European stock markets opened mixed on Wednesday ahead of US president Joe Biden’s visit to the UK later today for the G7 Summit, his first international trip since taking office.
The FTSE 100 (^FTSE) was down 0.3% after the opening bell, France’s CAC (^FCHI) was up 0.2%, and the DAX (^GDAXI) was less than 0.1% lower in Germany.
Markets continue to be cautious about inflation as they react to Chinese inflation data.
However, the World Bank updated its growth forecast, with the global economy now set for the fastest recession recovery in more than 80 years. The Washington-based group expects the world economy to grow by 5.6% in 2021. The upgraded outlook beats previous expectations in January for growth of 4.1%.
Despite the recovery, the institution warned on Tuesday that global output will be about 2% below pre-pandemic projections by the end of this year.
Things on the continent are also moving in the right direction, with Europe’s COVID vaccinations accelerating after a slow start and most countries lifting lockdown restrictions, with inflation, consumer and business confidence rebounding strongly.
Investors await the key event this week, a meeting of the European Central Bank (ECB) on Thursday, to gauge how the upbeat economic outlook changes the president Christine Lagarde and the bank’s policy plans. As well as the latest inflation data from the US, also on Thursday.
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However, major indices have been on a knife edge amid fears the pandemic recovery will cause economies to overheat and prompt central banks to withdraw policy support sooner than expected.
Inflation concerns, supply-chain issues and staff shortages are also adding further pressure as investors look for direction.
Across the Atlantic, US stocks ended mixed on Tuesday after job openings soared to record highs. Figures from the Bureau of Labor Statistics showed vacancies rose to 9.3 million in April – the highest number on record and up 100% year-on-year.
Wall Street’s blue-chip S&P 500 (^GSPC) closed flat, up just 0.02% and came within inches of a fresh record. The Dow Jones (^DJI) ended the session less than 0.1% lower.
The tech-heavy Nasdaq (^IXIC) rallied for the third consecutive session, climbing 43.19 points or 0.3%, as a rebound in megacap technology stocks including Amazon (AMZN) Apple (AAPL) and PayPal (PYPL) helped prop up the benchmark index.
Despite rising inflation fear, the US 10-year Treasury yield (^TNX) fell 2.7% to its lowest level since 7 May, ahead of Thursday’s consumer-price data that could offer hints on how long the Federal Reserve holds off tapering stimulus.
Asian stocks were also mixed overnight. The Nikkei (^N225) fell 0.4% in Japan, while the Hang Seng (^HSI) was down 0.2% and the Shanghai Composite (000001.SS) closed just over 0.3% up.
It comes after Chinese producer price index (PPI) jumped 9% from a year earlier, the highest in over 12 years, on surging commodity prices. The country’s consumer price index for the same month rose 1.3% from a year earlier.
China has been taking steps to curb the recent sharp increase in commodity prices. “While some of the rise can be attributed to base effects due to the huge slide in commodity prices that we saw in March and April last year which saw PPI decline -3.7%, there is increasing evidence that various supply side issues are starting to create a situation where rather than being transitory, inflation pressures could become more persistent,” chief market analyst at CMC Markets, Michael Hewson said.
Crude oil (CL=F) rebounded after taking a hit on Tuesday, trading up 0.6% to $70.42 (£50). Brent (BZ=F) was also in the positive territory, up over 0.4% to $72.44. Both benchmarks rallied last week, with crude hitting $70 a barrel for the first time since October 2018 and brent pass the $72 mark.
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