Stocks down, Dollar up on rate hike fears

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Stocks down, Dollar up on rate hike fears

Stock markets went down on Friday while the dollar went up against the euro and pound, as investors fretted about interest rate hikes and a possible recession.

Both Paris and Frankfurt stocks ended up with small gains despite the news of record high eurozone inflation that reinforced expectations of a European Central Bank interest rate hike later this month.

The eurostat data agency said consumer price inflation in the 19 countries in June rose to 8.6 percent, up from the previous record of 8.1 percent in May.

According to Pushpin Singh, an economist at research group CEBR, today's figures support the European Central Bank's decision to raise interest rates at its next Governing Council meeting in July.

The ECB stated last month that it will deliver its first interest rate hike in more than a decade in July to combat inflation.

Eurostat said Friday that core inflation had slowed to 3.7 percent from 3.8 percent, helping equities calm heading into the weekend pause.

The main indices of Wall Street bounced around since the opening bell and were barely lower in late morning trading.

Chris Beauchamp, chief market analyst at online trading platform IG said there was little buying interest at the beginning of the second half of the year, even though the sharp drops suffered by stocks in the first half open up the possibility of gains.

New York's S&P 500 index suffered its worst first-half performance since 1970.

He said that there was a growing sense of anxiety about the summer, especially with the potentially very gloomy second quarter earnings season nearly upon us.

Beauchamp said that it really does look like we have another big leg lower before the bear market is done.

Losses across world markets this week came after a rally last week fuelled by hopes that an economic slowdown or signs of recession would lead to central banks easing off their monetary tightening drive.

According to top finance chiefs, including Federal Reserve boss Jerome Powell, they are willing to endure the pain of a contraction as long as they can rein in prices, which are rising at their fastest pace in 40 years on both sides of the Atlantic.

City Index analyst Fiona Cincotta told AFP that investors know that inflation is high and is likely to push higher.

The market's obsession is turning from inflation to recession fears. She said that the bad news is priced in until it starts next week because of the steep declines in stock prices this week.

The dollar, a safe-haven currency, jumped one percent against the pound and euro because of rising expectations of a recession.

The US dollar is poised to end the week stronger against most major currencies, nearing its strongest level since 2002, as 'risky assets remained under pressure, said James Reilly, economist at Capital Economics.

The euro fell to a low of $1.0369 before rebounding above the $1.04 level. The pound was at a low of $1.1979.

New York - Dow: DOWN 0.3 percent at 30,693. 52 points are needed to score the most important points in the world.

Brent crude in the North Sea was up 1.9 percent at $111.12 per barrel.

West Texas Intermediate: UP 2.2 percent at $108.08 per barrel.

The euro dollar was DOWN at $1.0405 from $1.0484 Thursday.