Wall Street, European stocks, and the FTSE 100 (^FTSE) were all lower on Thursday as investors digested the impact of the latest interest rate hikes by the European Central Bank (ECB) and US Federal Reserve.
The ECB raised its benchmark interest rate by 25 basis points to fight inflation. It follows the Fed raising its federal funds rate by 25 basis points on Wednesday, which was widely expected. It marks the 10th increase in borrowing costs since March 2022 – and the highest level since September 2007.
FTSE 100 and European stocks
The ECB's latest rates decision comes after data released this week showed that inflation in the euro area rose slightly to 7% in April, but core inflation – which excludes food, fuel, tobacco and alcohol – slowed to 5.6% from 5.7%.
FTSE 100 stocks
Shell reported net profit of $9.65bn (£7.68bn), topping analysts' forecasts, as a result of strong earnings from fuel trading and higher liquefied natural gas (LNG) sales, which offset cooling energy prices.
Next, meanwhile, maintained its guidance for annual profit in a trading update – after reporting a smaller decline in first-quarter sales of 0.7%, rather than the 2% fall it had expected, in the 13 weeks to 29 April.
The fashion retailer expects full year pre-tax profit to be £795m and earnings per share of 501.9p.
US and Asia markets
Meanwhile, in the US, stocks opened in the red as traders considered the impact of the Federal Reserve interest rates announcement.
Chairman Jerome Powell reiterated that US inflation is still high, and said the odds for avoiding a recession seem greater than those for entering a recession.
“US interest rates now stand at a 16-year high after the Fed raised rates ten times in the last year and two months. While inflation in the United States has been coming down with CPI at 5% in the latest data for March, falling for nine consecutive months, it is still significantly above the Fed’s 2% target. Although some have started to question whether this target is somewhat arbitrary,” Victoria Scholar, head of investment at Interactive investor, commented.
In Asia, the major markets were all trading in the green.
Tokyo’s Nikkei 225 (^N225) gained 0.12% to 29,157.95 points, while the Hang Seng (^HSI) in Hong Kong rose 1.01% to 19,897.44. In mainland China, the Shanghai Composite (000001.SS) was also in the green, rising 0.80% to 3,349.99 points.
Meanwhile, crude prices gained on Thursday in early London trade.
“We saw serious selling pressure yesterday as both crude and Brent oil prices dropped significantly. Traders are worried that the biggest economy in the world, the US, is heading towards an economic crisis, and it is highly likely that we will see oil demand easing off,” Naeem Aslam, chief investment officer, Zaye Capital Markets, said.
Investors are also waiting for more quarterly earnings reports to be published, with Apple's set to be released after the US market closes later.
Analysts expect Apple to report revenue of $92.6bn (£73.64bn) for the second-quarter, a 4.8% decline from the $97.3bn it brought in during the same quarter last year. That's about in line with the 5% decline Apple posted in Q1.
Watch: Federal Reserve officials raise interest rates to the highest level since 2007