Market Wrap – Inflation fears weigh

Concerns over global inflation weighed on stock prices during the US trading session after the release of inflation figures from the UK today showed more stubborn inflation.

The major indices in the US dipped over these fears, with the VIX rising close to 15 on the day. Traders and investors also remained on edge for Tesla earnings and a host of Fed speakers.

Inflation, which measures the rate of price rises, fell to 10.1% in the year to March from 10.4% in February. UK inflation was widely expected to fall below 10%, but food prices continued to soar, rising at their fastest rate in 45 years.

Falling inflation doesn’t mean prices are falling, but just that the rate of price rises is slowing. Grant Fitzner, chief economist for the Office for National Statistics, which provides the figures, said globally food prices were falling, but that had not yet led to price cuts.

Some of the other major moves were seen in oil prices, which dipped close to 2% intraday. The OPEC production cut had been expected to boost price and the recent API data was also fairly strong.

API showed generally close to what was expected, with Crude inventories at2675,000 and Gasoline at 100,000. Distillates inventories were also seen at 1900,000.

This number should have been supportive but there may have been selling the fact with these numbers increasingly front run. The official US numbers, which should include a scheduled 1.6-million-barrel release from the SPR.

The consensus for the US numbers is Crude inventories at 1088,000 and Gasoline at 1267,000. Distillates inventories are expected at 927,000.

Commodity related currencies also took a hit today, with the USDCAD pair moving higher as the Canadian dollar sagged due to the drop in oil prices, which often happens when crude drops.

Also, commodity and risk on currencies dropped, such as the AUDUSD and NZDUSD. The Japanese yen benefitted, with NZDJPY and AUDJPY also dropping over risk fears.