Germany’s bluechip stocks index on Friday breached 16,000 points for the first time following more record highs on Wall Street overnight as investors shrugged off data showing fresh US inflation pressures.
A jump in wholesale prices added to expectations the Federal Reserve will shift course and pull back on its stimulus efforts, starting with a slowdown in the pace of massive bond buying.
“For now, markets appear… comfortable with that idea,” noted Michael Hewson, chief market analyst at CMC Markets.
“As long as the discussion doesn’t move onto the more sensitive topic of rate rises, then the current trend of… (stock market) highs looks set to continue.”
In Germany, Frankfurt’s DAX 30 index hit a record high of 16,030 points in Friday morning deals.
The first signal of a move to taper huge US stimulus could come as soon as this month when Federal Reserve chief Jerome Powell is due address the annual central banking conference in Jackson Hole, Wyoming.
The worry is that tapering, along with rises to interest rates to contain inflation as economies reopen from lockdowns, could hamper the recovery.
Elsewhere Friday, Asian stock markets closed lower following a broadly positive week.
The fast-spreading Delta virus variant, which is forcing governments to reimpose containment measures, and the Chinese government’s campaign to tighten its grip on the world’s number two economy were also playing on sentiment.
Data on Thursday showed US producer prices rose more than twice as much as forecast on-month in July, while the annual rate hit a record.
The producer price report came on the heels of Wednesday’s consumer price index which showed inflation moderating in July.
“Global investors are assessing the implications of the spread of the Delta virus, the possible tapering by the Fed, and China’s clampdown,” said Geir Lode, of Federated Hermes.
“With equity markets almost doubling since the start of the pandemic and a bull market lasting over a decade, investors are questioning how far the bull market can rally.”
Investors were keeping an eye also on developments in China after officials said they would put in place tougher anti-monopoly rules and penalties over the next five years, as Beijing looks to tighten the screw further after a recent crackdown on a range of industries.
Tech and private equity firms have already been caught in the crosshairs of leaders, and a statement late Wednesday indicated finance, public health, and food and drug manufacturing would also be targeted.
Elsewhere, crude prices extended their recent sell-off fuelled by concerns that the Delta mutation would slam demand, with the International Energy Agency warning as much in a report Thursday.
“The oil market will likely continue to maintain a nervous watch, especially for a deterioration in China and the US,” said Vandana Hari, of energy consultant Vanda Insights, adding that the IEA report “validated fears over a slowdown in second-half demand”.
Key figures around 0915 GMT
Frankfurt – DAX 30: UP 0.5 percent at 16,023.76 points
London – FTSE 100: UP 0.4 percent at 7,221.35
Paris – CAC 40: UP 0.4 percent at 6,908.29
EURO STOXX 50: UP 0.3 percent at 4,238.78
Tokyo – Nikkei 225: DOWN 0.1 percent at 27,977.15 (close)
Hong Kong – Hang Seng Index: DOWN 0.5 percent at 26,391.62 (close)
Shanghai – Composite: DOWN 0.2 percent at 3,516.30 (close)
New York – Dow: UP less than 0.1 percent at 35,499.85 (close)
Euro/dollar: UP at $ 1.1741 from $ 1.1733 at 2100 GMT
Pound/dollar: DOWN at $ 1.3803 from $ 1.3809
Euro/pound: UP at 85.08 pence from 84.94 pence
Dollar/yen: DOWN at 110.29 yen from 110.43 yen
West Texas Intermediate: DOWN 0.6 percent at $ 68.67 per barrel
Brent North Sea crude: DOWN 0.1 percent at $ 71.22 per barrel