World Markets Trade In Narrow Band Tracking Inflation Fallout

World stock markets were trading in a narrow band Wednesday tracking inflation fallout, as traders weighed economic growth and price growth prospects as countries come out of lockdown.

Wall Street opened cautiously, with the Dow Jones index adding just 0.2 percent shortly after the opening bell.

Meanwhile the tech-heavy Nasdaq rose 0.3 percent, after Asia’s main stock markets had closed with gains and main European markets were barely in the red.

Amazon was up 0.4 percent after extending its push into entertainment by agreeing to buy the storied MGM studios for $8.45 billion.

The deal gives the US tech giant a vast library to further its ambitions in streaming, bolstering Amazon Prime Video, which competes with Netflix and others in a fast-evolving market.

After rallying for more than a year, equities have recently been jolted by fears that a forecast surge in economic activity — fuelled by reopenings, stimulus and vaccinations — will send prices soaring and force central banks to wind back their ultra-loose monetary policies sooner than flagged.

A succession of US Federal Reserve officials have continued to repeat the mantra that while the rebound will likely fan inflation, it will not last long and the central bank will not step back from its supportive measures — including record low interest rates — for the foreseeable future.

Those pledges were for a time brushed aside by traders who feared the Fed is in danger of moving too late, with explosive inflation data last month adding to their unease.

However, analysts said the concerns may be subsiding, as the latest drive to soothe concerns by high-ranking Fed members appeared to be bearing fruit.

The yield of long-term US Treasuries, a key gauge of future interest rates, has stabilised after their recent sharp increase set off alarm bells.

“Inflationistas look like they might be ready to throw in the towel,” said Edward Moya, analyst at Oanda trading group.

“We are supposed to be seeing accelerating growth and mounting price pressures, but right now the surge across commodity prices has eased.”

He added that while the inflation debate had not ended, “the majority of Wall Street believes” price pressures are transitory.

Still, investor optimism continues to be kept in check by worries about a spike in infections around Asia’s top economies including, among others, India, Japan, Taiwan, Singapore and Thailand, with vaccination rates also worryingly low.

Elsewhere Wednesday, bitcoin briefly bounced back above, then fell below the $40,000 barrier after a bout of recent volatility, fuelled by China’s warning of a crackdown on cryptocurrency use and mining and various tweets by tycoon Elon Musk.

The digital unit at one point last week almost fell below $30,000 for the first time since January before rebounding in recent days.

But it remains well below its record high of close to $65,000, touched just over a month ago.

Investor fears about inflation have played off against optimism over the global recovery outlook in recent months Investor fears about inflation have played off against optimism over the global recovery outlook in recent months Photo: AFP / MOHD RASFAN

By contrast gold was trading at four-month highs above $1,900 an ounce as precious metals enjoyed a strong session.

New York – Dow: FLAT at 34,304.04 points

London – FTSE 100: DOWN 0.4 percent at 7,008.47

Paris – CAC 40: DOWN 0.1 percent at 6,384.84

Frankfurt – DAX 30: DOWN 0.1 percent at 15,446.06

EURO STOXX 50: DOWN 0.1 percent at 4,030.82

Tokyo – Nikkei 225: UP 0.3 percent at 28,642.19 (close)

Hong Kong – Hang Seng Index: UP 0.9 percent at 29,166.01 (close)

Shanghai – Composite: UP 0.3 percent at 3,593.36 (close)

Euro/dollar: DOWN at $1.2223 from $1.2253 at 2130 GMT

Pound/dollar: DOWN at $1.4141 from $1.4151

Euro/pound: DOWN at 86.42 pence from 86.59 pence

Dollar/yen: UP at 108.99 from 108.76 yen

Brent North Sea crude: DOWN 0.6 percent at $68.02 per barrel

West Texas Intermediate: DOWN 0.6 percent at $65.54 per barrel

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