World Stocks Steady Near Lows as Inflation Jitters Ease

By Reuters
October 5, 2021 Updated: October 5, 2021

MILAN—World shares steadied near lows on Tuesday as worries that rising oil prices will feed inflationary pressures appeared to ease, while the dollar regained strength ahead of U.S. payrolls data on Friday seen as key to the Federal Reserve’s next move.

MSCI’s gauge of global stocks was down 0.1 percent by 0823 GMT but off a more than three-month low hit during Asian trading.

European stocks rose 0.3 percent as rising bank stocks and an encouraging earnings update from chipmaker Infineon calmed nerves following a tech-fuelled selloff on Monday.

Wall Street was also set for a rebound with futures on the tech-heavy Nasdaq up 0.3 percent and S&P 500 futures 0.2 percent higher.

Asian shares fell for a third straight day, catching up with heavy losses in the United States, where investors dumped Big Tech as Facebook was hit by a nearly six-hour outage.

Facebook’s Frankfurt-listed stock rose 2.6 percent as its services came back online.

But investors remained cautious, worrying that the rally in energy prices and supply chain disruptions could derail the economic recovery just as the U.S. Federal Reserve gets closer to reducing its massive stimulus.

“More than anything else, we are concerned about the impact of stagflation on the general indices, which are very high,” said Giuseppe Sersale, fund manager at Anthilia.

“We prefer energy and materials, of course, and we’re worried about stocks with high multiples that price who-knows-what increase in earnings (see Nasdaq),” he added.

Oil prices hit their highest levels in at least three years, extending gains from the previous session that came after the world’s major oil producers announced they had decided to keep a cap on crude supplies.

OPEC+ confirmed on Monday it would stick to its current output policy as demand for petroleum products rebounds, despite pressure from some countries for a bigger boost to production.

Brent crude rose 0.6 percent at $81.75 a barrel, while U.S. oil added 0.4 percent at $77.94.

Market focus in Asia was on whether embattled property developer China Evergrande would offer any respite to investors looking for signs of asset disposals.

Trading in shares in the world’s largest indebted developer was halted on Monday but other Chinese property developers grappled with ratings downgrades on worries about their ability to repay debt.

The U.S. dollar edged back towards a one-year high versus major peers ahead of a key payrolls report at the end of the week that could boost the case for the Fed to start tapering stimulus as soon as next month.

“A positive number, which in this case would be somewhere in the region of 480,000 or above, will give the Fed the final reason it requires to initiate the tapering of its asset purchase program,” said ActivTrades analyst Ricardo Evangelista. The dollar index, which tracks the greenback versus a basket of six currencies, was last up 0.1 percent at 93.9, while the euro fell 0.16 percent to $1.1602.

Gains in the dollar depressed gold prices, which eased 0.7 percent to $1,757 per ounce, after rising on Monday to the highest since Sept. 23.

By Danilo Masoni and Anshuman Daga