Stocks fell in Europe and Asia-Pacific and investors are betting that Wall Street indices will fall for the fourth day in a row as fear of inflation in the United States swept through global stock markets.
The European Stoxx 600 index lost 0.9% and the UK’s FTSE 100 fell 1.6%. Hong Kong’s Hang Seng Index closed down 1.8%, while all other major Asian exchanges ended Thursday’s session lower.
Futures that bet on the future direction of the S&P 500 fell 0.3% after the blue-chip US index fell 2.2% on Wednesday in its worst one-day performance since February. Contracts on the top 100 stocks of the tech-focused Nasdaq Composite fell 0.1%. The Nasdaq ended Wednesday nearly 8% below its all-time close of record, reached on April 27.
Data released on Wednesday showed inflation in the United States rose 4.2% year-on-year in April, with prices rising at a faster pace than economists had expected. The S&P 500 hit an all-time high on Friday, fueled by optimism for a global recovery supported by central banks keeping the currency loose. The Wall Street benchmark has fallen about 4% so far this week.
“People are afraid of inflation and worried about rising interest rates,” said Patrick Spencer, vice president of equities at Baird.
This week’s stock declines, he added, were “healthy, and what historically happens when sentiment gets too positive.”
The prospect of sustained high inflation pushes down the prices of stocks and bonds by lowering real yields on dividends or fixed interest payments. 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.
Since global drugmakers announced effective coronavirus vaccines last November, stocks of banks, industry groups and other sectors whose fortunes are tied to economic growth have outperformed tech stocks that have benefited from the pandemic.
But on Thursday, investors withdrew money from these so-called reopening deals as well as from the tech sector. The Stoxx tech sub-index fell 0.9% on Thursday, while financial stocks fell 1.3% and traveler groups also fell.
The reopening of transactions had “turned frothy” and had “taken into account much of the recovery” even though major global economies had yet to fully reopen, said Sonja Laud, chief investment officer of Legal & General Investment Management . “It’s like the time to take a break.”
Fed Vice Chairman Richard Clarida said on Wednesday that ‘transient’ factors related to industry shutdowns last year had pushed price hikes above the bank’s 2% target central and that “the economy remains far from our objectives”.
“The Fed will likely continue to scorn the force led by transient price hikes,” Citigroup economist Veronica Clark said.
Credit Suisse strategists said the Fed “may well make an announcement on the cut before the end of the year, with a real reduction in the pace of bond purchases in 2022.”
International benchmark Brent crude oil fell 2% to $ 67.94 a barrel as the Colonial pipeline in the United States resumed operations after being shut down last Friday by a cyber attack.