European and Asian markets rallied on Thursday after Wall Street suffered its worst-ever battering in two years amid fears of a recession after decades of high inflation.
Rising interest rates, rising energy prices, the China Lockdown, and the war in Ukraine have raised concerns about consumer resilience, reports of downcast earnings from retailers.
“Inflation is rising and profit margins are hurting. Soon, however, those higher costs will continue and consumers will stop saving and be more cautious about their spending,” said Craig Erlam, senior market analyst. At OANDA
“The question is, are we going to see a recession or a recession,” he said.
Top European and Asian stock indices closed in red.
On Wall Street, the Dow was lower in late morning trading but both the broader S&P 500 and the tech-heavy Nasdaq composite were higher.
Shares of Chinese tech giants sank after Tencent reported insufficient profits, raising widespread concerns about China’s economic outlook.
One day after posting its lowest earnings gain since going public in 2004, shares of Tencent plunged more than eight percent in initial business before making a slight loss.
Among other tech titans, Alibaba has dropped more than six percent.
As three major U.S. indices dived on Wall Street on Wednesday, the Dow plunged more than 1,150 points, or 3.6 percent.
Nasdaq closed 4.7 percent higher.
“Consumer confidence is likely to decline further as earnings decline. The sharp fall in retailer shares – Target and Walmart – and others such as Amazon and Apple we saw on Wednesday certainly point to this trend,” said Fawad Razakzada, Market City Index and FOREX. .com analyst.
“Inflation will not be significantly easier soon, at a time when the economic outlook is looking bleak.”
Michael Hewson, chief market analyst at CMC Markets, said concerns over the resilience of the US economy continued to grow over the rest of the year, with the US dollar also suffering from lower yields.
In his most scathing remarks to date, Federal Reserve Chairman Jerome Powell said this week that the US Federal Reserve would raise interest rates until it had “clear and credible” evidence that inflation was receding.
But higher borrowing costs increase debt, putting more pressure on consumers and businesses.
The United States, like Britain, is facing the fastest inflation in four decades, prompting the Bank of England to raise interest rates.
(Except for the title, this story was not edited by NDTV staff and was published from a syndicated feed.)