Stock markets tumble as US inflation spikes

Stock markets tumble as US inflation spikes

London (AFP) – European stock markets tumbled into the red on Wednesday, as higher-than-expected US inflation data fed speculation that US borrowing costs will be ramped up very soon. 

After taking their lead from a stronger showing in Asia earlier and clocking up gains in the first part of the session, stock prices in London, Frankfurt and Paris fell sharply following the release of US inflation data.

US consumer price inflation jumped to 0.5 percent in January, overshooting analysts’ expectations, with one key measure posting its highest increase in a year, the US Labor Department calculated. 

The core consumer price index, which excludes volatile food and fuel categories, rose 0.3 percent, the largest increase since January 2017.

In response, London’s benchmark FTSE 100 index was down 0.1 percent at around 1345 GMT, compared with the close on Tuesday.

In the eurozone, Frankfurt’s DAX 30 and the Paris CAC 40 indices were showing losses of 0.6 percent and 0.2 percent respectively. 

“Inflation data just came out. Much bigger than expected. Stocks are tanking!!” tweeted eToro market analyst, Mati Greenspan.

“Inflation fears justified,” tweeted London Capital Group analyst Jasper Lawler.

– So much for the calm –

Earlier, analysts had noted the return of some semblance of calm following the recent volatility. 

In Asia, Hong Kong’s main stocks index had closed up more than two percent, extending a rebound from the sell-off last week. 

Tokyo, however, fell to another four-month low as the yen strengthened against the dollar, at one point hitting a 15-month high. 

Investors were also unimpressed by weaker-than-expected economic data for Japan in the last quarter of 2017.

In Europe, the continent’s biggest economy, Germany, expanded by 0.6 percent in the final quarter of last year, official data showed. 

Global stock markets have tumbled in recent weeks, wiping out previous strong gains, largely on concerns that high US inflation will force the Federal Reserve to tighten the cost of borrowing faster than anticipated this year. 

“Given the recent stock market slump, risk aversion has grown, which prompted safe-haven buying of the yen,” Shinichiro Kadota, foreign exchange strategist at Barclays Securities, told AFP.

The dollar hit 106.84 yen in Asian trading — the lowest level since November 2016 — before recovering back above 107 yen.

In corporate activity, shares in pan-European TV giant Sky rallied 3.3 percent to 1,096 pence after the satellite broadcaster beat rival BT to show the bulk of live Premier League football matches in Britain over the next few years.

BT shares rose 1.15 percent to 228.45 pence.

– Key figures around 1345 GMT – 

London – FTSE 100: DOWN 0.1 percent at 7,164.76 points 

Frankfurt – DAX 30: DOWN 0.6 percent at 12,126.74

Paris – CAC 40: DOWN 0.2 percent at 5,099.14 

EURO STOXX 50: DOWN 0.4 percent at 3,327.01

Tokyo – Nikkei 225: DOWN 0.4 percent at 21,154.17 (close)

Hong Kong – Hang Seng: UP 2.3 percent at 30,515.60 (close)

Shanghai – Composite: UP 0.5 percent at 3,199.16 (close)

New York – DOW: UP 0.2 percent at 24,640.45 (close)

Euro/dollar: DOWN at $1.2311 from $1.2354

Pound/dollar: DOWN at $1.3841 from $1.3869

Dollar/yen: DOWN at 107.14 yen from 107.49 yen

Oil – Brent North Sea: DOWN 51 cents at $62.21 per barrel

Oil – West Texas Intermediate: DOWN 70 cents at $58.49