Renewed inflation fears send US stocks tumbling
AFP – Wall Street closed sharply lower on Tuesday as inflation fears returned to the market, tamping down share prices in Europe as well.
The losses in New York hit every sector after the 10-year US Treasury note moved back above three percent and oil prices moved higher, which combined to sap investor optimism of recent days.
Solid retail sales data released Tuesday bodes well for GDP growth in the second quarter but also reignited concerns that inflation will accelerate, causing the Federal Reserve to be more aggressive about raising interest rates.
All three major US indexes fell for the first time in days, with the broad S&P 500 losing 0.68 percent.
"It reflects the continued prospect for Fed rate hikes and improved economic growth in the second quarter," Karl Haeling of LBBW said of the jump in Treasury yields.
Maris Ogg, at Tower Bridge Advisors, said the strong run up in share prices in the past few days, and the bull market of the last 18 months — which hit its peak in late January — mean the market retreat on inflation concerns is "pretty understandable."
– European data disappoints –
In Europe, Wall Street weakness and downbeat economic data undercut stocks; Frankfurt lost 0.1 percent, while London and Paris were fractionally higher.
In Europe’s biggest economy, Germany, growth came out at a disappointing 0.3 percent in the first quarter, half the pace of the preceding three months, new data showed.
And adding to the gloom was a widely watched index of investor confidence, which stood at its lowest level since November 2012.
Meanwhile, growth in the 19-country eurozone as a whole stood at 0.4 percent in the January-March period, down from 0.7 percent in the previous quarter, the EU’s Eurostat statistics agency calculated.
Analysts nevertheless were confident that the disappointing data would prove short-lived.
"We think that the slowdown in eurozone GDP growth largely reflected temporary effects," said Capital Economics analyst Jack Allen, noting that "unseasonably bad weather" impacted the data.
– Asia trade issues weigh –
Asian stock markets mostly fell as trade issues returned to the spotlight with China and the US holding more high-level talks this week.
A run-up in equities over the past week has also led to profit-taking, with Hong Kong hit after six straight days of gains.
Chinese Vice Premier Liu He — President Xi Jinping’s right-hand man on economic issues — is leading talks in Washington aimed at heading off a trade war between the world’s two largest economies.
There are hopes the two sides can hammer out an agreement to end a dispute that has seen both sides threaten tariffs on billions of dollars of goods.
Concerns about the crude-rich Middle East have helped put upward pressure on oil prices, with deadly clashes on the Israel-Gaza border coming less than a week after US President Donald Trump ripped up the Iran nuclear deal.
– Key figures around 2100 GMT –
New York – Dow: DOWN 0.78 percent to 24,706.41 points (close)
New York – S&P 500: DOWN 0.68 percent to 2,711.45 (close)
New York – Nasdaq: DOWN 0.8 percent tO 7,351.63 (close)
London – FTSE 100: UP 0.2 percent at 7,722.98 (close)
Frankfurt – DAX 30: DOWN 0.1 percent at 12,970.04 (close)
Paris – CAC 40: UP 0.2 percent at 5,553.16 (close)
EURO STOXX 50: FLAT at 3,564.38
Tokyo – Nikkei 225: DOWN 0.2 percent at 22,818.02 (close)
Hong Kong – Hang Seng: DOWN 1.2 percent at 31,152.03 (close)
Shanghai – Composite: UP 0.6 percent at 3,192.12 (close)
Euro/dollar: DOWN to $1.1838 from $1.1923
Pound/dollar: DOWN to $1.3506 from $1.3540
Dollar/yen: UP to 110.33 yen from 109.92 yen
Oil – Brent North Sea: DOWN 21 cents to $78.02 per barrel
Oil – West Texas Intermediate: UP 3 cents to $70.99