Stock markets around the world have had a mixed week, with renewed inflation fears denting investor confidence on both sides of the Atlantic as well as in Asia. New data from the United States, the eurozone and China has indicated that the strong upward pressure on prices seen in recent months shows no sign of abating.
The annual rate of inflation in China jumped to 1.5% in October, its highest level in more than a year, while factory gate prices in the country were up by over 13% on the back of soaring energy costs. Germany’s inflation rate last month rose to 4.5% from 4.1% in September, while the US consumer price index was up 6.2% in October – its highest level since 1990.
For investors, persistently high inflation is a problem because it raises the likelihood of central banks tightening monetary policy: by hiking interest rates, policymakers can try to restrict spending and bring prices under control. But higher rates are bad news for many businesses, particularly those that need to borrow to fund growth.
The US
On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 1.1% down for the week so far, with the S&P 500 losing 1%. While investors in the US had initially welcomed President Biden’s success in passing a $1trn infrastructure bill, concerns are growing over the impact that extra government spending will have on inflation in the years ahead.
Shares in carmaker Tesla have fallen sharply this week after founder and CEO Elon Musk revealed plans to sell off a significant chunk of his stock – apparently in order to settle a large tax bill.
The UK & Europe
In the UK, the FTSE 100 closed on Thursday 1.1% up for the week, with its strong performance underpinned by gains for energy and mining companies. Oil prices have continued to rise after data from the US showed that crude stocks had fallen faster than expected. Meanwhile the price of copper and other metals has risen on the back of increased global demand.
Shares in Marks & Spencer soared after the retailer raised its 2021 profit forecast, while broadcaster ITV also did well after announcing a surge in advertising revenues. Figures showing that the UK economy grew more slowly than expected in the last quarter led to declines in sterling – another factor behind the FTSE’s rise this week.
In Frankfurt, the DAX index ended Thursday’s session up 0.2% for the week, while France’s CAC 40 gained 0.3%. New data from Germany showed that fears over a bottleneck in the country’s manufacturing sector are starting to recede.
Asia
In Asia, the Hang Seng index in Hong Kong rose 1.5%: the news that real estate giant Evergrande had reached another restructuring deal with creditors helped to ease concerns over a potential property sector crash.
Japan’s Nikkei 225 index of leading shares, meanwhile, finished down 1.1%, giving up some of last week’s gains. Investors are concerned that next week’s official Q3 data will show that growth has slowed faster than expected.
November 5 | November 11 | Change (%) | |
|---|---|---|---|
FTSE 100 | 7304.0 | 7384.2 | 1.1 |
FTSE All-share | 4176.0 | 4212.4 | 0.9 |
S&P 500 | 4697.5 | 4649.3 | -1.0 |
Dow Jones | 36328.0 | 35921.2 | -1.1 |
DAX | 16054.4 | 16083.1 | 0.2 |
CAC 40 | 7040.8 | 7059.6 | 0.3 |
ACWI | 757.1 | 752.0 | -0.7 |
Hong Kong Hang Seng | 24870.5 | 25248.0 | 1.5 |
Nikkei 225 | 29611.6 | 29277.9 | -1.1 |
Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 11/11/2021.
