Global stocks lose ground after jump in US inflation

The dollar hit three- month highs against the euro and world stocks slipped on Wednesday after a jump in US inflation fuelled the expectation of a quicker end to Federal Reserve stimulus, while a drop in China’s crude imports dampened oil.

The US consumer price index ( CPI) rose 0.9percent in June, data showed on Tuesday, above market expectations and the largest gain since June 2008. Investors are also watching the semi- annual testimony of Fed chair Jerome Powell to Congress on Wednesday and Thursday for more clues on whether the Fed will take more aggressive steps to halt rising inflation. “This isn’t surprising that the market is concerned about inflation, our view is still that most of it is transitory,” said Seema Shah, chief strategist at Principal Global Investors, adding that she did not expect the Fed to start tapering its bond- buying programme until early next year. “The Fed speakers will be out in force today reiterating their patience with inflation to reassure markets.” MSCI’s broadest gauge of global stocks dipped 0.15percent after hitting a record high on Tuesday on investor bets of a global economic recovery just weak enough to permit central banks to retain a dovish policy.

European stocks fell 0.34percent after hitting record peaks on Tuesday, with Germany down 0.24percent and France off 0.15percent. Britain’s FTSE 100 dropped 0.5percent, after UK inflation hit 2.5percent in June, its highest in nearly three years. MSCI’s broadest index of Asia- Pacific shares outside Japan dipped 0.22percent, as Chinese blue chips fell 1.15percent, Hong Kong’s Hang Seng slipped 0.7percent and Seoul’s Kospi lost 0.2percent. Japan’s Nikkei fell 0.38percent.