LONDON: Stock markets mostly retreated on Thursday as fresh evidence of runaway global inflation ramped up expectations of more aggressive interest rate hikes by central banks, while disappointing earnings revived recession fears.

That sent the dollar rising, helping push oil prices sharply lower and the euro briefly below $1.00.

Eurozone inflation will end the year at 7.6 per cent, much higher than previously forecast, the EU said on Thursday.

The prediction comes one day after US inflation came in at a blistering 9.1pc last month, the highest level for more than 40 years, as the Ukraine war fuelled energy prices.

US producer prices rose by a faster-than-expected 1.1pc in June from the previous month, data released Thursday showed.

Market watchers are now wondering whether the Federal Reserve could hike US borrowing costs by a full percentage point at a scheduled policy meeting this month.

One Fed policymaker said publicly Thursday he would support such a hike if economic data comes in stronger than expected. The central bank in June unveiled its first 75 basis-point rise in three decades and is one of dozens to hike rates.

Singapore and the Philippines became the latest to tighten policy Thurs­day, a day after Canada, New Zealand, Chile and South Korea announced hikes.

The US inflation reading followed last week’s news of a surprise spike in jobs creation, which suggested the world’s top economy was withstanding the rate hikes, giving the Fed more room for further increases.

“Stubbornly high inflation increases the risk that the (Fed) continues to hike aggressively and triggers a recession,” said Kristina Clifton at Commonwealth Bank of Australia, adding that belief was picking up momentum on trading floors.Growing fears of a global recession sent oil prices tumbling, with the main US contract, WTI, losing more than five percent at one point.

The Fed’s drive to tighten monetary policy continues to send the dollar higher, and Wednesday it finally rose above parity with the euro for the first time since late 2002, before falling again.

Published in Dawn, July 15th, 2022