Equities slowing down despite US inflation

LONDON — US stocks slid on Wednesday following data that showed a slowdown in inflation, but less than investors had expected. 

European stocks, which had been trading strongly higher, pared their gains after the US Labour Department said the consumer price index (CPI) rose by 8.5 per cent in April, down from the 8.5 per cent annual gain registered in March.

Briefing.com analyst Patrick J. O'Hare said the 0.3 per cent month-on-month gain in the overall CPI was above the consensus expectation of 0.2 per cent.

The 0.6 jump in monthly core CPI, which excludes food and energy costs, was also above the consensus of 0.4 per cent.

"The key takeaway from the report is that it provided some leeway that suggests peak inflation might have been hit, but with the moderation not as significant as had been hoped, it also stirred concerns that inflation might stick at persistently high levels longer than anyone would like, including the Fed," said O'Hare.

The US Federal Reserve (Fed) and other central banks have been hiking interest rates to tackle decades-high inflation, both of which tend to slow economic growth.

So far, the European Central Bank has been reluctant to follow suit, but on Wednesday, ECB president Christine Lagarde hinted that it could raise interest rates from historic lows as soon as July.

On Wall Street, the Dow dipped 0.2 per cent after a couple minutes of trading, with the S&P 500 shedding 0.5 per cent and the tech-heavy Nasdaq dropping 1.1 per cent.

In afternoon European trading, London was up 0.5 per cent, Frankfurt added 0.8 per cent and Paris climbed 1.2 per cent.

Ahead of the inflation figure, equities also won a boost from US President Joe Biden's administration looking at possibly lifting trade tariffs on China to try and control inflation.

Equities have been on another roller-coaster ride this week amid high inflation concerns, the Russian invasion of Ukraine and impact of China's COVID-19 lockdowns on supply chains.

Global investors have been spooked by China's sinking April exports — the lowest in almost two years — as well as data showing its consumer inflation had risen at the quickest pace in nearly half a year.

Meanwhile, global oil prices rose around 5 per cent on concerns over Russia's war in Ukraine, China's COVID lockdown and slowing US inflation.

A day after briefly falling below $100 per barrel, benchmark US oil contract WTI surged back above to $105 per barrel.