Global stocks diverge before key US inflation data

Stock markets mostly retreated Tuesday, with all eyes on the latest US inflation data as recent surges to global prices risk derailing the economic recovery.

Markets were waiting to see whether Tuesday’s update on US consumer prices would amplify or mitigate worries about soaring inflation.

“There is always room for a positive surprise in inflation figures as we are not done worrying about the global chip shortage, the slow logistics, firm energy and commodity prices, rising wages and rising Covid worries,” noted Swissquote analyst Ipek Ozkardeskaya.

The Federal Reserve has argued that sharp price increases are transient and do not require an abrupt shift in monetary policy, such as sudden tapering of huge financial stimulus that has supported economies through the pandemic.

Central banks could also raise interest rates to tame runaway prices, increasing the cost of the vast government borrowing during the Covid outbreak.

Rises to raw materials has helped to fuel inflation in recent months.

Oil prices have bounced back strongly, and rose further Tuesday, despite global crude demand dropping for three straight months as Covid cases rise in Asia.

The International Energy Agency, however, added on Tuesday that oil demand was expected to rebound in October.

The US inflation numbers come after figures showed the cost firms pay for goods leaving American factories had risen last month at a record pace owing to a jump in demand as well as supply and labour shortages.

That report has put pressure on the Fed to begin tapering its ultra-loose monetary policy as soon as November.

High inflation concerns have hit stock markets in recent weeks, while the first gain for Wall Street’s S&P 500 and Dow indices Monday after last week’s losing streak was not enough to spur a broad advance for Asian and European stock markets Tuesday.

Tokyo, however, clocked up its highest finish in 31 years on hopes for fresh Japanese stimulus.

Hong Kong and Shanghai led Asian losses on concerns about troubled property titan Evergrande, which is teetering on the brink of bankruptcy owing hundreds of billions of dollars.