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WASHINGTON — Global stock markets edged lower on Thursday and oil slid as the safe-haven dollar rose after the latest reading of U.S. inflation at red heightened investor fears of US interest rate hikes. Federal Reserve and a possible recession.

Data on Wednesday showed consumer prices in the United States jumped 9.1% year-on-year in June, from 8.6% in May.

The data was seen as strengthening the case for an aggressive rate hike by the Federal Reserve. Policymakers could consider a 100 basis point hike at the July meeting, Atlanta Federal Reserve Chairman Raphael Bostic said.

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The pan-European STOXX 600 index lost 1.53% and the MSCI gauge of stocks across the world lost 0.82%.

On Wall Street, stock indexes fell on Thursday after weaker-than-expected earnings at major U.S. banks JPMorgan Chase & Co and Morgan Stanley underscored growing fears of a sharp economic slowdown.

The Dow Jones Industrial Average fell 0.46%, the S&P 500 lost 0.30% and the Nasdaq Composite added 0.03%.

Meanwhile, the dollar hit a 20-year high, becoming a favored safe haven amid rising economic risks of late, as gold fell more than 2% to a near low. one year Thursday. The dollar index rose 0.351%, with the euro falling 0.47% to $1.0013.

“The Fed probably needs to temper people’s expectations in terms of what they can do,” said Eddie Cheng, head of international multi-asset investments at Allspring Global Investments.

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“In the last hike cycle, we observed that inflation continued to rise during the hike cycle. … It takes time for monetary policy to affect inflation.

Cheng said riskier assets would be the “collateral damage” of the Fed’s attempts to rein in inflation.

JPMorgan Chase, the largest bank in the United States, reported lower second-quarter profits. Managing Director Jamie Dimon warned that geopolitical tensions, high inflation, declining consumer confidence, unprecedented quantitative tightening and war in Ukraine “are very likely to have negative consequences for the global economy. at one point”.

“There has been an irrational response to results from JPMorgan and Morgan Stanley,” said Jay Hatfield, managing director and portfolio manager at InfraCap in New York. “It was no surprise that investment banking was weak.

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“JPMorgan has warned that there is uncertainty in the market, but if you are alive and breathing you know there is uncertainty in the market.”

Slowdown fears were heightened as the Labor Department’s Producer Price Index report echoed Wednesday’s Consumer Price Index data, showing higher-than-expected inflation in June.

The pound fell 0.5% to $1.1832. In the first vote to choose who will succeed Boris Johnson as leader of the Conservative Party, former finance minister Rishi Sunak won the strongest backing from Tory lawmakers.

The euro fell 0.5% to $1.001, after slipping below parity on Wednesday for the first time since 2002.

The euro has been under pressure due to the European Central Bank delaying the Fed in ending its ultra-loose monetary policy of the past decade, as well as economic risks from the euro zone’s reliance on Russian gas. .

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The European Commission has revised downwards its forecast for economic growth in the euro zone for this year and revised upwards its inflation estimates.

Italian yields rose sharply ahead of a parliamentary confidence vote that risks bringing down the country’s government.

The yield on 10-year Treasury bills rose 5.5 basis points to 2.961%. The 2-year, 10-year portion of the Treasury yield curve is the most inverted it has ever been at any point in this cycle, according to Deutsche Bank.

An inverted yield curve – that is, when short-term interest rates are higher than longer-term ones – is generally seen as an indicator that markets are anticipating a recession.

The two-year US Treasury yield, which generally moves in line with interest rate expectations, fell 1 basis point to 3.134%.

Oil prices fell as traders saw a sharp rise in US rates eventually reduce demand for crude.

U.S. crude fell 0.07% to $96.23 a barrel and Brent to $99.63, up 0.06% on the day.

Overnight, the Monetary Authority of Singapore and the Central Bank of the Philippines surprised markets by tightening monetary policy in off-cycle moves.

(Reporting by Katanga Johnson in Washington and Elizabeth Howcroft in London Editing by Tomasz Janowski/Kirsten Donovan/Jonathan Oatis/Ken Ferris)



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