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US inflation fears knock stocks Stocks slide in jittery trading
(about 7 hours later)
US consumer prices rose in October as energy and food prices shot up, official data has shown. Stocks fell in a jittery bout of trading on Thursday, on concerns about the US housing market and consumer spending after an uptick in inflation.
Although in line with forecasts, the inflation data knocked US stock prices lower as investors worried about the strength of consumer spending. Investors were also uncertain if the worst of the credit crisis was over, with fears of more losses at big banks.
The US Labor Department said its consumer price index rose 0.3% in October, while core prices, excluding food and energy costs, rose 0.2%. The Dow Jones industrial average fell 120.96 points, or 0.91%, to 13,110.05 after stocks in Europe and Asia fell.
Investors were also cautious amid continued concern about credit markets. Rising inflation, with high fuel prices a major factor, could make consumers cut back spending.
Rising inflation, with higher fuel prices a major factor, could make consumers cut back spending and prevent the Federal Reserve from lowing interest rates further in coming months to shore up the economy. It could also prevent the Federal Reserve from lowering interest rates further in coming months to shore up the economy.
A downbeat outlook from retailer JC Penney also raised fears that problems in the US housing market were taking their toll on shoppers. Housing market
JC Penney shares declined 2% to $45.84 after the retailer cut its fourth-quarter profit outlook by at least 25%. Wells Fargo, the second-largest US mortgage lender, said that housing market downturn was far from over.
The Dow Jones industrial average fell 45.12 points, or 0.34 %, to 13,185.89 in early trade. "We have not seen a nationwide decline in housing like this since the Great Depression," said Wells Fargo chief executive John Stumpf.
The Federal Reserve also pumped $47.25bn into US money markets to help ease tight liquidity.
This marked its biggest infusion of cash into the US banking system since just after the 11 September attacks.
To try to ease fears over available credit, several central banks have intervened by injecting money into the banking sector since August.
Global lossesGlobal losses
Stock markets in Europe and Asia also chalked up losses.Stock markets in Europe and Asia also chalked up losses.
London's FTSE 100 index of leading shares was down 1.41%, or 90.40 points, at 6341.70. London's FTSE 100 index of leading shares ended the day down 1.13%, or 72.50 points, at 6359.60.
The Paris Cac 40 index slid 1.02%, while Frankfurt's Dax shed 1.81%. The Paris Cac 40 index slid 0.93%, while Frankfurt's Dax shed 1.49%.
It was a similar story in Asia, with Japan's Nikkei closing down 0.6% and Hong Kong's Hang Seng index ending the day 1.4% lower.It was a similar story in Asia, with Japan's Nikkei closing down 0.6% and Hong Kong's Hang Seng index ending the day 1.4% lower.
Volatility
Concern about banks' financial exposure to investments backed by US mortgages that have gone bad has been causing extreme volatility on global markets in recent weeks.Concern about banks' financial exposure to investments backed by US mortgages that have gone bad has been causing extreme volatility on global markets in recent weeks.
Earlier on Thursday, UK bank Barclays unveiled a £1.3bn write-down for the July to October period on its exposure to credit market problems, although this was less than feared.Earlier on Thursday, UK bank Barclays unveiled a £1.3bn write-down for the July to October period on its exposure to credit market problems, although this was less than feared.
"You're seeing some news overseas on write-downs and banks are down, but they're not too bad considering some of their (earlier) losses," said Steve Goldman, market strategist at Weeden & Co. "There's just too much fear in the financials," said John O'Brien, senior vice president at MKM Partners LLC in Cleveland, Ohio.
"The fear is back again that the write-downs are kind of a mystery and no one really knows what the bottom is or what the outcome is going to be."
HSBC, UBS, Bank of America, Morgan Stanley, Merrill Lynch and Citigroup have all suffered financial pain as a result of the sinking US mortgage market.HSBC, UBS, Bank of America, Morgan Stanley, Merrill Lynch and Citigroup have all suffered financial pain as a result of the sinking US mortgage market.
Inflation fears
US consumer prices rose in October as energy and food prices shot up, official data has shown.
Although in line with forecasts, the inflation data knocked US stock prices lower as investors worried about the strength of consumer spending.
The US Labor Department said its consumer price index rose 0.3% in October, while core prices, excluding food and energy costs, rose 0.2%.
A downbeat outlook from retailer JC Penney also raised fears that problems in the US housing market were taking their toll on shoppers.