Stocks diverge while oil gains tracking soaring inflation

LONDON — Stock markets diverged on Wednesday as investors pored over data showing further spikes to inflation, while oil prices extended gains.

US annual consumer inflation hit a 40-year high in March, the same month that UK prices jumped at the fastest pace in three decades. 

Global inflation, already rocketing on supply constraints as economies look to fully reopen following pandemic lockdowns, is rising further on fallout from the Ukraine war.

US wholesale price inflation hit a record annual rate of 11.2 per cent  in the year to March, according to data released Wednesday.

Analysts said markets welcomed an indication that US inflation was approaching its peak, though it has raised expectations that the Federal Reserve will take more aggressive action to contain prices.

"The steepest rises in a generation have unsettled financial markets, as investors digest the unsavoury prospect of tougher hikes in interest rates," noted Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

Tokyo shrugged off the gloom, however, with the benchmark Nikkei 225 closing almost 2 per cent  higher following sharp losses at the start of the week.

In China, where a COVID-19 outbreak has caused mass lockdowns and snarled global trade arteries, the main stock market index lost close to 1 per cent  Wednesday.

That came as official data showed China's imports shrank on-year in March for the first time in nearly two years, hit by the coronavirus and weakening consumer demand.

European stocks were solidly lower in afternoon trading while Wall Street opened little changed as the corporate reporting season got underway.

JPMorgan Chase saw its first quarter net profit plunge by 40 per cent as it set $900 million aside to deal with potential losses due to the Ukraine conflict and inflation.

It already booked $524 million in losses as it sought to lower its exposure to soaring commodities prices and Russian counterparties.

Shares in JPMorgan Chase fell 2.8 per cent at the opening of trading. 

Meanwhile, Delta airlines beat expectations even if it still lost money and said it expects second quarter revenue to come in at 97 per cent of the pre-pandemic level in 2019.

Its shares rose 3.8 per cent.

Oil rises 

Elsewhere on Wednesday, oil prices climbed further in a volatile trading week.

"Oil seems to be the primary benefactor of [the] Ukraine vs. Russia conflict dragging out longer," noted Stephen Innes of SPI Asset Management.

Russia is a major producer of oil and gas and the war has triggered fears of supply constraints.

However, global oil demand will be slightly lower than forecast this year in the wake of strict COVID lockdowns in China, the world's biggest importer of crude, the International Energy Agency (IEA) said on Wednesday.

Russian oil supply is expected to continue to fall in April by 1.5 million barrels per day, according to the IEA, which advises developed countries on their energy policies.