US, European stocks drop amid rate hike fears

NEW YORK, United States — US and European stock markets slid Wednesday as record-high inflation fanned fears that more interest rate hikes are on their way.

Wall Street's main stock indices closed lower for a fourth day, a downward trend that follows Federal Reserve chief Jerome Powell's warning last week there will be no respite from increasing interest rates.

Frankfurt, London and Paris stocks all dropped as data showed eurozone inflation hit 9.1% in August on surging fuel prices, raising pressure on the European Central Bank to tighten its monetary policy.

And most Asian markets closed lower as well on concerns the US Fed's rate-hiking policy could send the world's biggest economy into recession.

Following Powell's highly anticipated statement, the US "had a quiet start to the week in data," said Jack Ablin of Cresset Capital. 

Traders are now awaiting the release of US job-creation figures on Friday for a better idea about the state of the economy.

"Starting tomorrow and Friday, I think we'll have a lot more information to digest," Ablin said.

'One direction only'

Major central banks are rushing to contain surging consumer price inflation that has largely been prompted by fallout from key energy supplier Russia's invasion of Ukraine.

"The data from the EU has confirmed that inflation is moving in one direction only, and the ECB has a long way to go before it can put a leash on inflation," said Naeem Aslam, chief market analyst for Markets.com.

The ECB is set to lift borrowing costs next week, having increased them in July for the first time in a decade to help tackle rampant inflation.

Meanwhile, oil prices fell on demand jitters as China imposes further pandemic restrictions, and the possibility that a deal on Iran's nuclear program could unlock crude exports.

State energy giant Gazprom suspended gas deliveries to Germany on a major pipeline on Wednesday.

It was the latest in a series of supply halts that have fueled Europe's energy crisis and sent gas and electricity prices soaring before the peak-demand winter.

European gas prices, however, fell on Wednesday after flirting with a record high last week.