European stocks closed in the green after global assets rebounded as a cocktail of inflation, interest rates, Ukraine war and China’s zero-COVID stance threaten growth.
Across the Atlantic, US benchmarks were mixed as inflation in the country topped forecasts in April, in a sign that soaring prices are persisting across the economy.
Wall Street’s S&P 500 (^GSPC) advanced 31.46 points, or 0.8%, to 4032.51, while the tech-heavy Nasdaq (^IXIC) was trading flat. The Dow Jones (^DJI) added 0.7% after hitting a 52-week low the previous session.
US consumer price index rose 8.3% last month from the year before, according to the Labor Department. While inflation rose at a slower pace in April it was still near the 40-year high in March.
Airfares, food, new vehicles and services were some of the largest contributors to the monthly increase. Core CPI, which excludes food and energy, increased 0.6% from a month earlier and 6.2% from April 2021.
Inflation had peaked at 8.5% in March, the fastest annual gain since December 1981, while core prices rose slightly below forecasts to 6.5% during the month.
The increase mounts pressure on the Federal Reserve to raise interest rates and get inflation under control.
🇺🇸Focus on sequential core CPI momentum!
🟢#CPI +0.3% (slower m/m)
🔥Core CPI +0.6% (faster m/m)
⛽️Energy -2.7% (gas -6.1%)
⚠️ OER +0.5%
🏨Hotels 2.0% pic.twitter.com/fXzeFzmSdW
— Gregory Daco (@GregDaco) May 11, 2022
Analyst say the inflation-driven market volatility which has caused extreme swings in global equities this year is not yet over.
"Beleaguered stock markets have recovered to an extent this afternoon, following a slowing of US CPI growth, but concerns about further tightening remain," said Chris Beauchamp, chief market analyst at online trading platform IG. "It is too soon to tell if the slowing of price growth is transitory or not, but slowing or not, 8.1% price growth is still far too hot for the Fed’s taste."
"Thus, while we might get a short-term, and dramatic, bounce in stocks, it is highly unlikely that we have seen the end of 2022’s volatility."
It comes as concerns over energy shortages mounted after Ukraine said it will suspend flows through a key entry point that delivers about a third of Russia’s gas supplies to Europe.
Ukraine's gas operator GTSOU warned on Tuesday night that it would stop receiving supply into the Sokhranivka station from 7am local time on 11 May as it can’t control the infrastructure in areas occupied by Russian troops. It declared a force majeure, meaning it's unable to provide deliveries for reasons beyond its control.
The country had proposed the fuel to be rerouted to Sudzha, however Russian energy giant Gazprom (GAZP.ME) said the switch was "technically impossible" because of how the system operates.
Benchmark European gas prices jumped as much as 6.8%, while the UK equivalent rose 9%, but prices have since eased after Germany said its gas supply was currently secure.
Read more: Oil prices tumble to five-week low
The price of crude rose on Wednesday after a 9% drop over the previous two sessions. It follows supply jitters on China and inflation fears. The EU is also working to gain support for an unanimous ban on Russian oil while major producers warned they may struggle to fill the gap when demand improves.
Overseas markets rebounded, tracking European markets and Wall Street as China’s zero-COVID stance continues to threaten to revive the supply chain bottlenecks that first drove inflation higher. The MSCI’s broadest index of Asia-Pacific shares excluding Japan was up 2.6% in after-hours trade.
Watch: How does inflation affect interest rates?