NEW YORK - Stock markets fell Wednesday as investors fretted about stubbornly high inflation in Britain and braced for fresh interest-rate signals from US Federal Reserve chief Jerome Powell.
With annual inflation unchanged at 8.7 percent in May when markets expected a fall, the Bank of England could go for a bigger rate hike than previously thought at a meeting on Thursday, according to analysts.
"The impact of further monetary tightening on the British economy is likely to hinder economic activity and ultimately cause a contraction," noted Ricardo Evangelista, senior analyst at ActivTrades.
Wall Street opened lower as investors awaited Powell's testimony in Congress later on Wednesday.
His comments will be closely scrutinised for clues about the direction of the Fed's campaign to fight elevated inflation with interest-rate hikes.
The US central bank last week held rates steady after 10 straight increases, but signalled more hikes could come to bring prices under control.
Investors are equally eager to hear his take on the near global banking crisis in March triggered in the aftermath of the collapse of a number of regional lenders.
Powell is expected to "attest that the banking system is resilient, that the inflation adjustment process has a ways to go still," said Briefing.com analyst Patrick O'Hare.
Bu traders are "entertaining the notion that the market is overdue for a consolidation period", O'Hare added.
The anxiety over Powell's testimony follows disappointment across market floors this week with Beijing's moves to try and revive the Chinese economy.
The People's Bank of China reduced its benchmark five-year rate by 10 basis points on Tuesday, less than the 15 points expected.
Uncertainty over the Chinese economy, which continues to show signs of weakness as the post-Covid rebound fades, also weighed on the yuan, which on Wednesday briefly fell past 7.2 per dollar for the first time since November.
"Developments in China... continue to point to a slower-than-predicted post-pandemic recovery in the world's second-largest economy," added Evangelista.
"With China's economy struggling to regain momentum, the headwinds for the global economy get stronger."
The Shanghai stock market closed down 1.3 percent and Hong Kong lost two percent.
- Key figures around 1330 GMT -
New York - Dow: DOWN 0.4 percent at 33,921.03 points
London - FTSE 100: DOWN 0.4 percent at 7,538.97
Frankfurt - DAX: DOWN 0.4 percent at 16,047.73
Paris - CAC 40: DOWN 0.6 percent at 7,253.01
EURO STOXX 50: DOWN 0.4 percent at 4,327.70
Tokyo - Nikkei 225: UP 0.6 percent at 33,575.14 (close)
Hong Kong - Hang Seng Index: DOWN 2.0 percent at 19,218.35 (close)
Shanghai - Composite: DOWN 1.3 percent at 3,197.90 (close)
Euro/dollar: DOWN at $1.0915 from $1.0918 on Tuesday
Pound/dollar: DOWN at $1.2717 from $1.2766
Dollar/yen: UP at 142.13 from 141.40 yen
Euro/pound: UP at 85.86 pence from 85.50 pence
Brent North Sea crude: DOWN 0.1 percent at $75.81 per barrel
West Texas Intermediate: FLAT at $71.21 per barrel