Stock markets and oil prices fell on Wednesday, as investors responded to dismal Chinese growth statistics and an unexpected increase in UK inflation.
China’s economy, the world’s second largest behind the United States, expanded at one of the weakest rates in almost three decades last year.
China’s National Bureau of Statistics said that GDP increased by 5.2 percent, as expected.
However, official figures showed that UK annual inflation rose to 4.0 percent in December from 3.9 percent the previous month defied market expectations of a minor decrease.
It shattered hopes that the Bank of England will lower interest rates in the first half of 2024, lifting the pound against the dollar and euro.
The unexpected jump in UK inflation comes as traders increasingly expect the US Federal Reserve and the European Central Bank (ECB) to postpone rate cuts as global inflation takes longer to fall than expected.
“Investors have had to rip up their game plan after UK inflation went in the wrong direction to support the narrative for interest rate cuts,” noted AJ Bell investment director Russ Mould.
The European Central Bank (ECB) may begin decreasing interest rates this summer, according to President Christine Lagarde, although any such move would be dependent on economic indicators.
According to XTB research director Kathleen Brooks, China “may have hit official growth targets, but it is still an economy under pressure”.
The Shanghai stock market fell more than 2% Wednesday, while Hong Kong fell nearly 4%.
“The headwinds facing China’s economy in 2023 have not subsided, and the geopolitical environment may become more contentious following election results in Taiwan,” warned SPI Asset Management’s Stephen Innes, referring to the victory for pro-sovereignty candidate Lai Ching-te in a weekend presidential vote.
Key figures around 1100 GMT
London – FTSE 100: DOWN 1.5 percent at 7,447.19 points
Paris – CAC 40: DOWN 1.1 percent at 7,314.58
Frankfurt – DAX: DOWN 1.0 percent at 16,403.15
EURO STOXX 50: DOWN 1.1 percent at 4,399.23
Tokyo – Nikkei 225: DOWN 0.4 percent at 35,477.75 (close)
Hong Kong – Hang Seng Index: DOWN 3.7 percent at 15,276.90 (close)
Shanghai – Composite: DOWN 2.1 percent at 2,833.62 (close)
New York – Dow: DOWN 0.6 percent at 37,361.12 (close)
Pound/dollar: UP at $1.2676 from $1.2635 on Tuesday
Euro/pound: DOWN at 85.78 pence from 86.07 pence
Euro/dollar: DOWN at $1.0873 from $1.0879
Dollar/yen: UP at 147.75 yen from 147.18 yen
West Texas Intermediate: DOWN 2.1 percent at $70.92 per barrel
Brent North Sea Crude: DOWN 1.8 percent at $76.86 per barrel