London/Singapore (Reuters) – On Wednesday, European stocks barely went up, and the dollar went up because investors were worried about rising inflation and how rising interest rates could hurt global growth.
Europe’s STOXX 600 index went up by 0.3%, and the stock markets in London and Paris both went up by 0.2% and 0.4%.
Even though German retail sales fell more than expected in April because consumers are feeling the pinch of higher prices, bank and auto stocks went up.
Figures released on Tuesday showed that rising food and energy prices drove inflation in the eurozone to a record high of 8.1% in May. This has raised concerns about rate hikes not just in Europe but around the world.
The Bank of Canada will be the next central bank to raise interest rates. Economists expect the rate to go up from 1% to 1.5% by the end of the day on Wednesday.
Market players were watching to see if tighter monetary policy by central banks around the world to fight inflation would cause recessions, which could slow rate hikes.
Mike Bell, a global market strategist at J.P. Morgan Asset Management, said, “Right now, everything is just so uncertain.” “In times like that, it makes sense to just limit how much risk you take.”
Bell said that investors were also worried about what Moscow would do if the European Union agreed to a ban on importing crude oil from Russia. The goal of the ban is to stop 90 percent of Russia’s crude oil imports into the 27-country group by the end of the year.
Europe’s gains were expected to be repeated on Wall Street. In London trade, S&P 500 futures rose 0.4%, making them stronger.
The MSCI world equity index, which tracks stocks in 50 countries, was flat.
Earlier, Shanghai came out of a two-month lockdown with bleary eyes. However, as data showed sharp drops in factory activity across Asia because China’s demand was falling, the relief in the region was short-lived.
The Hang Seng index in Hong Kong was a big reason why the MSCI index of Asia-Pacific stocks outside of Japan fell by 0.4%.
Bond yields in the Eurozone went down early Wednesday after going up on Tuesday when the bloc’s inflation numbers were much higher than expected.
As worries about global inflation grew again, the U.S. dollar went up against the yen to its highest level in two weeks. This was helped by higher yields on U.S. Treasury bonds. The dollar has stopped falling after three weeks and reached its highest level in two weeks at 129.23 yen.
The dollar index, which compares the value of the dollar to those of six major currencies, including Japan’s, went up by 0.2% to 102.05. This continued a 0.4% rise from Tuesday.
GYRATIONS
The U.S. Federal Reserve starts selling off some of the assets it bought during the pandemic. Traders think it will raise rates by 50 basis points at meetings this month and next, but they aren’t sure what will happen after that and are getting more worried about it.
James Bullard, president of the Federal Reserve Bank of St. Louis, and John Williams, president of the Federal Reserve Bank of New York, will also speak on Wednesday. Their words will be watched for clues about the future.
Moh Siong Sim, an analyst at the Bank of Singapore, said, “We’re in this kind of gray area where it’s hard to know what the Fed will do after the July meeting.”
“Over the next few weeks, there will be a lot of changes based on what people say and how the data turns out.”
After the EU agreed to a partial and phased ban on Russian oil and the COVID-19 lockdown in Shanghai ended, oil prices in the commodity markets slowly went up. [O/R]
Brent crude futures were trading 0.3 percent higher at $115.95 per barrel.
