US stocks slip as investors look to inflation data

Receive free Markets updates

We’ll send you a myFT Daily Digest email rounding up the latest Markets news every morning.

Wall Street stocks slipped on Wednesday as oil prices hit a seven-month high, with investors bracing for data later in the week that is expected to show US inflation accelerated last month.

Extending Tuesday’s sell-off, Wall Street’s benchmark S&P 500 fell 0.6 per cent, with semiconductor group Nvidia the worst performer, down 4.8 per cent. The tech-heavy Nasdaq Composite shed 1.1 per cent.

Those moves came as traders awaited the latest US inflation numbers, which will be released on Thursday and are expected to show consumer prices rising to 3.3 per cent year on year in July, up from 3 per cent in June. That would mark the first acceleration in the headline figure since June 2022. 

Even so, a so-called “soft landing” scenario under which higher interest rates induce neither a deep economic slump nor a sharp jump in unemployment has become “the dominant market narrative [and] recession risk has been largely priced out from risk assets — apart from in commodities”, said analysts at JPMorgan.

Brent crude, the international oil benchmark, rose more than 1 per cent on Wednesday to $87.65 a barrel, the highest since January and up roughly a fifth since the end of June in a rise triggered by Saudi Arabia’s and Russia’s cuts to production. European natural gas prices, meanwhile, surged 26 per cent to €38.62 per megawatt hour on news of potential supply disruptions from Australia.

The negative tone in US equity markets contrasted with Europe, where Italian bank stocks rebounded after the country’s finance ministry watered down a planned windfall tax that sent shares in the biggest lenders tumbling in the previous session.

Europe’s region-wide Stoxx 600 trimmed earlier gains to close up 0.4 per cent, France’s Cac 40 added 0.7 per cent and Germany’s Dax climbed 0.5 per cent. London’s FTSE 100 rose 0.8 per cent.

Shares in Intesa Sanpaolo and UniCredit, Italy’s two largest banks by assets, gained 2.3 per cent and 4.2 per cent, respectively, after the country’s finance ministry said a tax on net interest income would be capped at 0.1 per cent of assets.

State-owned Monte dei Paschi di Siena rebounded 2.4 per cent after dropping by more than a tenth on Tuesday, while Banco BPM added 5.4 per cent.

Despite the legislative climbdown, Italy’s decision to go after the banks could fuel debate over profit windfall taxes in other European countries, raising the chance that lenders pre-empt new taxation by raising deposit rates, analysts said. Spain has already introduced a windfall tax on banks.

Asian equities were mixed as data showed China’s economy slipped into deflation in July, heightening concerns over low consumption and growth after the release of disappointing trade numbers earlier in the week.

Hong Kong’s Hang Seng index rose 0.3 per cent and China’s CSI 300 shed 0.3 per cent after consumer prices in the world’s second-biggest economy fell 0.3 per cent year on year in July.

Data released on Tuesday showed China’s exports and imports declined by 14.5 per cent and 12.4 per cent year on year in dollar terms, respectively. 

Some investors hope a government stimulus package might revive economic growth and promote a return to inflation.