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Global shares fall on inflation, central bank moves

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© Reuters. FILE PHOTO: A customer hands over Russian rouble banknotes and coins to a vendor at a market in Omsk, Russia February 18, 2022. REUTERS/Alexey Malgavko
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By Elizabeth Dilts Marshall

NEW YORK (Reuters) – Global share markets slid on Thursday as inflation in the United States hit almost 8%, likely cementing the case for an interest rate hike by the U.S. Federal Reserve, and the European Central Bank sped up its exit from its massive stimulus program.

Data showed U.S. consumer inflation running at a 7.9% annualized clip in February, bang on analysts’ expectations. Wall Street fell on the data, giving up some of the gains notched in the prior session’s relief rally.

Euro zone stocks slumped on Thursday, hitting session lows after the ECB surprised markets by saying it will end asset purchases in the third quarter, and ceasefire talks between Moscow and Kyiv made no headway.

The euro retreated from overnight gains following the ECB announcement, and the dollar strengthened on the U.S. inflation report.

“What’s the answer from central banks? They hike,” Jeff Klingelhofer, co-head of investments at Thornburg Investment Management. “Unraveling a decade of easy policy and implicit central bank puts (will) undoubtedly lead to the heightened volatility in asset markets.”

MSCI’s gauge of stocks across the globe shed 0.65% at 10:35 a.m. EST (1535 GMT).

In the United States, the Dow Jones Industrial Average fell 323.32 points, or 0.97%, the S&P 500 lost 50.68 points, or 1.18% and the Nasdaq Composite dropped 236.67 points, or 1.79%.

The pan-European STOXX 600 index lost 1.25%.

The global trading day started with a positive Asian session on the prospect of the resumption of diplomatic talks between Russia and Ukraine for the first time since Moscow’s invasion began on Feb. 24.

But the two countries made no apparent progress towards a ceasefire or on a humanitarian corridor from the southern Ukrainian port of Mariupol.

Other EU talks were due on Thursday, with leaders set to hold initial discussions at a summit starting on Thursday evening about a joint investment plan to boost the bloc’s independence in defense and energy.

OIL STEADIES

The dollar index rose 0.548%, with the euro down 0.86% to $1.098 after its strongest day a session earlier in almost six years.

Oil bounced in volatile trading after falling more than 12% on Wednesday, after the United Arab Emirates backtracked on statements saying OPEC and its allies might increase output to help to plug the gap in exports from Russia. [O/R]

U.S. crude recently rose 0.52% to $109.26 per barrel and Brent was at $112.64, up 1.35% on the day.

European Union leaders will phase out buying Russian oil, gas and coal, a draft declaration showed on Thursday, as the bloc seeks to reduce its reliance on Russian sources of energy, following a ban from the United States.

Other riskier assets such as cryptocurrencies also fell, with bitcoin down 6.5%.

World shares fall on U.S. inflation, ECB announcement

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