European stocks down to two-month lows

On Friday European stocks fell to two-month lows after negative performances in Asia and on Wall Street, with euro zone inflation data expected to reach a 13year high to intensify investor fears over increasing prices combining with faltering growth.

On the first day of October, the month for some of history’s most notorious market collapses, the STOXX index of 600 companies dropped 0.9%, reaching its weakest level since mid-July. The MSCI’s gauge of stocks across the globe lost 0.4%, with U.S. stock futures pointing to further falls.

Data overnight showed that Asia’s manufacturing activity broadly stagnated in September as signs of slowing Chinese growth weighed on the region’s economies.

The dollar, however, began the last quarter of 2021 near its highest levels of the year, and moving for its best week since June as currency markets braced for U.S. interest rates to rise before those of major peers.

In Asia, Japan’s Nikkei fell by 2.3% to the lowest level since the 3 September. An MSCI index of Asia-Pacific stocks lost 1.22% to its lowest since the 24 August. Chinese markets are closed for a week from Friday for the Golden Week holiday. The debate over whether rising inflation mixed with irregular growth was a formula for stagflation continued.

Federal Reserve Chair Jerome Powell said on Wednesday that solving “tension” between high inflation and high unemployment is the Fed’s most crucial matter, recognising a possible struggle between the U.S. central bank’s two goals of stable prices and full employment.

Crude prices continued to fall after Brent topped $80 a barrel earlier in the week for the first time in three years. Brent crude futures shed 0.5% from Thursday to $77.92, while U.S. crude futures dropped 0.6% to $74.57. Gold, despite being traditionally an inflation hedge and safe haven, lost 0.26% to $1,752 an ounce, following Thursday’s 1.77% surge, the biggest since March.