Global stockmarkets fell sharply early this week, with concern over US inflation. Technology shares were hit particularly hard: the tech-heavy Nasdaq 100 index has fallen by 5% since 1 May.
Investors’ US inflation expectations are at a 15-year high, says Naomi Rovnick in the Financial Times. The five-year break-even rate (the difference between the yield on inflation-linked five-year Treasuries and nominal five-year bonds) shows that investors expect average inflation of 2.73% over the next five years, the highest this figure has been since 2006. Spiking inflation could force the US Federal Reserve to tighten monetary policy sooner than expected. That would mean less liquidity sloshing around the market, which is negative for stock prices.
Markets were already struggling to digest some puzzling US jobs numbers, says Neil Irwin in The New York Times. Last week we learnt that the US added only 266,000 jobs in April, less than one-third of the amount predicted. With the unemployment rate still elevated at 6.1%, does this mean that the promised boom has gone missing? A more likely explanation is that generous federal unemployment support, which has been extended until September, is discouraging people from seeking work, says Noah Williams for National Review Capital Matters. “Incentives still matter… make unemployment more attractive, and, all else equal, more people will remain unemployed.”
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Business leaders are certainly complaining about a tight job market, adds Irwin. That is feeding through into higher wages. Average hourly earnings rose 0.7% last month; in leisure and hospitality, which is reporting some of the worst labour shortages, hourly wages surged by 4.8%. That should eventually feed through into higher inflation.
-
8 of the best houses for sale with home cinemasHouses for sale with home cinemas – from a modern oast-house style property in Kent to a house in Buckinghamshire with Dolby sound and bespoke seating
-
Rachel Reeves faces £23 billion capital gains tax “black hole” – will she be forced to look elsewhere?The fiscal watchdog has downgraded its forecast for capital gains tax revenues, leaving chancellor Rachel Reeves with £23 billion less than previously expected
-
Protests erupt in Turkey after the arrest of president Erdogan's rivalTurkey's president has jailed his main political opponent, Ekrem Imamoglu
-
What is the Mar-a-Lago Accord and why is it getting attention from Wall Street?On Wall Street, there is talk that Trump's tariffs aim to make the world’s leaders come crawling to Mar-a-Lago, his Florida residence
-
Spring Statement: Rachel Reeves 'must turn good intentions into effective measures'Opinion Chancellor Rachel Reeves understands the economy’s structural problems but is unlikely to solve them, says Max King
-
England's department stores return – but do they have a future?Opinion The great traditional retail shops of Middle England have bounced back for now. Don’t get too carried away though, says Matthew Lynn
-
Can investors stay optimistic about Russian stocks?Investors look to profit from Russia as Trump pushes for peace in Ukraine. But is it worth the risk?
-
Labour's 'Project Chainsaw' begins by abolishing NHS England – will it backfire?Keir Starmer is taking the fight to the blockers, the NIMBYs, public sector workers and the unions says Emily Hohler. What happens if Labour fails to deliver?
-
The benefits of a stock bubbleOpinion We tend to think of stock bubbles as bad things but, as the dotcom craze shows, good things can come from them, says Matthew Lynn
-
Friedrich Merz proposes 'radical' spending package for GermanyGermany's chancellor designate Friedrich Merz wants to scrap restraints on borrowing and allow for much higher defence spending
