Stocks slide on returning recession fears

The downbeat mood has offset hopes that China's economy would enjoy a strong recovery in 2023 after moving away from its zero-Covid restrictions. ©AFP

New York (AFP) - Stock markets lost ground on Thursday after disappointing US data and corporate earnings rekindled worries about a global recession later this year.

Oil prices rallied slightly on indications that short-term crude demand would hold up in a relatively strong US labor market and as China reopens after dropping its zero-Covid policy.

But "US recession fears are still here, and they won't be going away anytime soon," said Edward Moya, an analyst at the brokerage OANDA.

Wall Street stocks slumped again Thursday as a Federal Reserve Vice Chair Lael Brainard pledged a tough line on inflation, saying the central bank would "stay the course" in its fight.

"Even with the recent moderation, inflation remains high, and policy will need to be sufficiently restrictive for some time," she said in remarks for an event in Chicago.

Joshua Mahony, a senior analyst at online trading platform IG, said: "Stocks are on the slide once again, as fears of prolonged periods of high interest rates cast aside recent optimism on falling inflation."

The recession fears dragged on equities, with the Dow losing 0.8 percent in New York, while main European indices showed losses of more than one percent at the close.

"An overnight sell-off in the US has soured sentiment," said AJ Bell's investment director Russ Mould.

In Davos, European Central Bank chief Christine Lagarde insisted, however, that the eurozone economy would fare "a lot better" this year than initially feared.

The "news has become much more positive in the last few weeks," Lagarde told an audience at the World Economic Forum.

Elsewhere, the New Zealand dollar and the country's stock market dipped after Prime Minister Jacinda Ardern's announcement that she would step down next month.

Expectations that US interest rates would not rise as much as previously feared weighed on the dollar but the yen recovered after Wednesday's slump, triggered by a Bank of Japan decision not to tweak monetary policy.

Several Fed officials have warned that the US central bank would continue to tighten its own policy until inflation is brought down from multi-decade highs.

After five straight rises, Norway left its benchmark interest rate on hold at 2.75 percent Thursday but hinted at a fresh rise in March.