Volkswacht Bodensee - Stocks and oil sink on recession fears

London ended the day down two percent, with both Frankfurt and Paris close behind.

That followed a largely downbeat performance in Asia, although Shanghai rose after data showed a forecast-beating improvement in China's services sector on easing Covid restrictions.

Wall Street's main indices also fell, with the Dow down 0.9 percent in late morning trading.

Crude futures slumped as major oil producers led by Saudi Arabia and Russia kept to a decision on a limited boost to output despite the risk that high oil prices may help push the global economy into recession.

- 'Terrible mood' -

"Stock markets have fallen heavily in June so it seems only fitting that they're ending the month with big losses as reality continues to bite," said Craig Erlam, senior market analyst at trading platform OANDA.

Stock markets are "in a terrible mood across Europe", said AJ Bell investment director Russ Mould.

"There really is a lack of good news for investors to cling onto, and the near-term outlook looks bleak."

The threat of an extended period of elevated inflation and painful interest rate hikes has left traders fretting over the threat of a prolonged economic downturn, while the Ukraine war continues to sow uncertainty.

"Recession continues to be the primary concern at the moment... as countries continue to grapple with spiralling inflation and cost-of-living crises," said Mihir Kapadia, head of Sun Global Investments.

The surge in inflation to multi-decade highs has forced central banks to swiftly raise interest rates, dealing a hefty blow to equities as companies faces higher borrowing costs.

The Federal Reserve is next month expected to announce a successive 75-basis-point hike in US interest rates.

Sweden's central bank on Thursday announced its biggest hike in 22 years, raising its main rate by 50 basis points to 0.75 percent.

There had been hope that policymakers would ease off their hikes as economies show signs of slowing, but analysts say some officials are less concerned about a recession than letting prices run out of control.

- Risk of 'going too far' -

Fed boss Jerome Powell, speaking at a European Central Bank conference Wednesday, hinted again that such hikes could lead to economic contraction.

"Is there a risk that we would go too far? Certainly there's a risk," Powell said.

"The bigger mistake to make... would be to fail to restore price stability," he insisted.

ECB President Christine Lagarde stated this week that the guardian of the euro would go "as far as necessary" to fight inflation that was set to remain "undesirably high" for "some time to come".

US data released Thursday showed that a key annual inflation measure held steady at 6.3 percent in May, but real spending by consumers declined by 0.4 percent month-over-month.

Briefing.com analyst Patrick O'Hare said the decline "will fuel concerns about the Fed continuing to tighten into a slowing economic environment."

- Key figures at around 1530 GMT -

New York - Dow: DOWN 0.9 percent at 30,754.90 points

EURO STOXX 50: DOWN 1.6 percent at 3,449.46

London - FTSE 100: DOWN 2.0 percent at 7,169.28 (close)

Frankfurt - DAX: DOWN 1.7 percent at 12,783.77 (close)

Paris - CAC 40: DOWN 1.8 percent at 5,922.86 (close)

Tokyo - Nikkei 225: DOWN 1.5 percent at 26,393.04 (close)

Hong Kong - Hang Seng Index: DOWN 0.6 percent at 21,859.79 (close)

Shanghai - Composite: UP 1.1 percent at 3,398.62 (close)

Brent North Sea crude: DOWN 1.2 percent at $114.87 per barrel

West Texas Intermediate: DOWN 2.7 percent at $106.85 per barrel

Euro/dollar: DOWN at $1.0457 from $1.0442 Wednesday

Pound/dollar: UP at $1.2152 from $1.2124

Euro/pound: DOWN at 86.06 pence from 86.12 pence

Dollar/yen: DOWN at 135.89 yen from 136.59 yen

burs/rl/lth

F.Pavlenko--BTB