US stocks lose ground as London sapped by rate rise fears

US stocks gave up ground Wednesday but remained near record highs, while London fell out of step with Europe on fears spiking inflation would prompt the Bank of England to raise interest rates.

The FTSE 100 index of top British shares was firmly in the red by close of trading, in contrast with Paris and Frankfurt which booked small gains.

On Wall Street, the Dow Jones Industrial Average, S&P and tech-heavy Nasdaq all dropped.

“US stocks are slipping but remain near record high territory with the markets digesting some divergent data on retail earnings and housing,” Charles Schwab analysts wrote.

Major American retailer Target beat forecasts in third-quarter earnings published Wednesday, following strong data Tuesday from Walmart and upbeat consumer sentiment.

But statistics released Wednesday also showed falls in housing starts and mortgage applications in the world’s biggest economy.

Oil prices sank further even though data showed US commercial crude stocks fell back, as traders eyed the possibility of Washington and Beijing releasing part of their reserves — a possibility discussed by presidents Joe Biden and Xi Jinping in a video summit Monday.

Across the Atlantic, data released early Wednesday showed UK annual inflation rose to a near decade-high of 4.2 percent in October on higher energy bills.

The news sent the pound jumping as traders priced in a December interest rate hike from the Bank of England, emboldened also by Tuesday’s upbeat UK jobless data.

– Diverging on inflation –

Inflation and retail data have also stoked calls for the US Federal Reserve to act sooner to prevent overheating and make sure prices do not run out of control.

Top Fed official James Bullard said the bank should take a “more hawkish” shift and that the tapering of its vast bond-buying programme — which has helped support an extended global equity rally — “could move faster”.

In the eurozone, European Central Bank chief Christine Lagarde has pushed back on talks of rate rises even as far out as 2023.

Her deputy Luis de Guindos told Bloomberg TV Wednesday that “the reality check is going to be the evolution of inflation next year”.

“If you look at the drivers, the transitory nature of these drivers of inflation are quite clear,” he added — suggesting no shift in monetary policy for the single currency for now.

Separately, ECB board member Isabel Schnabel said the bank expected inflation to peak in November before gradually falling back in 2022.

Meanwhile Turkey’s lira fell to a new record low against the greenback as President Recep Tayyip Erdogan promised to “lift the interest rate burden from citizens” — even as inflation runs close to 20 percent.

There was positive news for Russia, as the economy booked a second quarter in a row with a strong rebound from the impact of the coronavirus, growing 4.3 percent in July-September compared to last year.

Moscow is also struggling with inflation, which reached 8.1 percent year-on-year in October.

– Key figures around 1645 GMT –

New York – Dow: DOWN 0.5 percent at 35,965.31 points

London – FTSE 100: DOWN 0.5 percent at 7,291.92 (close)

Frankfurt – DAX: FLAT at 16,252.60 (close)

Paris – CAC 40: UP 0.1 percent at 7,156.85 (close)

EURO STOXX 50: FLAT at 4,402.60

Tokyo – Nikkei 225: DOWN 0.4 percent at 29,688.33 (close)

Hong Kong – Hang Seng Index: DOWN 0.3 percent at 25,650.08 (close)

Shanghai – Composite: UP 0.4 percent at 3,537.37 (close)

Euro/dollar: DOWN at $1.1316 from $1.1320 at 2200 GMT

Pound/dollar: UP at $1.3480 from $1.3430

Euro/pound: DOWN at 83.94 pence from 84.29 pence

Dollar/yen: DOWN at 114.38 yen from 114.82 yen

Brent North Sea crude: DOWN 1.3 percent at $81.38 per barrel

West Texas Intermediate: DOWN 1.8 percent at $79.32 per barrel

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