Investors worry inflation may disrupt recovery; prompt central banks to withdraw stimulus, near-zero interest rates
Stock markets in London and Tokyo tumbled 2.5 per cent on Thursday and US futures were lower after a jump in American consumer prices fuelled worries inflation might drag on an economic recovery.
Shanghai, Frankfurt and Hong Kong also declined for a second day, following Wall Street lower.
Overnight, Wall Street's benchmark S&P 500 index recorded its biggest one-day drop in three months after US prices, exceeding forecasts, rose in April at their fastest year-on-year pace in 13 years.
Rising prices reflect growing economic activity after last year's global shutdown to fight the coronavirus pandemic.
But investors worry inflation might disrupt the recovery or prompt central banks to withdraw stimulus and near-zero interest rates.
The Federal Reserve says this surge should be temporary, but “if inflation does not calm,” the challenge to the US central bank's credibility “could be disruptive,” Tai Hui of JP Morgan Asset Management said in a report.
The FTSE in London fell by an unusually wide margin of 2.5 per cent at the opening bell to 6,829.76. Frankfurt's DAX fell 2 per cent to 14,839.30 while CAC 40 in France lost 1.9 per cent to 6,158.33.
On Wall Street, the S&P 500 future was down 0.4 per cent and that for the Dow Jones Industrial Average was off 0.6 per cent.
On Wednesday, the S&P 500 lost 2.1 per cent while the Dow shed 2 per cent in its biggest decline since January. The Nasdaq gave up 2.7 per cent in its largest pullback since March.
The Nikkei 225 in Tokyo fell 2.5 per cent to 27,448.01 while the Shanghai Composite Index lost 1 per cent to 3,429.54. The Hang Seng in Hong Kong retreated 1.8 per cent to 27,718.67.
The Kospi in Seoul sank 1.2 per cent to 3,122.11 and Sydney's S&P-ASX 200 was 0.9 per cent lower at 6,982.70.
Thailand's benchmark fell more than 2 per cent as the country reported a record 4,887 new Covid-19 cases in its worst outbreak since the pandemic started. More than half were in just two prisons in Bangkok.
New Zealand also retreated. Markets in India, Indonesia and Singapore were closed for holidays.
On Wednesday, Apple, Microsoft and Amazon all fell more than 2 per cent. Tesla fell 4.4 per cent, bringing its pullback this month to nearly 17 per cent.
Bond yields, or the difference between market price and the pay-out at maturity, snapped higher as prices fell. Bond prices fall if investors worry the value of that pay-out will be eroded by higher inflation.
The yield on the 10-year Treasury note rose to 1.69 per from Tuesday's 1.62 per cent, a big move.
In energy markets, benchmark US crude fell USD 1.39 to $64.59 per barrel in electronic trading on the New York Mercantile Exchange.
The contract rose 80 cents on Wednesday to $66.08. Brent crude, used to price international oils, sank $1.37 to $67.95 per barrel in London. It rose 77 cents the previous session to $69.32 a barrel.
The dollar gained to 109.63 yen from Wednesday's 109.60 yen. The euro declined to $1.2056 from $1.2080.