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Wall Street stocks swung between gains and losses in early trade on Thursday after this week’s rise in oil prices increased traders’ concerns that it would fan inflation.
Wall Street’s benchmark S&P 500 was up 0.1 per cent, while the tech-focused Nasdaq Composite was 0.2 per cent higher in choppy early trade in New York.
The price of Brent crude has headed towards $100 a barrel in recent weeks on concerns over global supply and concerns were stoked on Wednesday after a weekly US government report indicated that stockpiles at a critical US delivery hub fell further.
Brent crude slipped 0.4 per cent to trade at $96.13 per barrel, having earlier hit $97 a barrel, its highest level since November. US marker West Texas Intermediate lost 0.5 per cent to $93.19.
Crude prices have risen 35 per cent since June after some of the world’s biggest producers announced a series of supply cuts to last until the end of this year, adding to investors’ concerns over persistent inflation in the US and Europe.
“The biggest question mark for the inflation outlook is the evolution of fuel prices,” said Wouter Thierie, an analyst at ING.
“If, as we expect, it is a temporary uptick, the impact on our inflation outlook will be fairly moderate. The danger, though, is that if oil prices stay high for longer, companies will increasingly pass on these higher fuel prices, causing it to trickle down to core inflation again.”
The uptick in oil prices, reinforced investors’ belief that the Federal Reserve will keep interest rates higher for longer, pushing yields on 10-year US Treasuries up 0.02 percentage points to 4.64 per cent. Bond yields rise when prices fall.
Yields on 10-year UK gilts surged 0.18 percentage points to 4.54 per cent, while yields on the 10-year German Bund, a regional benchmark in Europe, were up 0.13 percentage points, to a fresh post-2011 high of 2.96 per cent.
The euro advanced 0.5 per cent to trade at €1.0547 against the dollar, edging up from a nine-month low.
Attention turned to US inflation figures due to come out on Friday, which are expected to show that the annual rate of consumer price growth rose to 5.3 per cent in August, up from 3.3 per cent in the previous month.
Stocks in Europe were flat after preliminary data from two of the largest economies in the eurozone showed that inflation had slowed. In Germany, the rate slowed to 4.3 per cent year on year in September, down from 6.4 per cent in the previous month and below analysts’ forecasts of 4.5 per cent. Inflation figures from Spain also came in below expectations. Eurozone inflation data is also due to be published on Friday.
Europe’s region-wide Stoxx Europe 600 was flat, while the Cac 40 in Paris rose 0.2 per cent.
The European Central Bank had at its last meeting raised interest rates to an all-time high of 4 per cent, signalling that its historic campaign had probably drawn to a close, unless surprises in the price data push policymakers towards further action.
“Today’s and tomorrow’s inflation figures are likely to be scrutinised by a data-dependent ECB and play a central role in the next interest rate announcement in October,” said Pia Fromlet, euro area economist at SEB.
In Asia, Hong Kong’s Hang Seng index gave up 1.4 per cent, hitting its weakest level in 10 months, while China’s benchmark CSI 300 lost 0.3 per cent. Japan’s Topix was down 1.4 per cent.
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