate hikes in the United States, traders said.
By the close of trade in Europe, London stocks were down by around 2.6 percent and the losses were even deeper in the eurozone, with Frankfurt and Paris each shedding nearly four percent.
Across the Atlantic, Wall Street was also down sharply, with the Dow Jones Industrial Average losing 2.4 percent and the tech-heavy Nasdaq more than three percent.
Geopolitical concerns surrounding Russia’s military build-up on the Ukraine border weighed on sentiment.
Investors are also bracing for the conclusion of a US Federal Reserve policy meeting on Wednesday, with the central bank expected to tighten its monetary policy to tame runaway inflation.
“It could be a make-or-break week for the markets, with the Fed meeting on Wednesday, big tech earnings, and ongoing tensions on the Ukraine/Russia border,” said OANDA analyst Craig Erlam.
“The Fed needs to strike the right balance between taking inflation seriously and not wanting to cause further unnecessary turmoil in the markets,” the expert said.
“It promises to be a really interesting week in the markets and one that could go terribly wrong or be the turning point.”
“The trend is clearly negative… investors have realised that the era of zero-interest rate policy is coming to an end faster because inflation is soaring,” said Fawad Razaqzada, analyst at ThinkMarkets.
“On Wednesday, the Fed is widely expected to provide the clearest signal yet that the first rate hike since 2018 will be coming our way in March.”
Furthermore, “tensions around Ukraine and a relatively poor start to the US fourth-quarter reporting season have not helped sentiment whatsoever.”
Tensions have soared over Russia’s deployment of some 100,000 troops and heavy armour at Ukraine’s borders, despite the Kremlin’s insistence it is not planning a new incursion.
Russia’s stock market and ruble plunged as tensions mount, prompting the central bank to suspend purchases of foreign currency to reduce volatility on financial markets.
– Fed turns hawkish –
Investors are fretting about the end of the ultra-loose monetary policies put in place by central banks in early 2020 to cushion the impact of Covid-19 containment measures.
The Fed has taken a hawkish tone as it becomes increasingly concerned about inflation, which is sitting at a four-decade high.
Commentators have tipped the first increase in borrowing costs in March followed by another three hikes before the end of the year, and the Fed is also forecast to start running down its vast bond holdings that have helped keep rates down.
Wall Street had already taken a battering on Friday, pulled down by a plunge in Netflix shares.
Tech firms — which soared on the back of the pandemic — led the retreat after weak subscriber figures from Netflix fuelled concerns that the end of lockdowns and reopening of economies is seeing consumers changing their spending habits.
– Key figures around 1700 GMT –
New York – Dow: DOWN 2.4 percent at 33,451.32 points
London – FTSE 100: DOWN 2.6 percent at 7,297.15 (close)
Paris – CAC 40: DOWN 3.9 percent at 6,787.79 (close)
Frankfurt – DAX: DOWN 3.8 percent at 15,011.13 (close)
EURO STOXX 50: DOWN 4.1 percent at 4,054.36
Hong Kong – Hang Seng Index: DOWN 1.2 percent at 24,656.46 (close)
Euro/dollar: DOWN at $1.1315 from $1.1344 late Friday
Pound/dollar: DOWN at $1.3446 from $1.3553
Euro/pound: UP at 84.12 pence from 83.70 pence
Dollar/yen: UP at 113.80 yen from 113.68 yen
Brent North Sea crude: DOWN 2.7 percent at $85.49 per barrel
West Texas Intermediate: DOWN 3.0 percent at $82.51 per barrel
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