Inflation concerns continue to grip markets today, after consumer prices in the United States jumped much sharper than expected in April amid supply shortages and rising prices. demand as blockages ease.
News that the consumer price index climbed 4.2% in the month from a year earlier – the fastest since 2008 – fueled fears the US economy was getting too hot .
This sparked losses on Wall Street last night, and in Asia-Pacific stock exchanges where stocks fell for the third day in a row.
With government support programs spurring consumer spending and stretched supply chains creating a commodity rush, investors fear the rise in inflation will be temporary, as the Federal Reserve believes.
the Dow fell 681 points, or 1.99%, to mark its worst session since January – a day after its biggest drop since February.
The sale went around the world again, sending Japan Nikkei slipping 2.5% and in Australia S & P / ASX 200 down nearly 1%, adding to losses earlier this week.
London is also heading for a lower start, with the FTSE 100 expected to fall nearly 1%, reversing yesterday’s slight rally after Tuesday’s drop.
Some economists, however, point out that inflation in the United States was pulled up by one-off factors as the economy emerged from the restrictions of the pandemic, which could therefore be a temporary spike.
Prices for used cars and trucks, housing and lodging, airline tickets, recreation, auto insurance and furniture all pushed up the CPI, as the reopening of businesses created temporary quirks in the data.
New US producer price data and weekly jobless claims are due today – which will provide new insight into the state of the world’s largest economy.
It will take time to tell if inflation is transient or permanent, so this problem will linger for months.
Jim Reid from German Bank predicts regular pockets of volatility as the two sides argue:
It is dangerous to read too much in one issue, but the great force gives us the certainty that this is not just a fleeting story. Another buzzword for us is that this year will be “tough” for the markets, especially once the reopening takes place. This version personifies that thought process.
You can have boring times, but this year is going to be a big battle between the uptrend of mass reopening / relaunching on the one hand and the inflationary consequences on the other. Expect regular pockets of theft. I’m still leaning heavily on the inflationary camp, but the reality is that the battle is still in its early stages and non-inflationists will still be able to use the transitional argument for several more months.
Bitcoin fell overnight, after Elon Musk tweeted that Tesla was halting vehicle purchases using Bitcoin, citing the environmental impact of mining the cryptocurrency.
Musk added that Tesla would not sell any of the bitcoin purchased earlier this year and intends to use bitcoin for transactions as soon as mining uses more sustainable energy.
This sent bitcoin down – from over $ 54,000 just before Musk’s tweet to under $ 46,000. It has recovered quite a bit since, to around $ 51,000 – but still down more than 10% in the past 24 hours.
Other cryptos have also slipped, notably ether and dogecoin:
- 1:30 p.m. BST: US weekly jobless claims figures
- 1:30 p.m. BST: US producer price inflation report for April