Investors fear central bank actions to tame inflation could cause recessions

London (AFP) - Europe’s main stock markets rebounded on Monday after a mixed Asian session following tumultuous sessions last week over recession fears.

Bitcoin regained $20,000 after sinking to an 18-month low of $17,599 in weekend deals because risk-averse investors had shunned the world’s most popular cryptocurrency.

London’s FTSE 100 rallied to close 1.5 percent higher, with sentiment boosted by news of a blockbuster takeover offer for publisher Euromoney.

Frankfurt stocks finished 1.1 percent higher while Paris gained 0.6 percent after French President Emmanuel Macron and his allies faced political deadlock after losing their parliamentary majority in weekend elections.

Wall Street, shut on Monday for a US public holiday, had risen on Friday, though the broad-based S&P 500 lost 5.8 precent for the week, its worst performance since 2020.

“Stability often comes before recovery and markets being more composed would suggest investors are no longer panicking,” said Russ Mould, investment director at broker AJ Bell.

Markets were rocked last week by a fierce selloff after the US Federal Reserve’s sharp interest rate hike – the biggest in nearly 30 years – and a warning of more to come as inflation soars.

The Fed’s move was followed by the fifth straight rate increase in Britain and the Swiss central bank’s first hike since 2007, raising concerns that such moves will drive countries into recession.

“There has undoubtedly been a shift in the market mindset over the last week and a half that has weighed heavily on risk assets,” said Craig Erlam, analyst at OANDA online trading platform.

“The prospect of a recession is being considered far more broadly and what’s more, central banks are increasingly resisting the urge to push back against it,” he said.

Cleveland Fed chief Loretta Mester added to the worry, warning that the risk of a US recession was increasing and it would take several years to bring inflation down from four-decade highs to the bank’s two-percent target.

She told CBS’s “Face The Nation” on Sunday that while she was not predicting a contraction, the Fed’s decision not to act sooner to fight rising prices was hurting the economy.

Analysts warned there was likely to be more pain ahead for traders as the Ukraine war – which has sent energy and food prices soaring this year – drags on and uncertainty continues to reign.

Oil prices stabilised on Monday after Friday’s hefty losses on demand worries caused by the prospect of a world recession.

However, US Energy Secretary Jennifer Granholm said prices could continue to surge if the European Union cut off imports of the commodity from Russia in response to the Ukraine war.

- Key figures at around 1620 GMT -

London - FTSE 100: UP 1.5 percent at 7,121.81 points (close)

Frankfurt - DAX: UP 1.1 percent at 13,265.60 (close)

Paris - CAC 40: UP 0.6 percent at 5,920.09 (close)

EURO STOXX 50: UP 0.9 percent at 3,469.33

Tokyo - Nikkei 225: DOWN 0.7 percent at 25,771.22 (close)

Hong Kong - Hang Seng Index: UP 0.4 percent at 21,163.91 (close)

Shanghai - Composite: FLAT at 3,315.43 (close)

New York - Dow: DOWN 0.1 percent at 29,888.78 (close)

Euro/dollar: UP at $1.0528 from $1.0499 late Friday

Pound/dollar: UP at $1.2243 from $1.2241

Euro/pound: UP at 86.02 pence from 85.77 pence

Dollar/yen: UP at 135.06 yen from 135.02 yen

Brent North Sea crude: UP 0.6 percent at $113.78 per barrel

West Texas Intermediate: UP 0.5 percent at $108.52

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