Stock markets mostly fell Wednesday before crunch US inflation data, with investors concerned that a spike in oil will drive consumer prices higher and force the Federal Reserve to lift interest rates again.
All eyes were on the latest reading on US inflation due Wednesday, ahead of an interest-rate decision Thursday from the European Central Bank and the Fed next week.
“Oil prices have risen by more than 25 percent over the past few months, which suggests a new inflationary pressure and something that will muddy the outlook for the Fed at its next rate meeting,” noted Russ Mould, investment director at AJ Bell.
The dollar traded mixed before the inflation reading.
The US central bank has insisted that its decision-making on monetary policy will be data-driven as it assesses a range of figures, which have for much of 2023 suggested that more than a year of tightening is having the desired effect.
That had fanned optimism that July’s hike was the last and officials would allow its measures to work through the economy and bring inflation to heel.
But a recent run of strong data, particularly on the jobs market and the services sector, has revived talk that more were on the way, with a surge in oil prices to 10-month highs adding to those concerns.
The pick-up has been fuelled by Saudi Arabia and Russia’s decision to slash output until the end of the year, while floods in Libya have hammered its ability to pump.
Oil prices rose further on Wednesday as the International Energy Agency warned that Moscow and Riyadh’s decision would cause a “significant supply shortfall”.
On the corporate front, shares in British oil giant BP fell nearly one percent after chief executive Bernard Looney unexpectedly resigned, having admitted to not being “fully transparent” about historical relationships with colleagues.
Looney, 53, has left after less than four years in the role, having seen the firm through a tumultuous period that included huge swings in prices owing to the Covid pandemic and Russia’s invasion of Ukraine.
He had also come under fierce criticism from environmentalists, who have accused BP and rivals of not going far enough in transitioning away from fossil fuels.
Away from oil, German footwear brand Birkenstock has filed for an initial public offering in the United States, planning to list its shares on the New York Stock Exchange.
The proposed terms of its share sale have not been revealed, but news reports previously said that the IPO could value the sandal maker at more than $8 billion.
The brand, founded in 1774 to make orthopaedic shoes, received a Hollywood boost recently when actress Margot Robbie donned a pair of pink Birkenstocks in the lead role of the hit movie “Barbie”.
– Key figures around 1100 GMT –
London – FTSE 100: DOWN 0.3 percent at 7,501.86 points
Frankfurt – DAX: DOWN 0.8 percent at 15,587.41
Paris – CAC 40: DOWN 0.8 percent at 7,194.17
EURO STOXX 50: DOWN 0.9 percent at 4,204.26
Tokyo – Nikkei 225: DOWN 0.2 percent at 32,706.52 (close)
Hong Kong – Hang Seng Index: DOWN 0.1 percent at 18,009.22 (close)
Shanghai – Composite: DOWN 0.5 percent at 3,123.07 (close)
New York – Dow: DOWN 0.1 percent at 34,645.99 (close)
Euro/dollar: UP at $1.0737 from $1.0732
Pound/dollar: DOWN at $1.2464 from $1.2492
Dollar/yen: UP at 147.40 yen from 147.15 yen on Tuesday
Euro/pound: UP at 86.16 from 85.88 pence
Brent North Sea crude: UP 0.6 percent at $92.62 per barrel
West Texas Intermediate: UP 0.6 percent at $89.36 per barrel
Originally published as Stocks retreat as rising oil prices fuel inflation fears