US inflationary fears weigh on world markets

Global stock markets have fallen amid persistent fears of a hike in US interest rates, brought about by inflationary pressure from high oil prices.

10:38 07 October 2005

Global stock markets have fallen amid persistent fears of a hike in US interest rates, brought about by inflationary pressure from high oil prices.

US stock markets continued their losing streak on Thursday, after cautionary comments on inflation from a Federal Reserve official.

Wall Street's Dow Jones Index closed down 31.38 points at 10,285.98. The loss was fuelled by a fall in market value of the major oil companies, despite a cooling in crude oil prices, which are hovering around the $61 per barrel mark.

The slump in the US market was assisted by Thursday's comments from Dallas Federal Reserve Bank President Richard Fisher.

Mr Fisher said that core inflation was nearing the top of its acceptable range, and warned that the central bank needed to stay alert to inflationary-pressure on the US economy.

US jitters have sparked a global reaction, with world markets sliding on fears that the world's dominant economy is faltering.

Market uncertainty sent European shares spiralling down to the biggest daily drop since London's July bombings.

The FTSE 100 index closed 55.40 points lower at yesterday's close, a fall of 1.2 per cent compounded by weak manufacturing.

In Japan the Nikkei posted its largest one-day loss by plummeting 330.83 points to 13,359, and Hong Kong's index fell 269 points to 14,891.

Germany's Dax index and France's key CAC 40 also closed sharply lower. The Dax sank 52.15 points to 5,017.27 while the CAC dropped 57.21 points to 4,536.