Global stocks rebound as inflation concerns ease

Milan — World shares edged off the previous days lows on Tuesday as worries that rising oil prices will feed inflationary pressures appeared to ease, while the dollar regained strength before US payrolls data on Friday that is seen as key to the Federal Reserve’s next move.

The MSCI’s gauge of global stocks rose 0.6% by 3.09pm GMT, off a more than three-month low hit during Asian trading.

European stocks gained 0.8% as rising bank stocks and an encouraging earnings update from chipmaker Infineon calmed nerves after a tech-fuelled sell-off on Monday.

Wall Street was also firmer with the Dow Jones industrial average up 0.56% and the S&P 500 adding 0.76%.

Asian shares fell for a third straight day, catching up with heavy losses in the US, where investors dumped Big Tech as Facebook was hit by a nearly six-hour outage. Facebook’s stock rose more than 1% in US pre-market trade after its services came back online.

But investors remained cautious, worrying that the rally in energy prices and supply chain disruptions could derail the economic recovery just as the US Federal Reserve gets closer to reducing its massive stimulus.

“More than anything else, we are concerned about the impact of stagflation on the general indices, which are very high,” said Giuseppe Sersale, fund manager at Anthilia. “We prefer energy and materials, of course, and we’re worried about stocks with high multiples that price who-knows-what increase in earnings,” he added.

Banks, which tend to benefit from tighter monetary policy, were the strongest gainers in Europe, rising more than 2%.

JPMorgan analysts confirmed their overweight view on European lenders, citing the pickup in inflation and expectations of higher bond yields.

Oil buoyant

Oil prices in London hit fresh three-year highs, extending gains from the previous session that came after the world’s major oil producers announced they had decided to keep a cap on crude supplies.

OPEC+ confirmed on Monday it would stick to its current output policy as demand for petroleum products rebounds, despite pressure from some countries for a bigger boost to production.

Brent crude rose 1.3% to $82.31 a barrel, while WTI added 1.2% to $78.51.

“OPEC+ may inadvertently cause oil prices to surge even higher, adding to an energy crisis that primarily reflects very tight gas and coal markets,” said Vivek Dhar, Commonwealth Bank of Australia’s commodities analyst. “That potentially threatens the global economic recovery, just as global oil demand growth is picking up as economies reopen on the back of rising vaccination rates.”

Market focus in Asia was on whether embattled property developer China Evergrande would offer any respite to investors looking for signs of asset disposals. Trading in shares in the world’s most indebted developer was halted on Monday but other Chinese property developers grappled with ratings downgrades on worries about their ability to repay debt.

Dollar firms

The US dollar edged back towards a one-year high versus major peers ahead of a key payrolls report at the end of the week that could boost the case for the Fed to start tapering stimulus as soon as next month.

“A positive number, which in this case would be somewhere in the region of 480,000 or above, will give the Fed the final reason it requires to initiate the tapering of its asset purchase programme,” said ActivTrades analyst Ricardo Evangelista.

The dollar index, which tracks the greenback versus a basket of six currencies, was last up 0.1% at 93.9, while the euro fell 0.16% to $1.1602.

Bitcoin rose above the $50,000 mark for the first time in four weeks, adding to a series of gains since the start of October. It was last up 1.6% on the day.

Gains in the dollar depressed gold prices, which eased 0.7% to $1,757 an ounce, after rising on to the highest since September 23 on Monday.

US bond yields nudged up towards recent highs amid caution about the need to raise the government’s debt ceiling as the country faces the risk of a historic default in two weeks.

Ten-year Treasury yields were up 1.7 basis points at 1.498%.

Reuters