Huge U.S. Inflation Sends Shockwaves To Stocks, Euro

Photo credit: Reuters

The economy is gulping as U.S. inflation tops 9 percent, making it the highest inflation in the country since 1981. The sky-high inflation has taken the euro to parity with the dollar for the first time in 20 years. 

Stock markets skidded after the inflation reading, bolstering the case for more supersized Fed rate hikes. 

Worries that higher rates could bring the global economy to a standstill or drag it into an even worse recession have been the key driver between a big 20 percent slump in world stocks this year, as well as the surge in the U.S. dollar. 

Europe has already been worried about a recession. But the eye-watering inflation number was even higher than economists had feared. 

The euro is down over 11 percent since January. Experts fear that the European economic prospects are only continuing to get worse and that this will be even more so if the Russian gas does not come through again with regularity. 

The euro’s parity with the dollar was brief, but it was enough. German’s DAX and France’s CAC40 nearly doubled their morning losses to 1.5 percent and 1.4 percent respectively. In London, the FTSE was not far behind either, as another jump of 4 percent in gas prices added to the UK’s pressure points. 

In the United States, Wall Street’s gasp that another 75 basis point Fed hike could be coming immediately shoved what had been a slightly higher S&P 500 futures down first 1.5 percent, and then the spot market down 2 percent as it opened.

The world is worrying that rising U.S. interest rates will crash the global economy far and wide. 

On the other side of the planet, the broadest index of Asia-Pacific shares outside of Japan had two days of straight losses and slumped to its lowest in two years. It finally gained 0.5 percent between Tuesday and Wednesday night. 

Korea and New Zealand jacked up their own rates overnight as well. In Taiwan, stocks led the gains after the Taiwanese finance ministry said it would activate its stock stabilization fund. The market had fallen on Tuesday to a 19-month loss. 

In Japan, the Nikkei finished up 0.5 percent after a nearly 2 percent loss the previous day. 

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