Market report

Markets fall on hot US inflation | Oil dips on China Covid alert


4.30pm: US inflation rockets

Wall Street

Stocks fell sharply as investors saw hotter-than-expected inflation data as a prelude to higher interest rates and possibly recession.

Prices rose 8.6% in May to a 40-year high, prompting a bout of selling across the market. On Wall Street the Dow Jones Industrial Average was down 2.38%, while the S&P 500 fell 2.64% and the tech-focused Nasdaq Composite was 3.12% lower.

The sell-off spilled over into European markets which were already lower. London’s FTSE 100 closed 158.69 points, or 2.1% lower at 7,317.52, while Germany’s DAX lost 2.5% and France’s CAC was down 2.2%.

Sarah Giarrusso, investment strategist at Tilney Smith & Williamson, said: “At the Fed’s next meeting on 16 June, markets are expecting a further 50bps increase in rates.

“The difficulty for the Fed now is to engineer a soft landing – increasing interest rates to bring inflation back down to target without impacting growth to the extent that the economy falls into recession.

“The US economy is still some way from recession in our view, with few economists forecasting negative growth in any quarter next year. The strong labour market and consumption continue to prop up the economy and gives Fed officials the leeway to raise rates further.”

Brent oil was quoted at $122.37 a barrel this morning, down one dollar. While remaining at three-month highs, concern is growing that the prospect of new Covid-19 lockdown measures in Shanghai outweighed solid demand for fuels in the US.

Shanghai and Beijing went back on a fresh Covid alert on Thursday after parts of China’s largest economic hub imposed new lockdown restriction and the city announced a round of mass testing for millions of residents.

“We were just starting to get optimistic about Chinese demand with lifting of restrictions in Shanghai and Beijing, and the latest move to lock down certain regions in Shanghai for mass testing is a reminder that there is no change in China’s Covid policy,” said Madhavi Mehta, commodity research analyst at Kotak Securities.

“If it continues to use restrictions to limit the spread, economic activity may be impacted.”

The European Central Bank yesterday left interest rates unchanged but said it will introduce a 25bps hike at the July meeting. It will be first increase for the first time in 11 years, and will be followed by another hike in September.

The Bank of England is expected to hike interest rates again when it meets next week.

7am: Space and People shares consolidation

SpaceandPeople, the Glasgow-based retail, promotional and brand experience specialist, has confirmed that following approval at the AGM earlier this week every 10 existing ordinary shares will be consolidated into one new share.

Application has been made for 1,951,957 shares to be admitted to trading on AIM from 13 June.

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