LONDON: Stock markets sank on Thursday as more central banks hiked interest rates in efforts to tame runaway inflation, actions that raised fears they could spark recessions.

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

The BoE jacked up its rate by a quarter-point to 1.25 per cent, its fifth straight increase, but it was lower than the Fed’s more aggressive 0.75-percentage-point increase.

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.

The European Central Bank plans to hike rates next month for the first time in a decade.

“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.”

European stock markets closed at their lowest level in three months, with London and Frankfurt shedding more than three percent and Paris falling by 2.4pc.

Wall Street, which had rallied following the Fed’s rate hike on Wednesday, fell sharply on Thursday.

The tech-heavy Nasdaq sank by 4pc in midday trading while the broad-based S&P 500 was off by 3.2pc and the Dow fell 2.4 percent.

Asian markets mostly closed lower. Markets have been pummelled this year as investors fret over consumer prices, which have soared as Russia’s invasion of Ukraine sent energy and food prices through the roof.

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.

Oil prices reversed earlier losses after the United States announced new sanctions on Iran, and as supply concerns remain at the forefront of energy markets.

US crude rose 0.9pc to $116.35 per barrel and Brent rose 0.35pc to $118.9.

Published in Dawn,June 17th, 2022