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US shares dip on rates concerns US shares dip on rates concerns
(about 1 hour later)
US shares have fallen in Wednesday trading due to ongoing concerns about the possibility of higher interest rates to combat inflation. US shares fell in Wednesday trading due to ongoing concerns about the possibility of higher interest rates to combat inflation.
The declines come after Federal Reserve chairman Ben Bernanke said overnight that US inflation remained "somewhat elevated".The declines come after Federal Reserve chairman Ben Bernanke said overnight that US inflation remained "somewhat elevated".
US investor unease was further fuelled by the European Central Bank raising its interest rates on Wednesday.US investor unease was further fuelled by the European Central Bank raising its interest rates on Wednesday.
The Dow Jones index was down 147 points to 13,449 by mid afternoon in New York. The Dow Jones ended the day down 131 points to 13,464.
Meanwhile, the Nasdaq lost 24 points to 2,587, and the Standard & Poor's 500 gave up 13.49 points to 1,517.
'Hitting speed bump''Hitting speed bump'
The Fed next meets to consider US interest rates on 27-28 June.The Fed next meets to consider US interest rates on 27-28 June.
While most analysts expect rates to remain at 5.25% this time - where they have been for the past year - there is now some concern that the Fed may raise rates further towards the end of the year.While most analysts expect rates to remain at 5.25% this time - where they have been for the past year - there is now some concern that the Fed may raise rates further towards the end of the year.
Worries about inflation were given a further boost by revised government figures showing wages rising faster than expected.Worries about inflation were given a further boost by revised government figures showing wages rising faster than expected.
The new figures showed that US labour costs rose by 1.8% in the first quarter of this year, up from the initial estimate of 0.6%.The new figures showed that US labour costs rose by 1.8% in the first quarter of this year, up from the initial estimate of 0.6%.
"The market hit a speed bump yesterday in the form of rising interest rates, and for the time being, it appears as if it will struggle to get back in high gear," said analyst Patrick O'Hare of Briefing.com."The market hit a speed bump yesterday in the form of rising interest rates, and for the time being, it appears as if it will struggle to get back in high gear," said analyst Patrick O'Hare of Briefing.com.
News that the European Central Bank had increased rates by one quarter of a percentage point to 4% also came as broker Morgan Stanley said it thought that European stocks could fall by as much as 14% over the next six months.News that the European Central Bank had increased rates by one quarter of a percentage point to 4% also came as broker Morgan Stanley said it thought that European stocks could fall by as much as 14% over the next six months.
Despite the interest rates concerns, Mr Bernanke says the US economy is continuing to expand and will enjoy moderate growth this year.Despite the interest rates concerns, Mr Bernanke says the US economy is continuing to expand and will enjoy moderate growth this year.
Meanwhile the US government has lowered its forecast for US economic growth, from 2.9% to 2.3% for the year from 1 October 2006.Meanwhile the US government has lowered its forecast for US economic growth, from 2.9% to 2.3% for the year from 1 October 2006.
The Dow Jones index has recently hit a series of all-time highs.The Dow Jones index has recently hit a series of all-time highs.