Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Stocks are sliding today as rising inflation worries, and a fall in tech stocks, send investors running for cover.
Markets across the Asia-Pacific region have fallen sharply, with Japan’s Nikkei sliding 3% – its worst day since February.
South Korea’s Kospi has lost over 1%, while Hong Kong’s Hang Seng is down almost 2%.
It’s shaping up to be a poor day in Europe too, with the main indices called down around 1%.
The selloff follows a jittery day on Wall Street. where technology stocks fell sharply yesterday, dragging the Nasdaq down by 2.6%, its biggest one-day fall since March.
Anxiety that rising commodity prices could push inflation sharply higher, as some economies reopen from the pandemic, is one factor. Iron ore and copper both hit record highs this month, putting pressure on manufacturers as they try to obtain raw materials.
Michael Hewson of CMC Markets says:
This underperformance in the Nasdaq once again started to act as a drag on wider market sentiment as another disappointing close served to undermine confidence more broadly, and pull all US indices lower, though not before the Dow posted yet another record high.
Once again it has been concern about inflation that appears to be weighing on broader market sentiment, with commodity prices once again the major culprit, ahead of US CPI [consumer price inflation] numbers that are due out later this week.
Tech stocks are also suffering from the rotation into ‘value stocks’ — firms badly hit by the pandemic, whose sales and profits should improve as economies reopen.
In a more inflationary world, companies with low (or no) profits today, but high hopes for the future, are less attractive.
Last Friday’s disappointing US employment report also continues to reverberate around the markets. One theory is that hiring was so weak (just 266,000 new jobs), because of labor shortages – a mismatch between supply and demand. If so, bosses may need to raise wages to attract back workers.
Chris Weston of Pepperstone explains:
The move in commodities has been there for all to see, and reports that China is hoovering up everything in the bulks space has resonated, with copper also on a charge – this has led to ever-higher inflation expectations, and despite a fall in real Treasury yields, talk of inflation is deafening.
Indications of labour shortages have the inflationist talking up the prospect of rising wage pressures, and another feedback loop to higher inflation.
Also coming up today…
AstraZeneca faces a bruising clash with investors at its annual meeting today, with a protest vote expected against CEO Pascal Soriot’s pay packet.
A host of shareholder advisory groups and fund managers have lined up to oppose a pay-and-perks plan with a maximum value of £17.8m for 2021. If investors holding more than 50% of the company’s stock vote against the proposals at its annual meeting on Tuesday, AstraZeneca will be forced to redraw the scheme.
- 9am BST: China’s new Yuan Loans for April
- 10am BST: ZEW Economic Sentiment Index for May
- 11am BST: AstraZeneca’s AGM
- 3pm BST: US JOLTs Job Openings for March