Markets fall again as inflation worries rattle investors – business live

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Inflation worries continue to grip the markets today, after US consumer prices jumped much more sharply than expected in April amid supply shortages and rising demand as lockdowns ease.

The news that the Consumer Price Index has climbed 4.2% during the month from a year earlier – the fastest since 2008 – fueled fears that the US economy could be running too hot.

It triggered Wall Street losses last night, and in Asia-Pacific bourses where shares fell for the third day running.

With government support packages driving consumer spending, and stretched supply chains creating a scramble for raw materials, investors are concerned that the jump in inflation may not be temporary as the Federal Reserve believes.

The Dow fell 681 points, or 1.99%, to notch its single-worst session since January – a day after its biggest fall since February.

The selloff has rippled round the globe again, sending Japan’s Nikkei sliding 2.5% and Australia’s S&P/ASX 200 down almost 1%, adding to losses earlier this week.

London is heading for a lower start too, with the FTSE 100 tipped to fall almost 1%, wiping out yesterday’s mild recovery after Tuesday’s slump.

Some economists, though, point out that US inflation was driven up by one-off factors as the economy emerged from pandemic restrictions, so it could be a temporary spike.

Used car and truck prices, shelter and lodging, airline tickets, recreational activities, car insurance and furniture all pushed CPI higher, as the reopening of businesses created temporary quirks in the data.

New US producer prices data, and weekly jobless claims are due today – which will give new insight into how the world’s largest economy is faring.

It will take time to tell if inflation is transitory or permanent, so this issue is going to loom for months.

Jim Reid of Deutsche Bank predicts regular pockets of volatility as the two sides tussle it out:

It’s dangerous to read too much into one number but the broad strength gives us confidence that this is not just a transitory story. Another buzz word for us has been how this year will be “complicated” for markets especially once reopening happens. This release personifies that thought process.

You may get dull periods but this year is going to be a big battle between the bullishness of mass reopening/stimulus on one hand and the inflationary consequences on the other. Expect regular pockets of vol. I still lean heavily on the inflationary camp but the reality is that the battle is still in the early stages and non-inflationists will still be able to use the transitory argument for several more months yet.

Bitcoin took a tumble overnight, after Elon Musk announced in a tweet that Tesla was suspending vehicle purchases using Bitcoin, citing the environmental impact of mining the cryptocurrency.

Musk added that Tesla would not sell any of the bitcoin it bought earlier this year, and intends to use bitcoin for transactions as soon as mining uses to more sustainable energy.

This sent bitcoin tumbling – from over $54,000 just before Musk’s tweet to below $46,000. It has recovered a little since, to around $51,000 – but still down over 10% over the last 24 hour.

Other cryptos also slid, including ether and dogecoin:

The agenda

• 1.30pm BST: US weekly jobless claims figures
• 1.30pm BST: US Producer Price Inflation report for April