US, Europe close lower as traders weigh recovery

19 May, 2021 12:00 AM printer

NEW YORK: Fears about inflation and rising Covid-19 infections in several countries dimmed the mood in global markets Monday and drove the dollar down, although there was good news on trade as Brussels and Washington called a truce on metals tariffs.

European and US markets both closed lower, with Wall Street starting the week in a grumpy mood after Friday’s exuberant finish, reports AFP.

Tech stocks were hit hardest, with the Nasdaq losing 0.4 percent.

Mounting price pressures in the United States are raising fears the Federal Reserve could call time on its easy money policies, although the central bank has said it will ride out volatility in inflation data caused by comparisons with the early months of the pandemic last year.

“The Fed continues to talk down inflation, saying it’s a sign of economic strength and activity, but the question is how much inflation is good for the economy,” Peter Cardillo of Spartan Capital Securities told AFP.

In an appearance ahead of Wednesday’s closely watched publication of minutes from the central bank’s latest policy meeting, Fed Vice Chair Richard Clarida said “it may take more time to reopen a $20 trillion economy than it did to shut it down,” but offered no signs of a change in policy.

With the Fed focused on the jobs side of its dual mandate, “our baseline view is that achieving maximum employment will not put unwanted or unwelcome upward pressure on the price level,” he said.

In Asia, Singapore and Taiwan both tightened restrictions to control rising coronavirus infections, while Chinese retail sales fell short of expectations, cooling hopes that consumption there would help power a global post-coronavirus recovery. “Latest activity data... reinforced the message that the country’s economy is clearly slowing, as it drifts back to its pre-pandemic trend and authorities remove policy support,” Capital Economics analyst Thomas Matthews commented.

But there was good news on transatlantic trade, as the United States and EU called a truce on tariff battles over steel and aluminium that dated back to former US president Donald Trump’s time in office.

The two sides announced “discussions to address global steel and aluminium excess capacity” that will see Brussels temporarily suspend a plan to increase tariffs on high-profile American goods.