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GLOBAL MARKETS-Europe flattened by snowballing global correction

Published 05/13/2021, 08:04 PM
Updated 05/13/2021, 08:10 PM
© Reuters.

* Euro STOXX 600 .STOXX down 1.5%
* MSCI world equity index down 0.6%, set for fourth day of
* Shock rise in U.S. CPI stirs fear of Fed tapering
* Treasury yields, rise after jump
* Bitcoin recovers after Tesla puts a hold on acceptance
* World stocks heading for worst week of year
* Metals, crop prices fall after rampant run
* Graphic: Global asset performance
* Graphic: World FX rates

By Tom Wilson and Marc Jones
LONDON, May 13 (Reuters) - World stocks were spiralling
towards their worst week of the year on Thursday, as a
bigger-than-expected rise in U.S. inflation worried bond markets
and as red-hot metals, crop and cryptocurrency prices all
suffered sudden stops.
For traders the only place to take refuge was the U.S.
Asia had taken a post-Wall Street pounding, London's FTSE
.FTSE was down 2% before lunch, bond, commodity and U.S.
futures markets were all deep red and Elon Musk and Tesla were
no longer accepting bitcoin.
.EU .N MET/ While there were plenty of idiosyncrasies, the overarching
worry was rising inflation pressures in the United States might
force the Federal Reserve to start turning off its cheap money
that has been driving markets rapidly higher.
Basic resources and oil and gas sectors .SXPP .SXEP ,
among the recent top gainers on the back of a surge in commodity
prices, fell over 2% as oil prices slumped nearly 2.5% in their
worst day in six weeks. O/R
"Inflation pressures are going to be rising, and they're not
going to be temporary," said Jeremy Gatto, investment manager at
Unigestion. "What does that mean? Effectively that (interest)
rates will be rising."
The MSCI world equity index .MIWD00000PUS , which includes
50 countries, fell 0.6% and was on course for its fourth
straight day of losses and weekly fall of nearly 4%, which would
be its worst since last October.
Wall Street futures were 0.4% down after being blindsided on
Wednesday when data showed U.S. consumer prices jumped by the
most in nearly 12 years in April. It showed booming demand amid
a reopening economy meeting equally powerful supply constraints
both in the U.S. and abroad. The jump, which sparked the S&P 500's worst one-day drop
since February, was largely due to outsized increases in
airfares, used cars and lodging costs, all driven by the
pandemic and likely to prove transitory.
Fed officials were quick to play down the impact of one
month's numbers, with vice chair Richard Clarida saying stimulus
would still be needed for "some time" but traders weren't wholly
convinced. Yields on 10-year Treasuries US10YT=TWEB were at 1.68%,
having climbed 7 basis points overnight in the biggest daily
rise in two months. Germany's sub-zero 10-year yield, which is
Europe's benchmark, was its closest to positive territory since
May 2019. GVD/EUR "The big question today is not by how much inflation is
going to spike, but for how long inflation is going to spike,"
said Hugh Gimber, a global market strategist at JPMorgan Asset
"As to the (global market) slide today, I think really it's
highlighting how uncomfortable investors are in assessing the
new mandates for the Fed. They still don't fully understand when
the Fed would move."

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Nasdaq futures NQc1 were flat, losing earlier slim gains,
while S&P 500 futures ESc1 turned slightly negative. .N
As major economies reopen more fully from COVID-19
lockdowns, many investors expect higher levels of inflation to
stoke volatility in equities markets through the year.
"This year is going to be a big battle between the
bullishness of mass reopening/stimulus on one hand and the
inflationary consequences on the other," Deutsche bank analysts
wrote. "Expect regular pockets of vol."
Investors have now priced in a roughly 80% chance of a Fed
rate hike as early as December next year, though it has provided
a shot in the arm for the dollar which is under pressure from
rapidly expanding U.S. budget and trade deficits.
Against a basket of major peers, the dollar crawled up to
90.759 =USD and away from Wednesday's 10-week trough of
89.979. L1N2N00E0
For the cryptonites, there was a chink of light as bitcoin
BTC=BTSP steadied at $50,830 after a 13% drop when Elon Musk
had said Tesla TSLA.O would stop accepting it as payment
because of the amount of fossil fuels that go into bitcoin
'mining' Bitcoin is created when high-powered computers compete
against other machines to solve complex mathematical puzzles. At
current rates the process is estimated to devour about the same
amount of energy annually as the Netherlands did in 2019.
Ether ETH=BTSP , the world's second-largest cryptocurrency,
couldn't match bitcoin though, dropping 2.3% to $3,735. Metals
and crops were also wilting. Copper dropped 1.6% having hit a
record high earlier in the week while corn, wheat, sugar dropped
between 1%-2%. MET/L

Asia stock markets
Asia-Pacific valuations
U.S. core inflation

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