European stocks and U.S. stock futures slumped early on Thursday amid fears of a recession, a day after Federal Reserve Chairman Jerome Powell told Congress the central bank will continue to hike interest rates to combat inflation and acknowledged that a downturn was a “possibility.”
The London Stock Exchange’s FTSE 100 slumped more than 0.7% after markets opened on Thursday morning while the Frankfurt Stock Exchange’s DAX index was down 1.27%.
The pan-European Stoxx 600 Index was down more than 1.1% an hour after markets opened.
Stock markets in Asia appeared to be largely unperturbed, however, with Hong Kong’s Hang Seng index being up 1.26% while the Tokyo Stock Exchange’s Nikkei 225 was up 0.08% when markets closed on Thursday
U.S. stock futures were also down in premarket trading early on Thursday with the benchmark S&P 500 index dropping 0.2% while the Dow Jones Index slid 0.36%.
Crude oil prices were also down, with the global Brent Crude futures dropping more than 2% and falling below $110 per barrel.
In testimony before Congress on Wednesday, Powell said the Federal Reserve is “strongly committed” to raising interest rates until the country’s high inflation numbers are normalized. Powell also admitted that the central bank’s aggressive rate hikes meant that a recession is “certainly a possibility.” Powell’s statement before Congress came a week after the Federal Reserve hiked interest rates by 75 basis points—the steepest hike since 1994. The steeper-than-expected hike in rates triggered alarm bells among financial institutions, who warned of an impending recession sometime in the next 12 to 18 months. Powell, however, stated the central bank was “not trying to induce a recession,” and was instead simply focused on bringing inflation down to a target rate of 2%, down from its current 41-year high of 8.6%.