Stock markets tumble as inflation surges and recession fears intensify

96 of top 100 shares fall into the red as warning signs flash for global economy

The FTSE 100 index of large company chares slid 2 per cent to 7,288.56 as markets reacted to Wall Street suffering its worst day since the height of the pandemic (Copyright 2022 The Associated Press. All rights reserved.)

Stock markets fell in London and across Europe on Thursday as fears grow that out-of-control price rises could soon cause a recession.

The FTSE 100 index of large company chares slid 2 per cent to 7,288.56 after inflation surged to a 40-year high and markets reacted to Wall Street suffering its worst day since the height of the pandemic.

The London Stock Exchange was a see of red as the sell-off gathered pace and 96 of the 100 leading shares lost value. The pound dipped slightly to $1.2375, down from $1.2394 at yesterday's close.

Germany’s DAX index was also down 2 per cent, with France’s CAC 1.9 per cent lower. In Asia, Hong Kong's leading share index dropped 2.1 per cent stocks and Japan's Nikkei shed 1.7 per cent.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said disappointing results from US retailers had rattled markets.

"The slide was sparked by the US retail giant Target warning that customers were already buying fewer high ticket items like furniture and electronics, with higher fuel prices and supply chain costs also eating into margins. It comes hot on the heels of Walmart’s.

"With consumer spending power expected to be eroded further through interest rate rises, the worry is that Target’s pain is a precursor for yet more struggles to come for retailers."

Consumer confidence in the UK has been battered by gloomy news on the cost of living. Data on Wednesday showed that UK inflation had surged to its highest annual rate since 1982 as energy bills soared.

Economists increasingly fear that a sharp slowdown in spending as shoppers tighten their belts will cause a recession.

The Bank of England forecasts that the economy will shrink in the final quarter of this year when households are hit with a further large increase in energy bills.

Meanwhile, disruption to food supply chains, combined with record-high fuel costs is pushing up the price of a grocery shop.

Statistics from data firm Experian Catalist show the average cost of a litre of petrol at UK forecourts on Wednesday was 168.2p.

That was up from 167.6p per litre on Tuesday. Diesel prices reached an average of 181.0p per litre on Wednesday, up from 180.9p a day earlier.

There was little sign of those presures easing on Thursday as oil prices rose again. Brent crude was up 1.2 per cent to $110.41 per barrel, while US crude was up 0.8 per cent to $110.48 a barrel.