Image source: PBS
Markets finally stabilized early Wednesday after U.S. stocks posted their worst day, the most recent in June 2020.
The good news eclipsed a precedent of higher-than-expected inflation in August.
Equities in Europe posted mixed results in several countries.
In Germany, the DAX (DAX) opened down 0.2% while the French CAC 40 (CAC40) was 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.
US stocks had their worst day since June 11, 2020 on Tuesday after August inflation data surprised investors.
The US CPI, which includes major goods and services, rose 0.1% in July.
The rise contradicts economists’ forecasts of a 0.1% decline.
Despite falling for the second consecutive month, annual inflation 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 move 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 serious damage to the US economy.
Carnell also wrote that daily US inflation data was flooding Asian markets.
She noted that core inflation in the United States, which excludes volatile categories like groceries and gasoline, 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%
In the United States, consumers are struggling to adjust to rising prices as markets have cut almost everything from groceries to school supplies.
Meanwhile, annual inflation in the UK fell to 9.9%, reflecting lower petrol prices. In the previous month, however, it had risen 0.5%.
Additionally, the UK’s annual CPI rose 6.3% on lower energy and food bills.
Markets steady after worst day for US stocks since June 2020