Such talk hits stocks hard because it would send investors back into less risky assets like bonds and make borrowing costs for companies higher.
Later today, US inflation data will provide more clues about the future direction of prices in the world’s biggest economy.
After a sharp rise in Chinese factory gate prices yesterday, US CPI numbers today are likely to show a similar jump. Markets expect a leap for April from 2.6% to 3.6%. While that may seem outlandishly high by modern standards, central bankers in the US should not be overly perturbed, given that it is in comparison to some of the worst days of Covid’s impact on the economy a year ago.
The question, as CMC analyst Michael Hewson pointed out in a note to clients this morning, is how much of the rise in prices is transitory, as the US Federal Reserve believes it to be.
“Unfortunately,” Hewson says, “we won’t know if they are right for another 2-3 months, which means we can probably expect to see further gyrations in global equity markets until the picture becomes clearer.”
The biggest riser on the FTSE 100 was Diageo, up 3% after a surprise announcement of stronger than expected profit growth and a return of its £4 billion share buyback plan. Glencore also rallied 3% and Spirax-Sarco Engineering gained 2.8%.
Fallers were Just Eat Takeaway.com, down 3.5% and Flutter Entertainment, which fell 1.5% after the respected head of its fantasy sports arm quit. HSBC fell 1%.
