US stocks resumed overnight selling as new economic data reignited fears of further sharp interest rate hikes by the US central bank and the World Bank warned of a global recession.

It was a volatile trading session as stocks first rose after US President Joe Biden announced a “provisional deal” with labor unions to avoid a railroad strike.

Economic data showed retail sales rebounded in August as consumers bought more cars and ate out amid falling gas prices.

However, revised figures showed lower sales in July.

The US Department of Labor also said initial claims for state unemployment benefits fell to their lowest level since the end of May last week.

Investors expect a significant rate hike by the Federal Reserve next week, possibly by as much as 1 percentage point.

“Markets remain volatile with the Fed meeting next week,” said Quincy Crosby, chief global strategist at LPL Financial.

The Dow Jones Industrial Average closed at a two-month low.

Banks and healthcare stocks rose, but technology and energy stocks led the decline.

The Dow was down 0.6% to 30,962, the S&P 500 was down 1.1% to 3,901, and the Nasdaq Composite was down 1.4% to 11,552.

Oil prices plummeted on news of a deal with railroad workers.

Brent crude fell 3.6% to $90.71 a barrel and West Texas crude fell nearly 4% to $85.03 a barrel.

Physical gold fell to its lowest since April 2021 as US Treasury yields and the US dollar rose on hopes of a sharp US interest rate hike next week.

The Australian dollar was also sold.

At 6:30 am AEST, it was down 0.7%. 66.97 cents.

The local currency has seen significant losses since hitting a high of 69.16 cents this week.

The Australian stock market is expected to fall today, with the ASX SPI 200 index down 0.8% to 6,790 at 7am AEST.

European stocks were the main losers, with oil and technology stocks losing the most.

The FTSE 100 Index rose 0.1% to 7,282, Germany’s DAX fell 0.6% to 12,956 and Paris’ CAC 40 fell 1% to 4,662.

World Bank Warns of Recession

The World Bank said the world could be headed for a global recession as central banks are raising interest rates to combat rapid inflation.

In a new report, the bank said the world’s largest economies, the United States, China and the eurozone, were slowing and “even a mild blow to the global economy next year could plunge it into recession.” .

The global economy is slowing at its fastest pace following the post-recession recovery since 1970, with consumer confidence declining faster than leading to previous global recessions.

However, he said central bank rate hikes are likely to continue, but may not be enough to keep inflation down.

He said global core inflation could remain at around 5% in 2023, almost double the five-year average before the pandemic.

The bank said the central bank may need to raise interest rates by another 2% on top of the average 2% rate hike seen in 2021.

But it could slow global gross domestic product to 0.5% next year, triggering a recession.

ABC/Reuters