Global shares flat as joy over cooling US inflation proves short-lived

After positive start on Monday, Stoxx-600 inched lower today in an apparent repeat of last week's pattern
Global shares flat as joy over cooling US inflation proves short-lived

European stocks ended flat today, with miners, banks, and luxury stocks leading declines as optimism over cooling US inflation growth in August proved to be short-lived.

The region-wide Stoxx-600 index inched 0.01% lower, with the basic resources sector index dropping 1.9% and banks sliding 1.1%.

“Having got off to a positive start [on Monday], [Tuesday’s] price action looks set to follow the pattern of last week, where after a similar Monday rally, sentiment deteriorated as concerns about profit margins in the face of rising prices saw certain sectors come under further pressure,” said Michael Hewson, chief market analyst at CMC Markets UK.

Luxury stocks fell up to 3%

Luxury stocks, including LVMH, Kering, Richemont, and Burberry, fell between 1.9% and 3%, tracking moves in Asia on concerns about the spread of Covid-19 cases in China.

“Ongoing China coronavirus concerns and lockdowns in several cities in Fujian are not helping sentiment,” said Mark Taylor, sales trader at Mirabaud Securities.

Home to many luxury names, France’s CAC-40 fell 0.4%, while the UK’s miner-heavy Ftse-100 shed 0.5%.

Still, many strategists expect European equities to outperform this year due to a relatively high rate of vaccinations and catch-up trade in cheaper segments of the market such as banks and energy.

US price rises slowing 

Data earlier in the day showed underlying US consumer prices increased at their slowest pace in six months in August, suggesting that inflation had probably peaked, though it could remain high for a while amid persistent supply constraints.

The US consumer price index edged up 0.5% from last year and 0.3% from July, indicating slower growth than in prior months.

The report supported sentiment for a while in midday trading as investors hoped the US Federal Reserve would likely delay its announcement of cutting back monetary stimulus.

“While we initially saw markets spike on the prospect of a more patient Federal Reserve, we have since seen traders realise that today’s data is unlikely to push the Fed to change course,” said Joshua Mahony, senior market analyst at IG.

Earnings boost jewellery giant by 6.8%  

Pandora, the world’s largest jewellery maker, rose 6.8% after it boosted its earnings target for the coming years and lifted its share buyback plan.

JD Sports Fashion jumped 9.7% after it reported a record first-half profit as lockdowns eased and people visited its shops in Britain.

Dutch specialty chemicals maker DSM hit a record high after it said it was weighing the sale of its materials division.

Danish brewer Carlsberg fell 3.5% after a double downgrade to “sell” by Berenberg. Oil prices also turned negative after on the US inflation data, Brent crude down 0.5% at $73 per barrel.

US stocks declined after the less-than-forecast increase in US inflation was seen as giving Federal Reserve officials more flexibility to pull back on stimulus. The dollar edged lower.

The US inflation report could also help blunt criticism US president Biden’s economic stimulus is spurring damaging inflation as he seeks to sell a $3.5 trillion long-term tax-and-spend package.

Reuters and Bloomberg

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