Stocks diverge before key US inflation data

·3-min read
Investors are keeping a close eye on the release of US consumer inflation data, which could have a bearing on when the Federal Reserve starts to tighten monetary policy (AFP/Ed JONES)

Stock markets mostly retreated Tuesday, with all eyes on the latest US inflation data as recent surges to global prices risk derailing the economic recovery.

Markets were waiting to see whether Tuesday's update on US consumer prices would amplify or mitigate worries about soaring inflation.

"There is always room for a positive surprise in inflation figures as we are not done worrying about the global chip shortage, the slow logistics, firm energy and commodity prices, rising wages and rising Covid worries," noted Swissquote analyst Ipek Ozkardeskaya.

The Federal Reserve has argued that sharp price increases are transient and do not require an abrupt shift in monetary policy, such as sudden tapering of huge financial stimulus that has supported economies through the pandemic.

Central banks could also raise interest rates to tame runaway prices, increasing the cost of the vast government borrowing during the Covid outbreak.

Rises to raw materials has helped to fuel inflation in recent months.

Oil prices have bounced back strongly, and rose further Tuesday, despite global crude demand dropping for three straight months as Covid cases rise in Asia.

The International Energy Agency, however, added on Tuesday that oil demand was expected to rebound in October.

The US inflation numbers come after figures showed the cost firms pay for goods leaving American factories had risen last month at a record pace owing to a jump in demand as well as supply and labour shortages.

That report has put pressure on the Fed to begin tapering its ultra-loose monetary policy as soon as November.

High inflation concerns have hit stock markets in recent weeks, while the first gain for Wall Street's S&P 500 and Dow indices Monday after last week's losing streak was not enough to spur a broad advance for Asian and European stock markets Tuesday.

Tokyo, however, clocked up its highest finish in 31 years on hopes for fresh Japanese stimulus.

Hong Kong and Shanghai led Asian losses on concerns about troubled property titan Evergrande, which is teetering on the brink of bankruptcy owing hundreds of billions of dollars.

The firm has warned it is under "tremendous pressure" as it deals with the cash crunch that many fear could send it under and have a severe impact on the Chinese economy.

Evergrande's Hong Kong-listed shares fell nearly 12 percent and have lost around 80 percent since the start of the year.

- Key figures around 1030 GMT -

London - FTSE 100: DOWN 0.3 percent at 7,047.23 points

Frankfurt - DAX 30: UP 0.1 percent at 15,708.79

Paris - CAC 40: DOWN 0.5 percent at 6,640.74

EURO STOXX 50: DOWN 0.2 percent at 4,181.05

Tokyo - Nikkei 225: UP 0.7 percent at 30,670.10 (close)

Hong Kong - Hang Seng Index: DOWN 1.2 percent at 25,502.23 (close)

Shanghai - Composite: DOWN 1.4 percent at 3,662.60 (close)

New York - Dow: UP 0.8 percent to 34,869.63 (close)

Euro/dollar: DOWN at $1.1808 from $1.1815 at 2040 GMT

Pound/dollar: UP at $1.3864 from $1.3839

Euro/pound: DOWN at 85.19 pence from 85.34 pence

Dollar/yen: UP at 110.09 yen from 110.01 yen

Brent North Sea crude: UP 0.8 percent at $74.12 per barrel

West Texas Intermediate: UP 0.7 percent at $70.94 per barrel

dan-bcp/rfj/cw

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