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Global stocks in trouble as markets bet on rising borrowing costs

GLOBAL CAPITALS: With markets betting that the US Federal Reserve and the ECB will both raise their key borrowing costs by 75 basis points when they meet next month, stock markets struggled to recover on Wednesday after a three-day losing streak, as stubborn inflation that has central banks on both sides of the Atlantic preparing to raise borrowing costs again next month kept investors on edge, reported Reuters.

Wall Street fell after making early gains, while U.S. crude oil prices fell for the second day on fears that tighter monetary policy around the world could hurt demand and dampen the global economy.

The MSCI All Country stock index was down 0.2% and down 18.5% for the year as the war in Ukraine, soaring energy prices and rising interest rates made havoc on risky assets.

The US S&P 500 index lost 0.17%, the Dow Jones Industrial Average fell 0.3% and the Nasdaq Composite was flat.

Europe’s STOXX 600-company stock index fell 1.1% to a six-week low, leaving it down nearly 15% for the year.

Economic news remained grim with overnight data showing economic activity in China, the world’s second-largest economy, extended its decline this month after new COVID-19 infections, the worst heatwaves since decades and the difficulties of the real estate sector.

Eurozone headline inflation for August hit a new record high, beating expectations and strengthening the case for a big rate hike by the European Central Bank on September 8.

Meanwhile, gold fell 0.4% to $1,715.4 an ounce, a one-month low. Crude oil fell further after declines of more than $5 overnight, but attracted support after industry data showed US fuel inventories fell more than expected.

U.S. West Texas Intermediate (WTI) crude futures fell 0.8% to $90.81 a barrel, after falling $5.37 in the previous session on recession fears. Brent futures for October fell 2.6%.

Cryptocurrencies defied the general gloom and held onto their gains, with bitcoin up 1.4% to $20,086