Stocks, equity futures drop on inflation concerns: markets wrap

Asian stocks fell with US and European equity futures Wednesday as concerns about faster inflation and Covid-19 flareups in some nations rattled investors. A dollar gauge was near the lowest level this year.

Australian equities had their worst day in almost three months. Shares also fell in Japan and China after key US equity benchmarks closed lower and large technology stocks like Amazon.com Inc. and Microsoft Corp. erased gains. S&P 500 and Nasdaq 100 futures were in the red along with European contracts.

Bitcoin and other cryptocurrencies extended a tumble in part after the People’s Bank of China conveyed a statement reiterating that digital tokens can’t be used as a form of payment. A slide in crude on rising US stockpiles and the possibility of more supply from Iran hurt energy stocks. Treasury yields were steady. Markets were closed Wednesday in Hong Kong and South Korea.

Stocks have been volatile after touching a record in early May, whipsawed by concerns about accelerating inflation amid elevated commodity prices, as well as a Covid-19 resurgence in some countries. Federal Reserve officials have repeatedly indicated that they see recent price pressures as transitory and intend to keep policy accommodative for some time to come. Traders are awaiting the latest Fed minutes for the clues about the outlook.

“The market has been trying to process a very unusual economic environment and a confluence of factors that it has not faced for a long time,” said David Donabedian, chief investment officer of CIBC Private Wealth Management. “I personally would say that the stock market has absorbed it all extremely well because there’s still a high conviction view on earnings being strong.”

In Bank of America Corp.’s latest fund manager survey, inflation topped the list of the biggest tail risks, followed by a bond market taper tantrum and asset bubbles. Covid-19 was in fourth place.

Here are some key events this week:

• The Fed publishes minutes from its April meeting Wednesday, which may provide clues to officials’ views on the recovery and how they define “transitory” when it comes to inflation.
• EIA crude oil inventory report Wednesday.
• St. Louis Fed President James Bullard and Atlanta Fed President Raphael Bostic to speak at separate events Wednesday.
• IMF Managing Director Kristalina Georgieva and ECB President Christine Lagarde speak at the Vienna Economic Dialogue Thursday.
• Euro-area finance ministers and central bank chiefs hold an informal meeting. A larger group of EU finance ministers and central bank chiefs will meet May 22.

These are some of the main moves in markets:

Stocks

• S&P 500 futures dipped 0.4% as of 7:16 a.m. in London. The S&P 500 fell 0.9%
• Nasdaq 100 futures shed 0.5%. The Nasdaq 100 fell 0.7%
• Japan’s Topix index retreated 0.7%
• Australia’s S&P/ASX 200 index fell 1.9%
• China’s Shanghai Composite index lost 0.7%
• Euro Stoxx 50 futures fell 1.1%

Currencies

• The yen was at 108.95 per dollar
• The offshore yuan traded at 6.4247 per dollar
• The Bloomberg Dollar Spot Index was little changed
• The euro was at $1.2241

Bonds

• The yield on 10-year Treasuries was at 1.64%
• Australia’s 10-year bond yield dipped one basis point to 1.77%

Commodities

• West Texas Intermediate crude fell 1% to $64.81 a barrel
• Gold was at $1 871.75 an ounce