Stock markets all but fell and oil costs extended earnings on Wednesday as investors pored over reports showing new inflation spikes.
The annual expansion in the United States hit a forty-year high in March, the same month that UK fees soared at the fastest rate in 30 years.
Global inflation, which is already soaring due to the constraints as economies appear to fully reopen after pandemic shutdowns, is similarly rising following the fallout from the battle against Ukraine.
“The steepest hikes in a generation have destabilized financial markets, as investors digest the unsavory prospect of more severe interest rate hikes,” noted Susannah Streeter, senior investment and market analyst at Hargreaves Lansdown. .
Tokyo shrugged off the gloom, however, with the benchmark Nikkei 225 closing nearly 2% higher after steep losses earlier in the week.
Analysts said markets welcomed an indication that US inflation was approaching its peak.
In China, where a Covid-19 outbreak has caused massive lockdowns and rumbled global trade arteries, the main stock index lost nearly 1% on Wednesday.
It came as official data showed Chinese imports fell in March for the first time in nearly two years, hit by the coronavirus and weakening consumer demand.
Elsewhere on Wednesday, oil prices rose further in a volatile trading week.
“Oil appears to be the main benefactor of the protracted conflict between Ukraine and Russia,” noted Stephen Innes of SPI Asset Management.
Russia is a major oil and gas producer and the war has raised fears of supply constraints.
However, global oil demand will be slightly lower than expected this year following strict Covid lockdowns in China, the world’s biggest crude importer, the International Energy Agency said on Wednesday.
Russian oil supplies are expected to continue to fall in April by 1.5 million barrels per day, according to the IEA, which advises developed countries on their energy policies.
In currency trading on Wednesday, the yen hit its lowest level against the dollar in two decades, extending recent declines as the gap widens between Japan’s ultra-loose monetary policy and the Fed’s tightening.
Although traditionally considered a safe-haven currency, the uncertainty fueled by the war in Ukraine did not cause the yen to strengthen.
Instead, the Fed is moving towards a more competitive rate-tightening policy and the shock of rising oil prices in Japan – a major importer of fossil fuels – drove the foreign currency lower, analysts said.
– Key figures around 11:00 GMT –
London – FTSE 100: UP 0.2% to 7,589.83 points
Paris – CAC 40: 0.2% down to 6,525.72%
Frankfurt – DAX: 0.6% down to 14,040.83%
EURO STOXX 50: DOWN 0.4% to 3,815.33
Tokyo – Nikkei 225: UP 1.9% to 26,843.49 (closing)
Hong Kong – Hang Seng Index: UP 0.3% to 21,374.37 (closing)
Shanghai – Composite: DOWN 0.8% to 3,186.82 (close)
New York – Dow Jones: DOWN 0.3% to 34,220.36 (closing)
North Sea Brent: 1.6% up to $106.28 a barrel
West Texas Intermediate: UP 1.3% to $101.90 a barrel
Euro/dollar: UP at $1.082 vs. $1.0818
Pound/dollar: UP to $1.3006 from $1.2977
Euro/pound: DOWN to 83.29 pence vs. 83.36 pence
Dollar/yen: FALL to 126.05 vs. 126.22 yen