Morning Chronicle - Stocks, oil drop on fresh inflation spikes

Eurozone inflation will end the year at 7.6 percent, much higher than previously forecast, the EU said Thursday.

The prediction comes one day after US inflation came in at a blistering 9.1 percent last month, the highest level for more than 40 years, as the Ukraine war fuelled energy prices.

US producer prices rose by a faster-than-expected 1.1 percent in June from the previous month, data released Thursday showed.

Market watchers are now wondering whether the Federal Reserve could hike US borrowing costs by a full percentage point at a scheduled policy meeting this month.

The central bank in June unveiled its first 75 basis-point rise in three decades and is one of dozens to hike rates.

Singapore and the Philippines became the latest to tighten policy Thursday, a day after Canada, New Zealand, Chile and South Korea announced hikes.

The US inflation reading followed last week's news of a surprise spike in jobs creation, which suggested the world's top economy was withstanding the rate hikes, giving the Fed more room for further increases.

"Stubbornly high inflation increases the risk that the (Fed) continues to hike aggressively and triggers a recession," said Kristina Clifton at Commonwealth Bank of Australia, adding that belief was picking up momentum on trading floors.

The European Commission on Thursday slashed growth forecasts for the eurozone, saying the consequences from the war in Ukraine were continuing to destabilise the economy.

Growing fears of a global recession sent oil prices tumbling, with the main US contract, WTI, losing more than five percent.

Federated Hermes senior economist Silvia Dall'Angelo said that while commodity prices were off their recent peaks, they remained elevated amid risks of further supply shocks.

The Fed's drive to tighten monetary policy continues to send the dollar higher, and on Wednesday it finally rose above parity with the euro for the first time since late 2002, before falling again.

The euro fell back below parity once again shortly after US markets opened.

Europe's main stock indices were down around 1.5 percent in afternoon trading, with Milan down more than three percent over fears political tensions within Prime Minister Mario Draghi's coalition government could bring it crashing down and spark snap elections.

Former anti-establishment Five Star Movement did not support the government in a confidence vote, despite Draghi's warning that his cabinet would not carry on without it.

On Wall Street stocks tumbled with the Dow falling two percent as data showed wholesale price rises accelerating and bank earnings disappointing.

JPMorgan Chase reported a drop in second-quarter profits, reflecting the impact of a weakening macroeconomic outlook that led it to set aside funds in case of bad loans.

The big US bank's earnings came in at $8.6 billion for the quarter, down 28 percent from the year-ago period in results that missed analyst expectations.

Chief Executive Jamie Dimon said key elements in the US economy remained healthy, but that macroeconomic headwinds including inflation "are very likely to have negative consequences on the global economy sometime down the road".

The bank's shares fell 3.8 percent as trading got underway.

- Key figures at around 1330 GMT -

London - FTSE 100: DOWN 1.5 percent at 7,052.94 points

Frankfurt - DAX: DOWN 1.6 percent at 12,548.59

Paris - CAC 40: DOWN 1.4 percent at 5,917.51

EURO STOXX 50: DOWN 1.5 percent at 3,401.76

New York - Dow: DOWN 2.0 percent at 30,155.37

Tokyo - Nikkei 225: UP 0.6 percent at 26,643.39 (close)

Hong Kong - Hang Seng Index: DOWN 0.2 percent at 20,751.21 (close)

Shanghai - Composite: DOWN 0.1 percent at 3,281.74 (close)

Euro/dollar: DOWN at $0.9956 from $1.0061 Wednesday

Pound/dollar: DOWN at $1.1770 from $1.1893

Euro/pound: DOWN at 84.57 pence from 84.59 pence

Dollar/yen: UP at 139.21 yen from 137.36 yen

West Texas Intermediate: DOWN 5.2 percent at $91.32 per barrel

Brent North Sea crude: DOWN 4.4 percent at $95.21 per barrel

burs-rl/bp

J.D.Peters--MC-UK