Make Kitco Your Homepage

Global stock markets slip on inflation, tax and regulation worries

Kitco News

NEW YORK, Sept 13 (Reuters) - World stock markets edged lower on Monday on inflation worries, as well as tax and regulatory pressures on the world's biggest companies.

Leading Democrats in the U.S. House of Representatives said on Monday they are seeking to raise the tax rate on corporations to 26.5%, up from the current 21%. NL1N2QF12B

The MSCI world equity index (.MIWD00000PUS), which tracks shares in 45 nations, rose 0.01%, while U.S. stocks started mixed.

The Dow Jones Industrial Average (.DJI) rose 0.72% and the S&P 500 (.SPX) 0.03%. The Nasdaq Composite (.IXIC) dropped 0.41%, as investors pivoted away from major technology stocks to sectors more likely to benefit from an economic bounce later this year.

The dollar climbed to a two-week peak against a basket of major currencies as investors continued to price in expectations that the U.S. Federal Reserve could reduce its asset purchases sooner rather than later despite a surge in COVID-19 cases. read more

A flurry of U.S. economic data is due this week, starting with U.S. consumer price data on Tuesday, which will give a broad picture of the economy's progress ahead of the U.S. Federal Reserve's meeting next week.

China fired a fresh regulatory shot at its tech giants - telling them to end a long-standing practice of blocking each other's links on their websites. The Financial Times also reported that Beijing is aiming to break up the payments app Alipay (688688.SS)read more

The Chinese blue-chip index (.CSI300) fell 0.5% and MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) closed 0.86% lower. Japan's Nikkei (.N225) rose 0.22%.

"We will see more of the state finding ways to extract funding from those it deems most capable of providing it," said Tom O'Hara, portfolio manager at Janus Henderson.


The continued acceleration in inflation added to concerns, with data showing factory gate inflation at more than decade-highs in the United States and China, and Japan reporting wholesale prices at 13-year highs last month.

"The market has been looking through inflation levels, assuming they are transitory and that interest rates won't go up much, but the conundrum is that wherever we look, we will probably see more inflation and interest rate rises than people think," O'Hara added.

A market gauge of euro zone inflation expectations rose to its highest since mid-2015 on Monday as supply bottlenecks and stronger-than-expected inflation prints encourage investors to seek inflation protection. read more

Inflation in the bloc will "in all likelihood" ease as soon as next year but the European Central Bank is ready to act if it does not, ECB policymaker Isabel Schnabel said.

Banks continue to flag caution. A Deutsche Bank survey found market players expect a 5-10% equity market correction by year-end, with COVID and inflation seen as the main risks.

BNP Paribas, while expecting the S&P 500 to stay unchanged by end-2021, highlighted risks from "higher yields and taxes, at a time when earnings momentum has slowed from excellent to good."

It also lowered estimates for emerging markets, stemming from Chinese policy risks.

The yield on the U.S. 10-year Treasury was 1.3191 percent .

The general air of risk aversion helped lift the dollar index to 92.65, up 0.07% and off recent lows of 91.941.

Brent crude was last up $0.64, or 0.88%, at $73.56 a barrel. U.S. crude was last up $0.84, or 1.2%, at $70.56 per barrel.

Reporting by Sujata Rao in London and Elizabeth Dilts Marshall in New York; additional reporting by Wayne Cole in Sydney and Dhara Ranasinghe in London; editing by Emelia Sithole-Matarise, Chizu Nomiyama and Dan Grebler
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.