Shares fall as inflation fears resurface

A gauge of global stocks fell on Wednesday after two straight days of gains as investors weighed the latest earnings reports, stubbornly high British inflation figures and comments from European Central Bank (ECB) policymakers.

MSCI’s gauge of stocks across the globe shed 0.3 per cent as European, US and UK stock indices paused.

Dublin

The Iseq index added almost 0.75 per cent, outperforming its European peers, even as hawkish remarks from ECB officials put the brakes on markets across the Continent.

With investors pricing in more rate hikes on the horizon, shares in the Irish banks climbed through the session. AIB added nearly 1.6 per cent to close at €3.89 per share while Permanent TSB was up 1.7 per cent to €2.34 and Bank of Ireland surged close to 2.9 per cent to €9.87.

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Shares in Paddy Power owner, Flutter, also saw a sharp move, adding 1.6 per cent €178.70 per share after its UK rival, Entain, published strong numbers on Tuesday.

Other Irish heavyweights like Smurfit Kappa, CRH and Kerry Group also finished the session in green while Kingspan slipped by 0.8 per cent to €60.98 per share. With a quiet few weeks before Irish first quarter earnings season takes off, traders in Dublin are expecting volumes to remain relatively low.

London

Snapping an eight-day rally, London’s blue-chip FTSE 100 index shed 0.15 per cent after another surprisingly strong inflation reading that will strengthen the case for more interest rate rises at the Bank of England.

The UK’s Consumer Prices Index rose 10.1 per cent from a year ago, driven by the strongest increase in food prices in more than four decades, the Office for National Statistics said Wednesday. Economists had expected a slowdown to 9.8 per cent.

Package holiday operator Tui, down 28 per cent this year amid shrinking revenues, shed almost 6 per cent in trading. Supermarket technology firm Ocado fell 2.2 per cent despite upward moves by some of the biggest names in the sector like Tesco and Sainsburys, up 0.9 per cent and 0.7 per cent respectively.

Industrial miners lost 1 per cent, led by a 2.3 per cent fall in Antofagasta after the Chilean miner’s copper output fell in the March quarter from the previous three months due to lower water availability and reduced ore grades.

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Europe

Both the blue-chip Eurostoxx 50 and the pan-European Stoxx 600 indices were essentially flat on the session as investors digested the UK’s latest inflation figures.

ECB chief economist, Philip Lane, added to the gloom on Wednesday, remarking that interest should be lifted again next month if the economic backdrop doesn’t shift significantly.

“If the baseline scenario underlying the March ECB’s staff macroeconomic projections persists, it will be appropriate to raise rates further,” Lane said Wednesday in a speech in Dublin. A key question is over underlying inflation – a price gauge that excludes volatile items like food and energy. The measure has remained stubbornly high even after officials lifted borrowing costs by 350 basis points since last July.

In anticipation of more interest rate hikes ahead, shares in Italian and Spanish banks gained on Wednesday. BBVA, Santander and Intesa Sanpaolo all added between 0.8 per cent and 1 per cent on relatively high volumes for the sessions. French lender BNP Paribas added 0.3 per cent, while its Dutch peer ING added 0.5 per cent.

Tech stocks touched their lowest level in three weeks, after shares of ASML fell 3.7 per cent as it noted some signs of caution among customers, overshadowing a strong quarterly showing.

New York

US stocks were lower on Wall Street in early trading, weighed down by a 3.2 per cent drop in Netflix after the streaming video company reported quarterly results, while Tesla dipped 1.5 per cent after the electric vehicle maker cut prices for the sixth time this year.

The Dow Jones Industrial Average fell 0.3 per cent, the S&P 500 lost 0.24 per cent and the Nasdaq Composite dropped 0.31 per cent.

Morgan Stanley slipped 0.5 per cent as the Wall Street bank reported a fall in quarterly earnings, a day after rival Goldman Sachs Group Inc posted a 19 per cent drop in profit.

While the start of the earnings season has been largely supportive for equities, investors will closely watch updates from market heavyweights as well as consumer companies for signs of inflation and economic slowdown hurting margins. – Additional reporting: Reuters, Bloomberg, PA