LONDON: Global equities sank further on Wednesday as stronger-than-expected US inflation data sparked fears of a prolonged campaign of Federal Reserve interest rate hikes.

London was the heaviest faller in Europe after news that UK inflation slowed last month but held close to a 40-year high.

Asia tanked after Wall Street took its worst beating in weeks Tuesday on news of hot US inflation.

US stocks opened to the upside, but then dipped into the red. The dollar edged down in choppy trade, while oil prices climbed.

US inflation slowed slightly in August to 8.3 per cent on an annual measure, but this trumped market expectations of about 8pc. Prices actually rose on a monthly comparison. European markets are “caught up in the negative sentiment that has taken hold across global markets,” said Victoria Scholar, head of investment at Interactive Investor.

“Hotter-than-expected US inflation figures prompted heavy selling on Wall Street,” she added.

Global consumer prices have soared for months, exacerbated by Russia’s invasion of Ukraine — which has hiked energy and food costs — as well as owing to supply chain strains and Covid lockdowns in China.

The Fed has already instituted two consecutive 75-basis-point hikes, and a third such move is widely expected at its meeting next week. After the latest US inflation data, some investors are even predicting the next Fed hike could be a full percentage point.

Aggressive rate tightening by central banks worldwide is denting economic activity as consumers and businesses face higher loan repayments.

Published in Dawn, September 15th, 2022