Stocks fall as fresh oil surge fans inflation fears / Photo: Kirill KUDRYAVTSEV - AFP
Stocks fall as fresh oil surge fans inflation fears
Stock prices fell Thursday after oil prices pushed higher on expectations of a prolonged Mideast war against Iran, fanning inflation fears that saw the European Central Bank lift its key interest rate.
Accelerating wholesale inflation data in the United States compounded worries that price increases are running too hot for central bank comfort, raising chances that the Federal Reserve will hike rates in turn.
US government bond yields rose after the producer price index climbed 5.4 percent in August, a sign that investors are pricing in higher Fed borrowing costs.
"With the PPI data overall still looking relatively hot, the Fed seems likely to hike this year even if it doesn't pull the trigger this month," said Stephen Brown, chief North America economist at Capital Economics.
Wall Street indices opened lower across the board, with European markets also down after widespread losses across Asia.
Consumer prices data to be released tomorrow will provide further guidance on whether the Fed will raise rates at next week's meeting -- despite President Donald Trump's insistence that rates should be much lower for the world's biggest economy.
The ECB raised its benchmark rate to 2.5 percent Thursday while warning that inflation "is set to remain well above target for an extended period".
Many investors took that as a sign of further tightening to come, which could dampen growth across the eurozone, especially as the ECB raised its forecasts for both inflation and growth.
"Don't forget that the recent surge in bond yields and oil prices has not been fully incorporated in these forecasts," said Carsten Brzeski, an economist at ING.
The benchmark US oil contract, West Texas Intermediate, jumped above $100 a barrel Thursday, while the international benchmark Brent crude hit $105 a barrel.
Worries of a long Mideast conflict snarling Gulf tanker traffic rose after Trump said Wednesday that the war would conclude after the US mid-term elections in November -- much longer than many investors have been hoping.
Iran has stepped up attacks on ships trying to pass the Strait of Hormuz chokepoint, raising the prospect of supply disruptions well into the Northern Hemisphere winter.
In company news, Nintendo shares sank almost five percent following an online showcase of coming games, with one analyst, Serkan Toto of Kantan Games, calling it "very underwhelming".
"They don't have a lot, and I think the investors understand that," he said.
Apple shares opened up 0.9 percent after the tech giant unveiled its first folding iPhone and raised prices on the latest classic models, kicking off the era of its new CEO John Ternus.
- Key figures at around 1340 GMT -
Brent North Sea Crude: UP 4.0 percent at $105.28 per barrel
West Texas Intermediate: UP 4.2 percent at $100.09 per barrel
New York - Dow: DOWN 0.3 percent at 52,225.89 points
New York - S&P 500: DOWN 0.6 percent at 7,591.37
New York - Nasdaq: DOWN 0.9 percent at 26,013.35
London - FTSE 100: DOWN 0.3 percent at 10,641.66
Paris - CAC 40: UP 0.2 percent at 8,137.68
Frankfurt - DAX: DOWN 0.5 percent at 25,438.42
Tokyo - Nikkei 225: UP 0.2 percent at 65,270.95 (close)
Hong Kong - Hang Seng Index: DOWN 1.3 percent at 24,954.47 (close)
Shanghai - Composite: DOWN 0.4 percent at 3,934.40 (close)
Euro/dollar: DOWN at $1.1610 from $1.1629 on Wednesday
Pound/dollar: DOWN at $1.3509 from $1.3544
Euro/pound: UP at 85.95 pence from 85.86 pence
Dollar/yen: UP at 154.17 yen from 153.65 yen
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