The Bank of England said the British economy has entered recession as it hiked interest rates once again to combat inflation
WALL STREET - Stock markets retreated on Thursday as the US Federal Reserve and European central banks unleashed more hefty interest rate hikes that aim to stomp inflation but raise fears of recession.
On Wall Street, the Dow Jones Industrial Average opened higher but later followed the tech-heavy Nasdaq and broader S&P 500 into negative territory.
European markets were down in afternoon trades, with London's FTSE 100 shedding 0.5 percent after the Bank of England raised its rate again to combat inflation and signalled that the UK entered recession in the current quarter.
The BoE's 0.5-percentage-point hike was smaller than the US Federal Reserve's third consecutive 0.75-point increase.
The world's major central banks are rushing to ramp up rates to dampen red-hot global consumer prices, but traders fear rising borrowing costs will herald recession.
While the Fed's 0.75-percentage-point rise was widely expected, there was some surprise at the central bank's forecast that borrowing costs would likely be held above four percent throughout next year.
Powell reiterated his determination to focus on bringing down inflation -- which is at a four-decade high -- and accepted that the campaign would hit Americans hard.
"What hit home for market participants yesterday is that the Fed, steered by Fed Chair (Jerome) Powell, really means business now in restoring price stability, and if that means a hard landing for the economy, so be it," said Briefing.com analyst Patrick O'Hare.
- Japan bucks the trend -
Switzerland and Norway also sprang hefty interest rate hikes on Thursday, two days after a super-sized increase in Sweden.
In Asia, Indonesia and the Philippines also tightened monetary policy but the Bank of Japan bucked the global trend as it left its status quo in place.
The dollar pared back gains after rising against other major currencies following the Fed's rate decision.
The British pound briefly dived to a new 37-year low at $1.1212 but recovered after the BoE announcement.
The yen, which has been plummeting due to the policy gap between the US and Japanese central banks, also clawed back against the dollar after Japan's finance ministry said it intervened in the currency market.
Oil prices extended recent gains after Russian President Vladimir Putin's announced a partial mobilisation of the Russian army and made a veiled threat to use nuclear weapons against the West.
- Key figures at around 1350 GMT -
New York - Dow: DOWN 0.4 percent at 30,052.68 points
London - FTSE 100: DOWN 0.5 percent at 7,203.67
Frankfurt - DAX: DOWN 1.4 percent at 12,584.76
Paris - CAC 40: DOWN 1.3 percent at 5,950.94
EURO STOXX 50: DOWN 1.3 percent at 3,445.13
Tokyo - Nikkei 225: DOWN 0.6 percent at 27,153,83 (close)
Hong Kong - Hang Seng Index: DOWN 1.6 percent at 18,147.95 (close)
Shanghai - Composite: DOWN 0.3 percent at 3,108.91 (close)
Pound/dollar: DOWN at $1.1257 from $1.1270 Wednesday
Euro/dollar: UP at $0.9847 from $0.9837
Euro/pound: UP at 87.45 pence from 87.29 pence
Dollar/yen: DOWN at 141.82 yen from 144.06 yen
Brent North Sea crude: UP 2.9 percent at $92.47 per barrel
West Texas Intermediate: UP 2.7 percent at $85.67 per barrel
By Roland Jackson