Stocks Fall After Powell Says Rate Hike Possible

Stock markets slid Friday after Federal Reserve boss Jerome Powell warned the central bank "will not hesitate" to hike US interest rates further in its quest to bring down inflation.

His comment halted a rally for equities since last week when Fed officials hinted that their long-running tightening cycle may be at an end.

"Powell helped bring the equity market resurgence to a grinding halt, with his apparent hawkish tone sending the 10-year (US Treasury) yields higher and equities lower," noted Joshua Mahony, chief market analyst at Scope Markets.

Other key decision-makers have lined up to suggest that while recent data suggested several earlier hikes were kicking in, traders should be aware that more measures could be needed if prices remained elevated.

Powell told an International Monetary Fund conference Thursday that progress toward reaching two-percent inflation was "not assured".

"If it becomes appropriate to tighten policy further, we will not hesitate to do so," he said.

He added that officials were aware of the need not to overtighten, which many fear could tip the world's top economy into recession.

The Fed decision last week to hold rates came as they acknowledged soaring Treasuries -- 10-year yields hit a 16-year high recently -- were acting as a substitute for rate hikes.

Hopes for an end to the rate-hiking fuelled a rally in US government bonds -- yields fall as prices rise.

Saxo market strategist Redmond Wong said Powell's comments were "an attempt to push back on the dovish repricing".

Stephen Innes at SPI Asset Management said Powell "basically dumped ice water on the thought of peak Fed" after Treasury yields rallied Thursday.

Wall Street ended in the red Thursday, with the S&P 500 falling after eight straight gains.

Asia and Europe followed suit Friday, with London stocks hit also by official data showing the UK economy stalled in the third quarter.

JPMorgan economist Michael Feroli remained optimistic the hikes had come to an end.

"We still believe the Fed is done hiking for this cycle, but... (Powell's) speech should serve as notice that their rhetoric must stay hawkish until they've seen further improvement in inflation," he noted.

London - FTSE 100: DOWN 1.2 percent at 7,366.83 points

Paris - CAC 40: DOWN 1.1 percent at 7,036.79

Frankfurt - DAX: DOWN 0.7 percent at 15,241.24

EURO STOXX 50: DOWN 0.9 percent at 4,192.74

Tokyo - Nikkei 225: DOWN 0.2 percent at 32,568.11 (close)

Hong Kong - Hang Seng Index: DOWN 1.8 percent at 17,203.26 (close)

Shanghai - Composite: DOWN 0.5 percent at 3,038.97 (close)

New York - Dow: DOWN 0.7 percent at 33,891.94 (close)

Euro/dollar: UP at $1.0676 from $1.0671 on Thursday

Pound/dollar: DOWN at $1.2211 from $1.2223

Dollar/yen: UP at 151.45 yen from 151.35 yen

Brent North Sea crude: UP 0.9 percent at $80.71 per barrel

West Texas Intermediate: UP 1.0 percent at $76.47 per barrel