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Stock markets fell in Europe and Asia after the fall on Wall Street, and technology stocks suffered once again amid concerns that rising inflation would drive central banks to tighten monetary policy.
The European Stoxx 600 index fell 1.7% in morning operations, with the German and French markets by a similar margin. London’s FTSE 100 fell 2%. The falls came after Nasdaq Composite, a tech-heavy company, fell 2.6 percent on Monday.
Technology stocks supported the heaviest sales in Europe on Tuesday, with a Stoxx 600 technology index falling 2% below. According to Refinitiv data, all other major industrial groups were lower on the day.
Movements were ahead of U.S. inflation data on Wednesday, with consumer prices expected to rise 3.6% in April compared to the same period last year and 0.2%. % compared to March 2021. A “basic” index that excludes volatile foods and energy prices are expected to increase by 0.3% over the previous month. Citigroup economists expect rising prices for used cars, transportation and hotels to boost the base index.
Data from Tuesday showed that Chinese factory prices, an indicator of what domestic consumers and Western importers will pay for goods, rose to a three-year high of 6.8% last month, year back year.
Hong Kong’s Hang Seng closed more than 2 percent lower and Japan’s Nikkei 225 ended Tokyo’s trading session more than 3 percent.
Jay Powell, president of the U.S. Federal Reserve, has it committed continue with monthly purchases of $ 120 billion in central bank bonds that have propelled markets through the pandemic until the path to recovery is clarified.
However, investors expect the Fed to be forced to change its stance, a forecast that has become a challenge after the central bank revised its inflation regime last year accepted short-term outbreaks of strong price growth.
“We hope that this year’s rapid economic recovery, and the consequent recovery in inflationary pressures, will encourage investors to increasingly take into account a narrower real stance on monetary policy,” Capital Economics analysts said in a statement. research note.
Inflation not only increases the chances of central banks withdrawing support from markets. It also erodes the yields on fixed-income securities, such as government bonds, causing their prices to fall and yields to rise. The performance of the US Treasury bond reports on how investors value future cash flows from equities. Analysts say this is a particularly important factor for technology stocks, which have risen rapidly during the pandemic and have had their valuations flattered by low interest rates.
The shares of many Wall Street users have begun to plummet. The Cathie Wood’s Ark fund, which has shares in companies like Tesla, is down a third since its February high, while other sparkling market shares such as unprofitable companies and technology groups exposed to bitcoin price fluctuations have stumbled.
U.S. Treasury 10-year benchmark yields remained stable at 1.608% on Tuesday, but rose 0.9% at the start of the year.
Not all analysts are bearish about the future direction of stocks, and some argue that higher inflation in the U.S. will be transient as consumer demand stabilizes and supply chain bottlenecks are resolved. related to industry shutdowns last year.
“While investors have recently been concerned about inflation, we expect any short-term rise in inflation to be temporary and not worry about persistent inflation,” said Andrea Bevis, senior vice president of private wealth management. ‘UBS.
He added, however, that “investors should diversify beyond high-capitalization technology firms and turn to cyclical, market-value-oriented areas,” such as energy producers and industrial groups, “which should to continue to benefit from higher yields and an expanded economic recovery ”.
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