World stock markets retreat, with eyes on central banks

LONDON — Global stock markets retreated Wednesday as traders digested stubbornly high UK inflation and mulled central bank moves in the fight against rampant consumer prices.

London's benchmark FTSE 100 index slid after official data stoked expectations of another interest-rate hike from the Bank of England (BoE) that could weigh further on the economy.

Britain's annual CPI inflation rate slowed in March but held above 10 per cent on soaring food prices, further fuelling a cost-of-living crisis in Britain.

In the eurozone, Frankfurt and Paris lapsed into negative territory after a largely downbeat session in Asia.

World oil prices shed two per cent on fears the US Federal Reserve (Fed) could also hike rates sharply again, in turn denting demand for crude.

Souring the mood 

"Stubbornly high inflation soured the mood," noted Russ Mould, investment director at stockbroker AJ Bell.

"News that UK CPI remains in double-digits will only strengthen the argument for the Bank of England to keep pushing up interest rates."

The BoE has hiked rates 11 times since late 2021 in an unsuccessful bid to keep inflation close to a 2 per cent target.

Higher borrowing costs have exacerbated the UK's cost-of-living crisis, ramped up loans for businesses and consumers alike and dampened activity.

Later on Wednesday, markets will focus on US earnings from electric carmaker Tesla and bank Morgan Stanley.

Wall Street had flatlined on Tuesday, leaving traders to scrutinise mixed earnings from major US lenders.

Analyst Stephen Innes, of SPI Asset Management, said investors were also dwelling on the Fed's outlook.

"Global traders have seemingly moved into defensive mode as the debate goes on whether the Fed is at the top of its hiking cycle," Innes noted.

That debate remained far from settled, with some analysts warning that certain investors' apparent confidence in coming rate cuts was misplaced.

China 

Investors also mulled the health of the Chinese economy, with data Tuesday showing it expanded a forecast-busting 4.5 per cent in January-March.

That was the first quarter it has been unencumbered by growth-sapping zero-COVID restrictions.

The jump was helped by a surge in retail sales in March, but while the readings were healthy, other figures on industrial output and fixed-asset investment came in below par, pointing to an uneven recovery.