# Stocks under pressure as euro zone inflation hits 13-year high
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2021-10-01
Category: INVESTING
Category URL: https://financedigest.com/category/investing
Meta Title: Euro Zone Inflation Hits 13-Year High Amid Stock Market
Meta Description: Explore how global markets are responding to the recent surge in euro zone inflation, impacting stock futures and sparking debates on interest rate hikes and
URL: https://financedigest.com/stocks-under-pressure-as-euro-zone-inflation-hits-13-year-highhtml

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By Huw Jones

LONDON (Reuters) – Wall Street headed for a steadier start on Friday after losses in Europe and Asia as euro zone inflation jumped to a 13-year high, fuelling a debate over the timing of interest rate rises against a backdrop of patchier global growth.

U.S. shares looked steadier after falling on Thursday, helping [European shares](https://www.financedigest.com/european-shares-hit-nine-month-high-dollar-wobbles-after-powell-remarks.html "European shares hit nine month high, dollar wobbles after Powell remarks") pare earlier losses. U.S. stock [futures pointed to a slightly firmer open](https://www.financedigest.com/the-future-of-open-finance.html "The Future of Open Finance").

All eyes are now on U.S. consumer spending, [inflation and factory activity data later in the day for signs of economic health and clues regarding the Federal Reserve’s timeline for tapering its asset purchases and hiking key interest rates](https://www.financedigest.com/hotel-investors-should-they-be-worried-about-a-potential-economic-pause-delving-into-inflation-interest-rates-recession-etc.html "‘Hotel Investors – should they be worried about a potential economic pause?’ delving into inflation, interest rates, recession etc").

On the first day of October, the month for some of history’s most infamous market routs, the STOXX index of 600 [European companies](https://www.financedigest.com/factbox-what-european-companies-are-doing-as-workers-face-high-inflation.html "Factbox-What European companies are doing as workers face high inflation") initially fell sharply, hitting its weakest level since mid-July, before recovering most lost ground. It was off 0.15% at 1149 GMT.

The MSCI’s gauge of stocks across the globe shed 0.2%, its longest daily losing streak [since last February](https://www.financedigest.com/dollar-heads-for-first-weekly-gain-since-february.html "Dollar heads for first weekly gain since February").

With stellar [economic growth](https://www.financedigest.com/economic-growth-risks-jolt-inflation-obsessed-markets.html "Economic growth risks jolt inflation-obsessed markets") figures now in the rear view mirror, markets were 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](https://www.financedigest.com/shares-rise-but-concern-mounts-over-inflation-flare-up.html "Shares rise, but concern mounts over inflation flare-up") and power shortages, October could be a fairly windy affair,” Hewson said.

[Consumer price inflation in the 19 countries sharing the euro](https://www.financedigest.com/euro-zone-consumers-more-optimistic-on-inflation-ecb-survey-shows.html "Euro zone consumers more optimistic on inflation, ECB survey shows") 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.

So far, [central bankers have insisted that rises in inflation](https://www.financedigest.com/inflation-fighting-central-bankers-air-climate-role-doubts.html "Inflation fighting central bankers air climate role doubts") are temporary.

We think there are high chances that this [inflation is less transitory than all central banks](https://www.financedigest.com/be-really-really-careful-on-inflation-bank-of-englands-haskel.html "Be ‘really, really careful’ on inflation – Bank of England’s Haskel"), including the European Central Bank, are suggesting,” BNP Paribas economist Luigi Speranza said.

Data overnight showed that [Asia’s manufacturing activity broadly stagnated in September as signs of slowing Chinese growth weighed](https://www.financedigest.com/asia-shares-weigh-china-risks-yen-hits-6-month-high.html "Asia shares weigh China risks, yen hits 6-month high") on the region’s economies, weighing on Asian shares.

DOLLAR, TREASURIES PERKY

The dollar, however, began the last quarter of 2021 near its highest levels of the year, and heading for its best [week since](https://www.financedigest.com/the-nasdaq-100-on-track-to-have-its-best-week-since-march-2010.html "The Nasdaq 100 On Track to Have its Best Week Since March 2010") June as currency markets braced for U.S. interest [rates to rise](https://www.financedigest.com/shares-slip-yields-rise-as-u-s-data-sparks-rate-hike-concerns.html "Shares slip, yields rise as U.S. data sparks rate hike concerns") before those of major peers.

The dollar index, which measures the currency against six major rivals, was off Thursday’s one-year high of 94.504, last changing hands at 94.081.

Meanwhile, the benchmark 10-year U.S. [Treasury yields](https://www.financedigest.com/wall-street-stocks-power-higher-as-treasury-yields-and-dollar-ease.html "Wall Street stocks power higher as Treasury yields and dollar ease") are up for a sixth straight week, trading at 1.4875%.

Japan’s Nikkei tumbled 2.3% to the [lowest level since](https://www.financedigest.com/uk-mortgage-approvals-hit-lowest-since-june-2020.html "UK mortgage approvals hit lowest since June 2020") Sept. 3. An MSCI index of Asia-Pacific stocks slid 1.22% to its [lowest since](https://www.financedigest.com/uk-unemployment-hits-lowest-since-1974-but-jobs-boom-is-fading.html "UK unemployment hits lowest since 1974 but jobs boom is fading") Aug. 24.

[Chinese markets are closed for a week from Friday for the Golden Week holiday](https://www.financedigest.com/chinese-fret-over-elderly-as-who-warns-of-holiday-covid-surge.html "Chinese fret over elderly as WHO warns of holiday COVID surge").

“You can argue whether it’s really stagflation or not, but the whole growth-inflation backdrop seems to have just tilted to a less favorable one,” said Rob Carnell, Asia-Pacific head of research at ING in Singapore.

Federal Reserve Chair Jerome Powell said on Wednesday that resolving “tension” between high [inflation and high unemployment is the Fed’s](https://www.financedigest.com/wall-st-seen-steady-ahead-of-inflation-data-fed-later-in-week.html "Wall St seen steady ahead of inflation data, Fed later in week") most urgent issue, acknowledging a potential conflict between the U.S. [central bank’s](https://www.financedigest.com/stock-pickers-reckon-its-time-to-move-on-from-central-banks.html "Stock pickers reckon it’s time to move on from central banks") two goals of stable prices and full employment.

The latest clues on the [Fed’s policy](https://www.financedigest.com/asian-shares-rise-dollar-dips-ahead-of-fed-policy-decision.html "Asian shares rise, dollar dips ahead of Fed policy decision") normalisation path come with U.S. personal spending and core consumption deflator [data later in the 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").

Crude [prices continued to ease](https://www.financedigest.com/euro-zone-inflation-eases-in-feb-but-core-prices-pick-up.html "Euro zone inflation eases in Feb but core prices pick up") after Brent topped $80 a barrel earlier in the week for the first time in three years.

Brent crude futures slipped 0.13% to $78.20 a barrel, while U.S. crude futures fell 0.3% to $74.78.

Gold, [despite being traditionally an inflation](https://www.financedigest.com/ecb-survey-shows-rising-inflation-expectations-despite-energy-price-falls.html "ECB survey shows rising inflation expectations despite energy price falls") hedge and safe haven, eased 0.17% to $1,753 an ounce, following Thursday’s 1.77% surge, the biggest since March.

(Reporting by Kevin Buckland; Editing by Alexander Smith and Chizu Nomiyama)


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