Opening Bell: Inflation Fears Push Global Stocks To 6-Week Low; USD, Gold Firm
New York (May 13) On Thursday, futures on the Dow, S&P, NASDAQ and Russell 2000 were all trading in the red and European shares opened lower, with global stocks at their lowest since early April. Spiking US inflation heightened concerns that the economic recovery may be at an impass.
Treasury yields rallied.
Global Financial Affairs
Global markets remain under pressure with the MSCI World Index lower for the fourth consecutive day. In Europe, the STOXX 600 Index dropped 1% right out of the gate, weighed by slumping commodity prices and a strengthening dollar, after US consumer prices recorded their biggest jump in in almost 12 years in April, reigniting concerns that the Fed will have to backtrack on its promise and raise interest rates.
The pan-European benchmark was down 1.6% at the time of writing, its lowest level since Apr. 1. The index is completing a small top, after having violated its uptrend line since the late-October low, as the price heads towards the uptrend line since the famous 2020 bottom, guarded by the 200 DMA.
The UK's FTSE 100 also slid, dropping 2.1% at the time of writing, to the lowest since Apr. 6. However, from a technical perspective it seemed in a better position than its continental peer.
While the price did fall below its uptrend line since late October, Briton's leading benchmark has not yet decisively topped out, and may have found support by the January highs.
British luxury retailer, Burberry (LON:BRBY) plunged 8% after it announced a 10% drop in the company’s annual sales, a result of pandemic shutdowns. Telecom and broadband provider BT Group (LON:BT) also declined, after reporting a 7% slide in revenue and 6% drop in annual adjusted earnings.
British financial services group Hargreaves Lansdown (LON:HRGV) was lower as well, despite reporting record new business in the first quarter, as people increased their savings during the coronavirus lockdowns.
Asian markets sank this morning and regional gauges were on course for a technical correction. The MSCI Asia Pacific fell as much as 1.5%, which means it has fallen 10% from its Feb. 17 high, erasing all gains YTD.
On Wednesday during the Wall Street session, US stocks posted their sharpest selloff since February, after the inflation report surprised traders. The Technology sector—which has been enjoying the highest market valuations—continued to sell off, leading the market lower. Big tech names like Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT) shed over 2%. Energy (+0.5%) was the only sector in the S&P 500 Index in the green. Consumer Discretionary (-3.4%) underperformed.
The CPI release confirmed investors worst fears and dispelled the Feds’ too-oft repeated promise of lower for longer, which pushed yields higher.
The 10-year Treasury note yield soared above 1.7% intraday, closing at 1.693% for the first time since Apr. 5.
The jump took rates back above the extended neckline of a top. It also meant rates broke out of their falling channel.
The outlook for higher rates boosted the dollar, offsetting concerns of its weakening buying power, as traders are confident the Fed will raise rates, promises or not.
Investing.com
