Image source: PBS
At the beginning of Wednesday, markets finally stabilized after US stocks recorded their worst day, last in June 2020.
The good news overshadowed a higher-than-expected inflation precedent in August.
Equities in Europe have shown mixed results in several countries.
In Germany, the DAX (DAX) fell 0.2% at the start of trading, while the French CAC 40 (CAC40) remained flat.
Meanwhile, London’s FTSE 100 (UKX) fell 0.7%. Italy’s benchmark index showed positive signs, rising 0.7%.
While European stocks had a mixed performance, US stock futures improved as they traded slightly higher.
“Equity futures suggest that the rout stops here,” Robert Carnell, regional head of Asia-Pacific research at ING, wrote in a report.
U.S. stocks fell Tuesday for their worst day since June 11, 2020, after August inflation data surprised investors.
The US CPI, which includes major goods and services, rose 0.1% in July.
The increase contradicts economists’ forecasts of a 0.1% decline.
Although annual inflation fell for the second consecutive month, it remained stubbornly high, with prices rising 8.3% year-on-year.
- The Dow (Indu) was down 3.9%
- S&P 500 (INX) fell 4.3%
- Nasdaq Composite (COMP) plunged 5.2%
Impact of inflation on the Asian market
The movement in the US stock market gave investors a sigh of relief.
Initially, they feared that higher-than-expected inflation would prompt the US Federal Reserve to aggressively raise interest rates.
The decision would have caused severe damage to the US economy.
Carnell also wrote that daily US inflation data flooded Asian markets.
She noted that core inflation in the US, which eliminates volatile categories like food and gas, hit 6.3% last month.
The monthly gain of 0.6% was double what economists expected.
- Japan’s Nikkei 225 slid 2.8%
- South Korea’s Kospi lost 1.6%
- Shanghai Composite (SHCOMP) Index slid 0.8%
- Hong Kong’s Hang Seng fell 2.5%
Consumers in the US are struggling to adjust to rising prices as markets have cut almost everything from food to school supplies.
Meanwhile, annual UK inflation fell to 9.9%, reflecting the decline in gasoline prices.
The previous month, however, it had increased by 0.5%.
In addition, the UK’s annual CPI increased by 6.3% thanks to lower energy and food bills.