The newÂ US inflation data released on Friday have triggered a fresh sell-off in the London stock market, sending stocks lower from Wall Street to Europe and Asia. TheÂ Dow JonesÂ Index slipped more than 1.3 per cent lower on Friday, followed by aÂ more thanÂ 1.86 per cent fall in the FTSE 100 Index as of yesterday.
I trust that even if you do notÂ fully comprehend the implications of a full-blown recession in the US economy, you have come across the clichÃ© that when US economy sneezes, the rest of the world catches a (rather heavy!) cold… Now, in this occassion,Â the high US inflationÂ signifies a threat for US policymakersÂ to be caught in anÂ “inflation trap”. Analysts are worried that the accelerating paceÂ of price increases could deter the US Federal Reserve from future interest rate cuts to spur growth, combat distressed financial markets, and easeÂ the pressure onÂ its housing market.
UK Biggest LosersÂ
UK stocks retreated on Monday, asÂ investors worried aboutÂ inflationary pressures which might force the Federal Reserve to put the breaks on its rate cutting.
TheÂ FTSE indexÂ fell 119.2 to close at 6277.8.
Home Retail Group (Argos owner) led the fallers with a 6% fall, followed by fashion chain Next, whose priceÂ fell almost 5%.
XstrataÂ tumbled 3.9% and Vedanta ResourcesÂ slumped 5.2%.
Alliance & LeicesterÂ declined 5.3%.
FurtherÂ stock market turmoils should be expected and not come as a suprise anymore,Â as the world markets will remain fragile and jumpy for as longÂ as the US economic slowdown continues. Â