Global equities fall as inflation fears agitate investors

Stocks fell in Europe and Asia-Pacific on Thursday as the fear of US inflation that rocked Wall Street in the previous session swept through global stock markets.

The European Stoxx 600 index fell 0.8% in early trades, while the UK’s FTSE 100 fell 1.3%.

Japan’s Topix closed 1.5% lower, bringing its losses for the week to 4.4%. China’s CSI 300 index of stocks listed in Shanghai and Shenzhen fell 1.2%. All the other major stock exchanges in Asia were also in the red.

The losses came after official data in the United States showed inflation rose 4.2% year on year in April, prices rising at a faster rate than economists had expected.

Reading scared markets, with the S&P 500 closing down 2.2%, the worst one-day performance of the Wall Street benchmark since February.

The prospect of higher and sustained inflation can depress equity and debt markets as it reduces real returns from dividends or fixed interest payments, causing stock and bond prices to fall.

The yield on 10-year US Treasuries, which moves inversely to its price, climbed in New York on Wednesday before stabilizing at the start of the European session at 1.674 percent, down 0.03 points percentage.

Wednesday’s data also heightened speculation that the U.S. Federal Reserve, the world’s most powerful central bank, may accelerate its schedule to cut its $ 120 billion in bond purchases that have supported financial markets since March. latest.

A senior Federal Reserve official this week downplayed inflation risks astransient overvoltage“.

“The Fed’s insistence that inflation is only transitory has a hearing,” said Tai Hui, chief Asian market strategist at JPMorgan Asset Management. “But if the inflation data does not calm down in the coming months, the challenge to its credibility could be disruptive.”

Tech stocks were hit hard in the United States, with the Nasdaq falling 2.7%. They have also weakened in Europe and Asia. Valuations in the sector had skyrocketed during the pandemic as locked-in households bought and socialized online, but are now deemed particularly vulnerable to a market correction.

In Hong Kong, Tencent and Alibaba both fell more than 2%. SoftBank, a technology conglomerate listed in Tokyo, lost 2.7% despite the highest profit ever for a Japanese company a day earlier. The Stoxx tech sub-index fell 1 percent.

Taiwan’s highly technological Taiex index fell 3.4% before offsetting most of the losses. The country’s benchmark also suffered this week on a Covid-19 resurgence.

The inflation data for the United States came after a period in which commodity prices have jumped, due to high demand and tight supply. Investors also see them as a hedge against inflation. Iron-ore prices hit a record dollar on Monday.

The commodity boom has pushed China’s producer price index – a measure of inflation at factory gates – to highest level in three years in April, although growth in the country’s consumer price index remained below 1 percent.

On Thursday, most commodities, including iron ore and crude oil, fell. The international benchmark crude oil, Brent, fell 1.4% to $ 68.33 per barrel. The Colonial pipeline in the United States, which transports fuel across the country, resumption of operations Wednesday after being arrested last Friday by a cyberattack.

Gold rose 0.2 percent to $ 1,819.76 per troy ounce.

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