The European Central Bank (ECB) hiked its benchmark policy rates by 50 basis points. The Deposit Facility Rate lifted to 2%. And the Bank of England (BoE) lifted the Bank Rate by 50 basis points to 3.50%, its highest level since 2008.

European sharemarkets posted their worst daily performance in six months on Thursday after the ECB delivered its fourth straight interest rate hike and President Christine Lagarde stressed that come. Rate sensitive technology shares shed 4.7% with the continent-wide FTSEurofirst 300 index down by 2.8%. The UK FTSE 100 index slid 0.9%, its worst day in over two months, after the Bank of England raised rates and said further rate increases might be needed to curb persistent inflation.

In US economic data, initial jobless claims fell by 20,000 to 211,000 last week (survey: 232,000). Retail sales slid 0.6% in November (survey: -0.2%). Industrial production fell 0.2% in November (survey: 0). Business inventories rose 0.3% in October (survey: +0.4%). The Empire State factory index fell from +4.5 to -11.2 in December (survey: -1). The Philadelphia Fed factory index rose from -19.4 to -13.8 in December (survey: -10).

US sharemarkets fell sharply on Thursday after the US Federal Reserve’s guidance for protracted policy tightening reduced hopes of the rate-hike cycle ending anytime soon and increased worries about a potential recession. Shares of Netflix slid 8.6% on media reports that the company would let its advertisers take their money back after missing viewership targets. Megacap technology shares Apple (-4.7%), Alphabet (-4.4%), Amazon (- 3.4%) and Microsoft (-3.2%) all weighed on major indexes. At the close of trade, the Dow Jones index fell by 764 points or 2.3%, its
worst day since September. The S&P 500 index lost 2.5%, with the Nasdaq index down by 360 points or 3.2%.

US government bonds were firmer (yields lower) on Thursday on the back of weak US economic data and despite spiking bond yields in Europe, where the ECB raised interest rates and signalled more aggressive hikes. US 10-year Treasury yields fell by around 5 points to near 3.45%. And US 2-year Treasury yields dipped by around 1 point to near 4.24%.


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Major currencies were weaker against the US dollar in European and US trade. The Euro fell from highs near US$1.0724 to lows near US$1.0592 and was near US$1.0620 at the US close. The Aussie dollar dipped from highs near US68.33 cents to lows near US66.77 cents and was near US67.00 cents at the US close. And the Japanese yen fell from near 135.55 yen per US dollar to JPY138.17 and was near JPY137.75 at the US close.

Global oil prices fell by around 1.5% on Thursday after a wave of central bank rate hikes reignited fears of a global economic slowdown. A section of the Keystone pipeline was restarted, signalling that more supply will be available in the short-term. The Brent crude oil price fell by US$1.49 or 1.8% to US$81.21 a barrel. And the US Nymex crude oil price dipped US$1.17 or 1.5% to US$76.11 a barre

Base metal prices tumbled on Thursday as weak Chinese manufacturing data and a US Federal Reserve warning of
further increases to interest rates fanned fears of weak demand. Copper fell 2.7% with aluminium down 2%.

The gold futures price fell by US$30.90 an ounce or 1.7% to US$1,787.80 an ounce. Spot gold was trading near US$1,776 an ounce at the US close. Iron ore futures rose by US$1.24 a tonne or 1.1% to US$110.50 a tonne.

Ahead: S&P Global release purchasing managers’ indexes.

Originally published by CommSec