Markets waver on inflation worry; oil rebounds from losses

On Wednesday, Asian and European stock markets shook as traders digested Wall Street losses and data showing that runaway inflation shows no signs of abating.

Oil, on the other hand, rebounded after falling sharply on reports that OPEC was considering dropping Russia from an output agreement, which observers said could allow producers to pump more.

Equities have enjoyed a largely healthy run of late on hopes that inflation could be nearing a peak and a sell-off across markets may have run its course.

The easing of some lockdown measures in China added to the optimism.

Read More: Headline inflation hits 28-month high of 13.8%

Yet investors were brought down to earth with a bump Tuesday after data showed that eurozone inflation hit a record high in May on rocketing energy costs.

The news puts extra pressure on the European Central Bank to act quicker to rein in prices by hiking interest rates, along with the Bank of England and the US Federal Reserve.

Markets remain fearful as the Ukraine conflict fuels massive price gains for energy and food, translating into spiking inflation — and damaging the post-pandemic global economic recovery.

“There are heightened concerns around inflation and where central banks are likely to go trying to combat inflation,” Kristina Hooper, of Invesco Advisers, told Bloomberg Radio.

“This has gone from just an inflation scare to a growth scare. Uncertainty has grown.”

Equities were also mixed in Asia, with traders shrugging off a further easing of lockdown restrictions in China that many hope will give a much-needed boost to the world’s number two economy.

Hong Kong and Shanghai slipped along with Taipei, Bangkok, Mumbai, and Manila, though Tokyo, Sydney, Singapore, and Wellington rose.

Back in Europe, London fell and Frankfurt rose, while Paris flatlined.

The oil market has recovered somewhat after falling more than 4% late Tuesday in response to a Wall Street Journal report that OPEC was considering withdrawing Russia from an agreement that has locked producers into limited output increases.

Analysts believe that removing Moscow would result in an early end to the pact and allow major crude producers such as Saudi Arabia to reopen the taps.

“If there’s any confirmation from OPEC+ members that the absence of Russia is being discussed, then prices can drop to as low as $100,” said Will Sungchil Yun, at VI Investment Corp.

London – FTSE 100: DOWN 0.4 percent at 7,580.33 points

Frankfurt – DAX: UP 0.3 percent at 14,431.51

Paris – CAC 40: FLAT at 6,468.99

EURO STOXX 50: FLAT at 3,788.16

Tokyo – Nikkei 225: UP 0.7 percent at 27,457.89 (close)

Hong Kong – Hang Seng Index: DOWN 0.6 percent at 21,294.94 (close)

Shanghai – Composite: DOWN 0.1 percent at 3,182.16 (close)

New York – Dow: DOWN 0.7 percent at 32,990.12 (close)

Euro/dollar: DOWN at $1.0720 from $1.0734 on Tuesday

Pound/dollar: DOWN at $1.2586 from $1.2602

Euro/pound: UNCHANGED at 85.18 pence

Dollar/yen: UP at 129.39 yen from 128.67 yen

Brent North Sea crude: UP 1.5 percent at $117.33 per barrel

West Texas Intermediate: UP 1.5 percent at $116.35

Read More: Markets mixed as inflation, rate worries temper rally

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