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Stocks bounce but inflation fears persist

Stock MarketsOct 01, 2021 05:37PM ET
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2/2 © Reuters. FILE PHOTO: A man wearing a protective mask, amid the COVID-19 outbreak, is reflected on an electronic board displaying stock prices outside a brokerage in Tokyo, Japan, September 21, 2021. REUTERS/Kim Kyung-Hoon 2/2

By Matt Scuffham

NEW YORK (Reuters) - Global shares bounced in volatile trading 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 U.S. and European indices feeling the heat. The S&P 500 had its worst month since the onset of the pandemic in September, reflecting concerns about COVID-19, inflation fears and budget wrangling in Washington.

The first day of October, the month for some of history's most infamous market routs, marked a see-saw session with major indices repeatedly switching direction amid investor uncertainty.

MSCI's gauge of stocks across the globe gained 0.45%.

Prior to Friday's rally, the index had been on track for its longest daily losing streak since last February.

Wall Street strengthened as the day progressed, with sentiment boosted by drugmaker Merck announcing progress in the development of an oral COVID-19 drug and rising hopes an infrastructure bill will be passed.

Even so, all three indexes ended lower than last Friday's close, with the S&P 500 and the Nasdaq posting their biggest weekly percentage drops since February.

The Dow Jones Industrial Average rose 483.53 points, or 1.43%, to 34,327.45, the S&P 500 gained 49.55 points, or 1.15%, to 4,357.09 and the Nasdaq Composite added 118.12 points, or 0.82%, to 14,566.70.

In Europe, it was a different picture with the STOXX 600 index falling 0.4%.

"There's clearly still plenty of nerves in the markets at the moment, which is perfectly understandable under the circumstances," said OANDA analyst Craig Erlam.

"There's an enormous amount of uncertainty as we move into the end of the year and central banks removing stimulus, even raising rates, in the midst of that doesn't inspire confidence."

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% year on year in September, from 3% a month earlier, the highest reading since the height of the global financial crisis in September 2008.

"A sharp rise in the cost of living poses a threat to consumers and savers, so that is influencing the mood in the markets," said David Madden, market analyst at Equiti Capital.

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 (OTC:BNPQY) economist Luigi Speranza said.

Data overnight showed that Asia's manufacturing activity broadly stagnated in September as signs of slowing Chinese growth weighed on the region's economies, weighing on Asian shares.

Graphic: world stocks and bonds - https://fingfx.thomsonreuters.com/gfx/mkt/xmvjokdkxpr/worldstocks.JPG

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 U.S. interest rates to rise before those of major peers.

The dollar index fell 0.303%, with the euro up 0.15% to $1.1598.

Gold inched higher, following Thursday's 1.8% surge, as the weaker dollar and worries about rising inflation countered bets for looming interest rate hikes, keeping bullion on course for a small weekly gain.

U.S. gold futures settled up 0.1% at $1,758.4. Spot gold added 0.2% to $1,759.47 an ounce.

Benchmark 10-year notes last rose 17/32 in price to yield 1.4702%, from 1.527% late on Thursday.

Japan's Nikkei tumbled 2.3% to the lowest level since Sept. 3. An MSCI index of Asia-Pacific stocks slid 1.22% to its lowest since Aug. 24.

Chinese markets are closed for a week from Friday for the Golden Week holiday.

Crude prices rose but were still below the $80 a barrel Brent hit earlier in the week for the first time in three years.

U.S. crude oil futures settled at $75.88 per barrel, up 1.1%. Brent crude futures settled at $79.28 per barrel, up 1.2%.

Stocks bounce but inflation fears persist
 

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Comments (5)
Nick Farr
Nick Farr Oct 02, 2021 1:31PM ET
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Do you feel the change in the wind? The temperature is dropping and the chill breeze of stagflation once again works it's icy little fingers into your wallet? Buy yourself a chunk of guaranteed fungible gold. Invest in stocks (not now!), gamble on bitcoin, store wealth in physical metals, wines and art. Not NFT's.
Sk Shanto Roy
Sk Shanto Roy Oct 02, 2021 8:31AM ET
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The world has suffered a lot because of this corona. Hopefully people will be able to recover from this loss
Stan Smith
Stan Smith Oct 01, 2021 9:11AM ET
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Not just the Euro Zone: It appears the good days are behind us as stimmies run dry and Americans are once again left to rely on their earning power (or credit cards) to fund their excess spending.
Iyarin Boonnum
Iyarin Boonnum Oct 01, 2021 8:35AM ET
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Uk die first 555
Kochar Bipin
Kochar Bipin Sep 30, 2021 10:50PM ET
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China has imposed major power cuts on industries. As China produces over 50% of the world's steel and aluminum, prices of these key inputs will zoom. US should incentivise all domestic producers to boost output of crude, gas, coal and metals to ensure the price stability is maintained and ask OPEC to boost quotas for Nov by at least 1 million barrels per day
Zachary Messer
Zachary Messer Sep 30, 2021 10:50PM ET
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Thats a great idea, but will it happen? I highly doubt it. Politicians and the financial sector are asleep at the wheel once again.
Darryl Allen
Darryl Allen Sep 30, 2021 10:50PM ET
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Good luck getting Democrats to support the production of anything
Jokers R Us
Jokers R Us Sep 30, 2021 10:50PM ET
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china is trying to collapse western nations
 
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