- Shares in London take a sharp downwards turn
- Inflation concerns remain
- Ocado hit by fire at fulfilment centre
Risk is firmly off this morning with European stock markets slipping in early trade, led lower by the travel and energy sectors. US futures are weaker after Friday saw the first down week on Wall Street in four. Bank earnings were strong, but markets have already discounted an exceptionally strong reporting season. Meanwhile concerns about variants, rising cases and declining vaccine efficacy are all conspiring to knock confidence. The FTSE 100 slumped to a 2-month low in early trade as it retreated well south of 7,000. US 10yr Treasury yields hover around 1.28 per cent but are off the low hit earlier close to the 200-day SMA. I think we are already in a high summer lull for stock markets.
Inflation was the big story last week and remains the big question mark hanging over markets. Consumer expectations have shot higher – the University of Michigan released its report on Friday showing consumers think prices will rise 4.8 per cent over the next year. Earlier in the week the CPI print hit 5.4 per cent. As expressed in these columns on many occasions, the risk was always that expressing a tolerance for inflation to run hot via average inflation targeting, the Federal Reserve was letting inflation expectations become unanchored, leading to a period of sustained high inflation.