European stocks and US stock futures fell on Wednesday, reflecting caution over US inflation data, which could boost expectations of the Covid-19-era first rate hike in the world’s largest economy.
The regional Stoxx Europe 600 lost 0.2 percent and the London FTSE 100 lost 0.4 percent. The futures markets indicated that the blue chip stock index S&P 500 would lose 0.2 percent in early New York deals.
Economists polled by Reuters expect data released later in the day to show US consumer prices rose 5.3 percent in September from the same month last year, following similar trends.
Investors and central banks have moved from characterizing inflation as a temporary effect of industries reopening after the 2020 pandemic closings to worries that it will prolong as wages rise and a gas shortage in Europe drives oil prices higher.
“The markets are currently debating persistent inflation and it is easy to see that this debate will continue through the middle of next year,” said Zehrid Osmani, head of Martin Currie’s global portfolio trust.
The specter of inflation undermining investment returns on stocks and bonds has pushed the FTSE All World stock index more than 4 percent below its all-time high in early September and brought government bond markets to a standstill. On Wednesday, the yield on the ten-year benchmark government bond, which is moving in the opposite direction to its price, was constant at 1.58 percent, its highest level since June.
The IMF predicts that price increases will fall back to pre-pandemic levels in mid-2022. But in a report on Monday, it also warned central banks that “risks are skewed upwards” and said monetary policy should be “very, very vigilant”.
European natural gas contracts for November delivery rose 6.1 percent on Wednesday to € 93 per megawatt hour, nearly five times their level at the beginning of the year, after Chinese trade data showed the country’s imports hit their highest level since January last month. Brent crude, the international oil benchmark, fell 0.2 percent to $ 83.2 a barrel, near a three-year high.
The dollar index, which measures the US currency against six others and was buoyed by expectations of a US rate hike, was near its highest level in a year on Wednesday.
The pound sterling remained stable against the euro, while the yen was roughly at its weakest against the dollar since December 2018.
In the Asian markets, the Hong Kong Stock Exchange canceled its trading session on Wednesday due to the effects of Typhoon Kompasu. The Japanese Topix stock index lost 0.5 percent in afternoon trading, while the Chinese CSI 300 index rose 1 percent.
