LONDON - Stock markets dropped further on prospects of more aggressive rises to interest rates to fight sky-high inflation, renewing concerns over the global economy entering recession next year.
After a healthy rally in recent weeks fuelled by signs that price rises were slowing, the US Federal Reserve, European Central Bank and Bank of England this week crushed any Christmas spirit by hiking borrowing costs again by sizeable amounts and warning of more pain.
While inflation in most countries has started coming down -- helped by a drop in energy costs -- it remains at multi-decade highs.
And observers have warned that economies could be heading for a period of stagflation where prices keep rising but growth stalls.
"In a nutshell, it is all about fears over a sharper economic slowdown in 2023 than previously expected," noted Fawad Razaqzada, market analyst at City Index trading group.
"While macro data have been weak of late, there was still hope that the downturn might be short-lived and that a recession might be avoided in some regions altogether, amid signs of inflation peaking in some regions like the US."
The latest rate hikes came as data showed US and UK retail sales dropping in November as consumers -- key drivers of growth -- feel the pinch from high prices and rate hikes.