NEW YORK/LONDON – Global shares remained under pressure on Friday with debate over the timing of future interest rate rises on both sides of the Atlantic intensified by euro zone inflation jumping to a 13-year high.
Earlier in the week, global shares suffered their worst rout since January with major US and European indices feeling the heat. The S&P 500 suffered its worst month since the onset of the pandemic in September, reflecting concerns about COVID-19, inflation fears and budget wrangling in Washington.
On the first day of October, the month for some of history's most infamous market routs, stocks continued to lag.
MSCI's gauge of stocks across the globe shed 0.25 percent. The index was on track for its longest daily losing streak since last February.
Wall Street gained ground, with sentiment boosted by drugmaker Merck announcing progress in the development of an oral COVID-19 drug. But the tech-heavy Nasdaq Composite continued to decline.
The Dow Jones Industrial Average rose 108.49 points, or 0.32 percent, to 33,952.41, the S&P 500 gained 0.49 points, or 0.01 percent, to 4,308.03 and the Nasdaq Composite dropped 36.94 points, or 0.26 percent, to 14,411.64.
The pan-European STOXX index of 600 European companies initially fell sharply, hitting its weakest level since mid-July. The index lost 0.49 percent.
With stellar economic growth figures now in the rear view mirror, markets are looking ugly going into October, Michael Hewson, chief markets analyst at CMC Markets, said.
"There is a sense that with October's reputation, worries about surging energy prices, supply chain disruptions, concerns about inflation and power shortages, October could be a fairly windy affair," Hewson said.
Consumer price inflation in the 19 countries sharing the euro accelerated to 3.4 percent year-on-year in September, from 3 percent a month earlier, the highest reading since the height of the global financial crisis in September 2008.
So far, central bankers have insisted that rises in inflation are temporary.
"We think there are high chances that this inflation is less transitory than all central banks, including the European Central Bank, are suggesting," BNP Paribas economist Luigi Speranza said.
Data overnight showed that Asia's manufacturing activity broadly stagnated in September, weighing on Asian shares.
Dollar, Treasury yields slip
The dollar slipped, having begun the last quarter of 2021 near its highest levels of the year, and heading for its best week since June as currency markets braced for US interest rates to rise before those of major peers.
The dollar index fell 0.307 percent, with the euro up 0.16 percent to $1.1599.
Benchmark 10-year notes last rose 12/32 in price to yield 1.4858 percent, from 1.527% late on Thursday.
Japan's Nikkei tumbled 2.3 percent to the lowest level since Sept. 3. An MSCI index of Asia-Pacific stocks slid 1.22 percent to its lowest since Aug 24.
Markets in the Chinese mainland are closed for a week from Friday for the Golden Week holiday, while Hong Kong markets were closed for a day.
"You can argue whether it's really stagflation or not, but the whole growth-inflation backdrop seems to have just tilted to a less favourable one," said Rob Carnell, Asia-Pacific head of research at ING in Singapore.
Federal Reserve Chair Jerome Powell said on Wednesday that resolving "tension" between high inflation and high unemployment is the Fed's most urgent issue, acknowledging a potential conflict between the US central bank's two goals of stable prices and full employment. read more
The latest clues on the Fed's policy normalisation path come with US personal spending and core consumption deflator data later in the day.
Crude prices rose but were still below the $80 a barrel Brent hit earlier in the week for the first time in three years.
US crude recently rose 0.21 percent to $75.19 per barrel and Brent was at $78.55, up 0.31 percent on the day.
Gold strengthened following Thursday's 1.77 percent surge, its biggest rise since March.
US gold futures gained 0.07 percent to $1,756.50 an ounce.