# Shares rise, but concern mounts over inflation flare-up
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-04-04
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Global Stocks Rise Amid OPEC+ Output Cuts and Weak Dollar
Meta Description: Investors navigate market uncertainty following surprise OPEC+ output cut. Economic indicators suggest potential impact on inflation and growth amid dynamic
URL: https://financedigest.com/shares-rise-but-concern-mounts-over-inflation-flare-uphtml

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By Amanda Cooper

LONDON (Reuters) -Global stocks rose in cautious trade on Tuesday as investors grappled with the possibility of a flare-up in inflation due to the OPEC+ group’s surprise output cut, while the dollar sagged after weak U.S. manufacturing [data the previous day](https://www.financedigest.com/investing-in-a-first-party-data-strategy-can-save-the-day-for-retailers.html "Investing in a first-party data strategy can save the day for retailers").

An announcement on Sunday of an output target cut by the Organization of the Petroleum Exporting Countries (OPEC) and its partners, known as OPEC+, boosted oil prices and complicated the [inflation outlook](https://www.financedigest.com/european-shares-set-for-weekly-gain-on-u-s-inflation-outlook.html "European shares set for weekly gain on U.S. inflation outlook"). Brent crude was last up 0.6% at $85.50 a barrel, set for its [biggest two-day rally since](https://www.financedigest.com/uk-firms-plan-biggest-pay-rises-since-2012-to-fill-staff-gaps.html "UK firms plan biggest pay rises since 2012 to fill staff gaps") last July, with a gain of 7.15% over Monday and Tuesday.

[Investors were also assessing](https://www.financedigest.com/dollar-tentative-as-investors-assess-rate-hike-path.html "Dollar tentative as investors assess rate-hike path") Monday’s survey of U.S. manufacturing activity from the Institute for Supply Management, which in March [slumped to a near three-year low as new orders plunged](https://www.financedigest.com/samsungs-quarterly-profit-plunges-to-8-year-low-on-demand-slump.html "Samsung’s quarterly profit plunges to 8-year low on demand slump"), and analysts said tighter credit conditions could choke off more activity.

In Europe, the STOXX 600 rose 0.4% in early trading, led by gains in basic resources stocks such as Glencore, whose bid for [Teck Resources was rebuffed by the Canadian copper miner](https://www.financedigest.com/copper-miner-teck-resources-rejects-glencores-22-5-billion-offer.html "Copper miner Teck Resources rejects Glencore’s .5 billion offer") the day before, while oil and gas stocks like Shell, BP and TotalEnergies got a lift from the strength in the crude oil price.

Meanwhile, U.S. [stock futures pointed to a flat](https://www.financedigest.com/oil-near-flat-as-us-crude-stock-draw-contends-with-economic-concerns.html "Oil near flat as US crude stock draw contends with economic concerns") start on Wall Street later and the MSCI All-World index rose 0.1%.

The decision by OPEC+ to catch the markets wrong-footed by announcing unexpected production cuts of 1.1m barrels a day from next month, sent oil and gas [prices surging](https://www.financedigest.com/explainer-oil-price-surge-changes-ecb-narrative-only-at-the-margins.html "Explainer-Oil price surge changes ECB narrative only at the margins") yesterday, boosting the energy sector and not much else,” CMC Markets chief market strategist Michael Hewson said.

The move by OPEC+ is particularly unhelpful for central banks who, while being [worried about sticky inflation](https://www.financedigest.com/boes-bailey-says-rate-setters-can-put-inflation-before-bank-worries.html "BoE’s Bailey says rate-setters can put inflation before bank worries"), are becoming increasingly concerned about pushing rates up from their current levels,” he said.

A market-based gauge of medium-term U.S. [inflation expectations](https://www.financedigest.com/dollar-drops-as-inflation-cools-more-than-expected.html "Dollar drops as inflation cools more than expected") blipped up to its highest in a month on Monday.

The so-called five-year breakeven [inflation rate](https://www.financedigest.com/uk-inflation-rate-unexpectedly-rises-to-10-4-in-february.html "UK inflation rate unexpectedly rises to 10.4% in February") – derived from subtracting the five-year inflation-linked Treasury yield from its nominal counterpart – rose to as much as 2.49%, before subsiding to around 2.39% on Tuesday in European trading.

[Investors believe the Federal Reserve and other central banks](https://www.financedigest.com/stocks-rise-after-bank-sale-fuels-investor-risk-appetite.html "Stocks rise after bank sale fuels investor risk appetite") may be almost done raising interest rates, especially in light of the turmoil across the banking sector in March, and as inflation has gradually cooled off in recent months.

RECESSION OR NO RECESSION?

The other concern is whether or not [higher rates](https://www.financedigest.com/powells-warning-on-higher-u-s-rates-pushes-dollar-to-3-mth-high.html "Powell’s warning on higher U.S. rates pushes dollar to 3-mth high") and slower growth will eventually tilt the U.S. [economy into recession](https://www.financedigest.com/world-bank-warns-global-economy-could-easily-tip-into-recession-in-2023.html "World Bank warns global economy could easily tip into recession in 2023").

There are only four instances where the ISM manufacturing reading was this low without a recession in the following 12-18 months – the early 1950s, 1967, the mid 1990s and right after the 2000s [recession,” Deutsche Bank](https://www.financedigest.com/banking-turmoil-means-recession-fears-are-creeping-back.html "Banking turmoil means recession fears are creeping back") strategists said in a note.

[Treasury yields](https://www.financedigest.com/wall-st-flutters-treasury-yields-ease-as-powell-resumes-testimony.html "Wall St flutters, Treasury yields ease as Powell resumes testimony") retreated after the U.S. manufacturing data, which increased [expectations for some investors](https://www.financedigest.com/wave-of-lawsuits-over-ftx-expected-but-investors-will-face-legal-hurdles.html "‘Wave’ of lawsuits over FTX expected, but investors will face legal hurdles") the Fed will cut rates later this year as the economy slows. Separate data also showed U.S. construction [spending weakened in February](https://www.financedigest.com/valentines-day-spending-boosts-british-retail-sales-in-february-brc.html "Valentine’s Day spending boosts British retail sales in February – BRC").

The [yield on benchmark 10-year Treasury](https://www.financedigest.com/wall-st-indexes-mixed-treasury-yields-tick-up-as-higher-rates-loom.html "Wall St indexes mixed, Treasury yields tick up as higher rates loom") notes was last up 1 basis point at 3.445%, while two-year yields, which are more sensitive to shifts in rate expectations, rose 2 bps to 3.998%.

In the currency market, the dollar remained on the defensive after losing ground on Monday.

The dollar index, which tracks the performance of the U.S. currency against six others, was last down 0.2%.

The euro rose 0.2% on the day to $1.0922, but was still showing a 0.5% gain over the last month, while the [Japanese yen](https://www.financedigest.com/japanese-yen-gains-as-ueda-set-to-be-named-next-boj-governor.html "Japanese yen gains as Ueda set to be named next BOJ governor") fell 0.2% against the dollar to 132.82.

The Australian dollar came under [pressure after the Reserve](https://www.financedigest.com/oil-prices-dip-on-u-s-crude-reserve-release-inflation-pressure.html "Oil prices dip on U.S. crude reserve release, inflation pressure") Bank of Australia left interest rates unchanged after 10 straight increases. It was last down 0.5% against the U.S. dollar at $0.6754.

Gold was last flat at $1,982 an ounce.

(Editing by Shri Navaratnam and Raissa Kasolowsky)


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