British flag on a flagpole.

UK braces for long recession after biggest interest rate hike in 27 years, ASX to open flat

Australian shares are likely to start the day relatively flat, after the Bank of England announced its biggest interest rate hike in 27 years and warned of a long recession for Britain.

ASX futures were up 0.1 per cent, to 6,891 points, by 8:40am AEST.

The Australian dollar was trading at 69.6 US cents, after rising 0.2 per cent overnight. This was largely due to a weaker US greenback.

It follows a lacklustre session on Wall Street, which saw the Dow Jones index fall 0.3 per cent, to 32,727 points, the S&P 500 lose 0.1 per cent, to 4,152, and the Nasdaq Composite gain 0.4 per cent, to 12,721.

“The market is looking for a direction after a strong bounce that relieved the deep pessimism that had permeated the markets,” said Yung-Yu Ma, chief investment strategist at BMO Wealth Management.

“Many signs indicate that [US] inflation has peaked and the question now turns to how quickly it will come down or whether stickier components will keep it higher than the Fed [Federal Reserve] is comfortable with.”

Recession fears were also on the minds of oil traders, and the possibility this could sink energy demand, as crude prices dropped to their lowest level since before Russia’s invasion of Ukraine in February.

Brent crude plunged 3.6 per cent, to $US93.34 a barrel.

Spot gold jumped 1.5 per cent to a one-month high of $US1,792 an ounce.

Recession for the UK

Britain’s central bank raised interest rates by 0.5 percentage points on Thursday evening (AEST), its biggest increase since 1995.

This was despite the BoE warning that a long recession was on its way, as it rushed to smother a rise in inflation which is now expected to peak at 13.3 per cent in October — up from its previous forecast of 11 per cent.

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