European shares notched up a ninth consecutive session of gains while stocks on Wall Street slid ahead of the conclusion of the US central bank’s two-day policy meeting on Wednesday.
The blue-chip S&P 500 was down 0.2 per cent at lunchtime in New York while the tech-focused Nasdaq Composite edged 0.1 per cent lower.
Before the market-wide retreat, US energy companies had tracked the rise in oil prices. Brent crude, the global benchmark, climbed 1.2 per cent to $74.89 a barrel, its highest level since April 2019, while US marker, West Texas Intermediate, was up 0.4 per cent at $72.40 a barrel, a three-year high.
“As long as the global economy continues to do well, the market will continue to go higher,” said Luca Paolini, chief strategist at Pictet Asset Management, referring to stocks on both sides of the Atlantic hovering near record highs.
The Stoxx Europe closed up 0.2 per cent for another all-time peak — the region-wide benchmark’s ninth session of back-to-back rises.
Frankfurt’s Xetra Dax rose 0.1 per cent, while both the CAC 40 in Paris and London’s FTSE 100 climbed 0.2 per cent.
Sterling strengthened against the dollar, climbing 0.2 per cent to $1.4105, after UK inflation in May rose 2.1 per cent year on year, reflecting higher costs for clothing and eating out and overshooting the Bank of England’s 2 per cent target.
“This transient inflation surge explained away by many central bank chiefs is at risk of becoming something more permanent or at least that continues to be the overhanging concern for markets,” said Charles Hepworth, investment director at GAM Investments.
Central banks around the world have been grappling with how to respond to rising inflation, although policymakers in Europe and the US have maintained that the price rises are transitory effects of economies reopening.
The “dot plot” released by the Federal Reserve on Wednesday will provide insight into how high US central bankers expect inflation to rise this year and next.
“The key component to watch at Wednesday’s press conference is an acknowledgment by Fed chair [Jay] Powell that the tapering discussion is under way,” said Danielle DiMartino Booth, chief executive of Quill Intelligence, “and that officials are pondering a timeframe as to when they will communicate to the markets that the tapering train is scheduled to depart the station”.
In the US, investors anticipate that discussion by the Fed about when to start shrinking its monthly asset purchase scheme may begin as soon as Wednesday. The European Central Bank said last week that it would stick to its bond-buying plan.
Bonds were steady on both sides of the Atlantic, with the yield on the 10-year US Treasury down 0.01 percentage point at 1.49 per cent and the equivalent German Bund slipping 0.03 percentage points to minus 0.25 per cent.