Equities waver on inflation concerns; oil rebounds

LONDON — Global stock markets wavered on Wednesday, as traders digested data showing that runaway inflation shows no sign of easing.

Oil rallied after a sharp fall following a report that the Organisation of the Petroleum Exporting Countries (OPEC) was considering suspending Russia from an output deal, which observers said could allow producers to pump more.

Equities have enjoyed a largely healthy run of late on hopes that inflation could be nearing a peak and a sell-off across markets may have run its course.

The easing of some lockdown measures in China added to the optimism.

But investors were brought down to earth with a bump on Tuesday after data showed that eurozone inflation hit a record high in May on rocketing energy costs.

The news puts extra pressure on the European Central Bank to act faster to rein in prices by hiking interest rates, along with the Bank of England and the US Federal Reserve.

"Investors took a pause for breath after the recent rally as the spectre of inflation continues to loom large," said Richard Hunter, an analyst at investment platform interactive investor.

In mid-afternoon trading, shares in Frankfurt and Paris were slightly higher and London flatlined.

Wall Street stocks began June on a high note, rising early in the session.

Markets remain fearful as the Ukraine conflict fuels massive price gains for energy and food, translating into spiking inflation — and damaging the post-pandemic global economic recovery.

"There are heightened concerns around inflation and where central banks are likely to go trying to combat inflation," Kristina Hooper of Invesco Advisers told Bloomberg Radio.

"This has gone from just an inflation scare to a growth scare. Uncertainty has grown."

Oil rebounds 

Equities were mixed in Asia, with traders shrugging off a further easing of lockdown restrictions in China that many hope will give a much-needed boost to the world's number two economy.

Hong Kong and Shanghai slipped along with Taipei, Bangkok, Mumbai and Manila, though Tokyo, Sydney, Singapore and Wellington rose.

The oil market rebounded after tanking by more than 4 per cent late Tuesday in reaction to a Wall Street Journal report that OPEC was considering removing Russia from an agreement that has locked producers into limited output increases.

Moscow's removal would mean an early end to the pact and allow major crude nations such as Saudi Arabia to open the taps, analysts said.

"If there's any confirmation from OPEC+ members that the absence of Russia is being discussed, then prices can drop to as low as $100," said Will Sungchil Yun, at VI Investment Corp. 

On Thursday, the 13 members of the Organisation of the Petroleum Exporting Countries and their 10 partners — who make up OPEC+ — are due to hold their monthly talks on output increases.