US tech sell-off and report of rising prices for goods leaving China\u2019s factories spook stock markets<\/p>\n
Last modified on Tue 11 May 2021 07.36 EDT<\/p>\n
Shares in the City have fallen sharply after fears of rising inflation in the world\u2019s two biggest economies sent shudders through global stock markets.<\/p>\n
Every one of the major companies featured in the FTSE 100 index was down in early trading after a sell-off in the US tech sector and an overnight report showed rising prices for goods leaving China\u2019s factories.<\/p>\n<\/p>\n
With financial markets already concerned about rising inflationary pressure in the US, a fall in share prices on Wall Street on Monday spread first to Asia and then to European bourses.<\/p>\n
In London, the FTSE 100 was down more than 2% \u2013 falling 160 points to drop back below the 7,000 level \u2013 and on course for its weakest performance in two months.<\/p>\n
Data released by Beijing showed rising global commodity prices feeding through into more expensive manufactured goods. China\u2019s producer prices index rose at an annual rate of 6.8% in April \u2013 up from 4.4% in March \u2013 and stood at its highest level in three years.<\/p>\n
Rising producer prices are an early indication of mounting inflationary pressure, and consumer prices in China were 0.9% higher in April than year earlier, up from 0.4% in March.<\/p>\n
Neil Wilson, the chief market analyst at Markets.com, said: \u201cIf you are looking for inflation signals, China\u2019s factory gate prices are a pretty good leading indicator. So today\u2019s report could be of concern. Tomorrow\u2019s US inflation numbers are going to be closely watched.\u201d<\/p>\n
Stock markets have been rising amid optimism that vaccine programmes will allow the reopening of the global economy, with technology shares leading the way.<\/p>\n
Investors have been assuming that central banks will allow their economies to grow strongly without raising interest rates or withdrawing other forms of stimulus such as bond-buying programmes.<\/p>\n
The US Federal Reserve, the European Central Bank and the Bank of England have said in recent weeks they are in no hurry to tighten policy but equity traders fear the mood could change if inflationary pressures increase.<\/p>\n
\u201cWith inflation resurging, it\u2019s expected that the increase in interest rates will come sooner rather than later,\u201d said Susannah Streeter, the senior investment and market analyst at Hargreaves Lansdown.<\/p>\n