FedEx results gave bad news about the state of the broader economy, sending Wall Street open lower
New York (AFP) – Stock markets fell further on Friday as weak UK retail sales data and a dire warning from global shipping giant FedEx fueled recession fears.
Stocks were already struggling this week after data showed inflation in the US had slowed but not as much as expected, raising fears of a strong monetary tightening by central banks.
Investors are concerned that central banks will move too aggressively to tame inflation by raising interest rates, which could halt economic growth.
Wall Street stocks fell after FedEx reported Thursday that it shipped fewer packages than expected over the summer due to weakness in the global economy.
The company said it was closing stores, freezing hiring and grounding planes, while warning of big profits, with CEO Raj Subramaniam telling CNBC he expects a global recession.
“The market looks weak this morning due to the FedEx warning, but it really goes beyond that,” Briefing.com analyst Patrick O’Hare said.
“There are urgent concerns that the large interest rate increases by central banks so far, and those yet to come, will push the global economy into a non-“weak” recession, O’Hare said.
The broad-based S&P 500 finished at 3,873.33, down 0.7 percent for the day and nearly five prior to the week.
“These heightened concerns about a global recession, as well as higher US yields are driving the shift to the US dollar and not much else,” said Michael Hewson, analyst at CMC Markets.
London’s FTSE 100 finished the day 0.6 percent lower while the British pound fell to a 37-year low against the dollar at $1.1351 on news that UK retail sales fell much more than expected in August as shoppers faced rampant inflation.
Sales in volume terms fell 1.6 percent last month, more than three times what was expected.
Sterling reached a string of 1985 lows in recent weeks, also with the US Federal Reserve aggressively raising interest rates.
– ‘Markets are in pain’ –
“Markets are in a lot of pain, and the UK retail data made things worse for traders because it clearly indicated one thing: an impending recession,” said Naim Aslam, analyst at AvaTrade.
“When you look at sterling against the dollar, it looks like there are no buyers there.”
Elsewhere, Frankfurt shares fell 1.7 percent and Paris fell 1.3 percent as investors digested confirmation of record high inflation in the eurozone.
“August data confirms that price pressures are very strong and broad-based” with eurozone inflation at 9.1 per cent, said Jack Allen Reynolds, Capital Economics analyst.
“The European Central Bank will need to continue to raise rates aggressively in upcoming meetings.”
The European Central Bank last week raised its key interest rate by 75 basis points historically, and markets are expecting a move of similar size at its October policy meeting.
The Federal Reserve and the Bank of England are widely expected to increase borrowing costs next week.
The US central bank raised borrowing costs by 75 basis points in each of its last two meetings.
– Key numbers around 2110 GMT –
New York – Dow: down 0.5 percent at 30822.42 (close)
New York – Standard & Poor’s 500: down 0.7 percent at 3,873.33 (close)
New York – Nasdaq: down 0.9 percent at 11448.40 (close)
London – FTSE 100: bearish 0.6 at 7236.68 (close)
Frankfurt – DAX: down 1.7 percent at 12,741.26 (close)
Paris – CAC 40: down 1.3 percent at 6077.30 (close)
EURO STOXX 50: down 1.2% at 3500.41 (close)
TOKYO – Nikkei 225: down 1.1 percent at 27567.65 (close)
Shanghai – Composite: down 2.3 percent at 3126.40 (close)
Hong Kong – Hang Seng Index: down 0.9 percent at 18,761.69 (close)
Pound/dollar: down at $1.1423 from $1.1467 on Thursday
EUR/GBP: DOWN at 87.00 pence from 87.21 pence
EUR/USD: up at $1.0018 from $1.001
Dollar / yen: down at 142.91 yen from 143.52 yen
Brent North Sea crude: up 0.6 percent to $91.35 a barrel
West Texas Intermediate: up less than 0.1 percent at $85.11 a barrel