Visitors look at an electronic board at the Sao Paulo Stock Exchange (B3), in Sao Paulo, Brazil, on October 10, 2018. – Brazil's stock market took a dive Wednesday after far-right presidential frontrunner Jair Bolsonaro defined limits for his privatization plans for the country's huge energy sector, specifically to keep key assets out of Chinese control. (Photo by NELSON ALMEIDA / AFP) (Photo credit should read NELSON ALMEIDA/AFP via Getty Images)
NELSON ALMEIDA/AFP via Getty Images
Global stocks and futures fell on Wednesday as rising inflation worries investors.
The tech and crypto sectors were hit especially hard as talk emerged of asset bubbles forming.
Gold continued its recent rally and hit a four-month high, boosted by a weaker dollar.
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Global shares and futures fell on Wednesday as concerns over rising inflation worried investors, especially in the technology and crypto sectors, which have been key beneficiaries of low interest rates.
Investor concerns about inflation continued ahead of the release of the minutes of the Federal Reserve's most recent policy meeting later in the day. Rising measures of consumer inflation have triggered a broad sell-off in the stock market, as investors believe this might force the Fed to raise interest rates sooner than expected.
This has sparked a broad equities sell-off as investors believe the Fed may have to raise interest rates sooner than anticipated, despite policymakers reiterating that they believe this most inflationary pressure will be short-lived.
“This would suggest that the Fed appears to be on autopilot through the summer, however the recent sharp rise in commodity prices, along with significant base effects appears to be creating some uncertainty given the recent sharp rise in inflation expectations,” Michael Hewson, chief market analyst at CMC Markets, said. He said he did not expect any surprises from the Fed's April minutes.
Dow Jones futures were last down 0.63%, whilst S&P 500 futures were last trading 0.79% lower on Wednesday morning. Futures on the tech-heavy Nasdaq 100 last slipped by 1.2%, suggesting that tech stocks would likely open much weaker than the rest of the market.
Yields on US 10-year Treasuries rose by 2 basis points to 1.663% on Wednesday.
Inflation fears have also impacted the crypto-sphere, which is additionally facing pressure from Elon Musk's concerns about the energy consumption of the market, as well as scrutiny from regulators. The most recent blow emerged when China said it would ban financial companies from engaging with cryptocurrencies. Major coins fell in value as a result, with bitcoin falling below $40,000 and ether dipping below $3,000 on Wednesday.
Bitcoin was last down 10.19% to $40,374 and ether was down 14.95%, to $2,959 in the 24 hours to 04:47 E.T.
Gold continued its recent rally and rose to a four-month high on Tuesday. The metal was boosted by a weaker dollar and by the mounting concern over inflation. Gold futures were last trading at $1,860.72, down 0.49% on the day and analysts said it may stage a retreat given how much the price has gained recently.
“Having rallied nearly $50 an ounce over the previous two sessions alone, gold's Relative Strength Index (RSI) has now moved into overbought territory. That suggests that gold will either trade sideways over the subsequent few sessions or retreat, easing the pressure on the technical indicator.” Jeffrey Halley, APAC senior market at OANDA said.
“Gold's fate is likely to be decided by the behaviour of the US long-dated bond yields after the FOMC Minutes tonight,” Halley said.
European markets fell on Wednesday, following the trend across Asian markets and US futures. UK inflation rose to 1.5% year on year in April, more than double compared to March's growth. Bank of England Governor Bailey had echoed the Fed's sentiment of the inflationary pressures being temporary in remarks made on Tuesday.
Overnight Asian markets also widely fell, with the exception of Hong Kong's Hang Seng index, which rose by 1.58%. At market close, the Japanese Nikkei 225 was down 1.28% and the Chinese Shanghai composite had fallen by 0.51%.
US President Biden had delayed making changes to the China investment ban his predecessor Donald Trump had implemented and EU politicians are likely to vote in support of halting the EU's investment agreement with the country on Wednesday.
WTI crude oil futures fell by 1.65%, trading at $64.42 per barrel and Brent crude futures were down 1.51% to $67.67 per barrel as rising COVID-19 cases in some regions dimmed some of the optimism around the economic outlook.
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