Global markets rise amid inflation fears
LONDON: Stock markets mostly climbed on Friday at the end of a week dominated by soaring inflation concerns.
The euro dropped to a 15-month low versus the dollar before steadying, with the US currency benefiting from Federal Reserve rate hike expectations owing to surging inflation in the world’s biggest economy.
This week has seen also data revealing rising costs in number two economy China, while figures out of Europe’s biggest economy Germany on Friday added to inflationary concerns.
“We have seen a fresh reminder of the underlying inflationary pressure on businesses and consumers ater German wholesale selling prices reached 15.2 per cent year-on-year,” noted Joshua Mahony, senior market analyst at IG trading group.
“Recent Chinese and US inflation readings have brought concern from investors, with the dollar gaining ground as a result.” Mahony said the fact German wholesale prices had reached the highest level since 1974 “highlights that European businesses are clearly under the same price pressures experienced in the US and China”.
Markets are looking to see if the global inflation spurt will ease as supply chain disruptions and wage hikes normalise.
A beter-than-expected earnings season -- which came despite the jump in prices -- has given confidence that the economic recovery remains on track.
“Inflation could remain elevated in the coming months, and each inflation release that comes in above expectations has the potential to cause volatility in rate and equity markets, but we still don’t expect inflation to derail the equity rally,” said Mark Haefele at UBS Global Wealth Management.
Still, the prospect of higher rates has boosted the dollar, which this week also hit a four-year high against the yen and saw a healthy run-up against the British pound.