Image source: PBS

At the beginning of Wednesday, markets finally stabilized after US equities recorded their worst day, the last time was in June 2020.

The good news overshadowed a precedent which revealed that inflation was higher than expected in August.

European stocks

Equities in Europe have shown mixed results in several countries.

In Germany, the DAX (DAX) fell 0.2% at the start of trading, while the French CAC 40 (CAC40) remained flat.

Meanwhile, London’s FTSE 100 (UKX) fell 0.7%.

The Italian benchmark index showed some positive signs, rising by 0.7%.

US stocks

While European equities showed a mixed performance, US stock futures showed improvements as they were slightly higher.

“Equity futures suggest that the rout stops here,” Robert Carnell, regional head of Asia-Pacific research at ING, wrote in a report.

U.S. stocks plunged Tuesday into what was the worst day since June 11, 2020, after August inflation data surprised investors.

The US consumer price index, which includes major goods and services, rose 0.1% in July. The rise contradicted economists’ forecasts of a 0.1% decline.

While annual inflation fell for the second month in a row, it remained stubbornly high, with prices rising 8.3% year-on-year.

The stocks

• The Dow (Indu) was down 3.9%
• S&P 500 (INX) fell 4.3%
• Nasdaq Composite (COMP) plunged 5.2%

Impact of inflation on the Asian market

The move in the US stock market gave investors a sigh of relief.

They were initially worried that higher-than-expected inflation would prompt the US Federal Reserve to aggressively raise interest rates.

The decision would have caused serious damage to the US economy. Carnell also wrote that daily US inflation data overwhelmed Asian markets.

She noted that core inflation in the US, which eliminates volatile categories like food and gas, hit 6.3% last month.

Monthly earnings of 0.6% were double what economists expected.

Asian stocks

• Japan’s Nikkei 225 slid 2.8%
• South Korea’s Kospi lost 1.6%
• Shanghai Composite (SHCOMP) Index slid 0.8%
• Hong Kong’s Hang Seng fell 2.5%

Other notes

Consumers in the United States are struggling to adjust to rising prices as markets have been slashed on almost everything from food to school supplies.

Meanwhile, annual UK inflation fell to 9.9%, reflecting the decline in gasoline prices. In the previous month, however, it had risen 0.5%.

Additionally, the UK’s annual CPI rose 6.3% thanks to the removal of energy and food costs.

Reference:

Markets steady after worst day for US stocks since June 2020