- European indices slide after falls on Wall Street.
- Inflation causing a fresh jump in anxiety.
- Traders await the US Consumer Price Index for May.
- Fresh Covid curbs in China helps push oil down slightly.
Inflation is what is scaring the horses on financial markets and equities in Europe are galloping lower after another pretty wild ride for US equities.
On Wall Street the tech heavy Nasdaq slid by 2.7% and the S&P 500 fell 2.3%, while the FTSE 100 and FTSE 250 have shed 0.8% in early trade. In Frankfurt the DAX has also opened 1% down and the CAC 40 in Paris is 0.9% lower.
Eyes are locked firmly on the release of the US Consumer Price Index due out later, and it’s the anticipation of the bleak scenario which this data is set to reveal which is causing this fresh jump of anxiety.
Prices are expected to show a year-on-year increase of 8.3%, the highest in almost 40 years and there are expectations the Federal Reserve may have to pull more tightly on the reins to slow it down. Signs that prices had spiralled even higher last month, are likely to set off a fresh round of selling, but a lower than expected reading could prompt a wave of buying which would top off a volatile week for stocks.
The European Central Bank’s decision to raise interest rates in July for the first time in 11 years yesterday was a fresh jolt for financial markets and is another sign that the cheap money journey is hurtling abruptly to an end. It came hot on the heels of larger than expected rates rises from the Reserve Banks of India and Australia this week, training the spotlight once again on the struggle to contain escalating prices for consumers and businesses.
The tech sell off continues, pushing Scottish Mortgage Investment Trust more than 2.4% lower in early trade, making it the biggest faller on the FTSE 100. It has plenty of big tech names in its stable such as Nvidia, Amazon and Tesla which all have taken a tumble as worries about future interest rate moves by the Federal Reserve ratchet up.
The surge in oil prices are expected to be a big driver up of prices in the US inflation report for May, and although the benchmark Brent Crude has eased off its highs of earlier in the week, the price is still sticking above $122 a barrel. China’s Coronavirus problem doesn’t look like its going away any time soon, with a fresh district lockdown now in force in Shanghai.
This is causing a ripple of uncertainty about demand in the Chinese economy, which is set to stay given Beijing’s zero-Covid stance which has been disabling parts of the economy as authorities try to eradicate the virus.