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Global Markets Weighed Down by Rising Inflation and European Debt Crisis

Strategic Insights

— 1 min read

Rising inflation figures around the world are causing concern among investors, leading to a decline in global stock markets. The European Central Bank and the People's Bank of China are expected to raise interest rates to counter the increasing prices, while the euro is struggling due to ongoing worries about Greece's debt restructuring. The eurozone's inflation rate rose to 2.7 percent in the year to March, surpassing the ECB's target of "close to but below" 2 percent.

Key Takeaways:

  • The European Central Bank is expected to raise interest rates again in June due to the revised eurozone inflation rate of 2.7 percent.
  • The People's Bank of China is likely to enact further measures in response to the 5.4 percent year-on-year increase in consumer prices, largely driven by surging food costs.
  • The euro failed to make significant headway despite rising inflation numbers, weighed down by concerns about Greece's debt restructuring and a credit rating downgrade of Ireland.
  • The European Central Bank's interest rate policy is expected to remain a major driver of the euro's fortunes in the near term.
  • The US Federal Reserve is not anticipated to start increasing interest rates anytime soon, while consumer prices in the US are expected to rise by 2.6 percent in the year to March.
  • The US will release a host of economic data, including the Empire State survey of manufacturing conditions and consumer confidence, later in the day.

Statistics:

  • Eurozone inflation rate: 2.7 percent (year-on-year, in the year to March)
  • Consumer prices in China: 5.4 percent (year-on-year, in the year to March)
  • Interest rate hike by the European Central Bank: 0.25 percentage points to 1.25 percent
  • Euro price: $1.4455 (late-morning London time)
  • Dow futures: down 0.2 percent at 12,203
  • S&P 500 futures: down 0.2 percent at 1,308
  • Shanghai Composite Index: 0.3 percent higher at 3,050.53
  • Nikkei 225 stock average: 0.7 percent lower at 9,591.52
  • Kospi: less than 0.1 percent lower at 2,140.50
  • May Brent crude oil price: $107.68 a barrel

Sources:

  • Associated Press, "Rising Inflation Weighs on Global Markets"
  • European Central Bank, "Press Release: Monetary policy decision"

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