Written by Advies Wealth 12/05/2021
The FTSE 100 shed 2.5% on 11/05/21 after fears of inflation sparked a tech sell off in US and Asia. Copper and iron ore prices, as well as other commodities have climbed to new highs in recent weeks, this is largely due to post COVID spending sprees, as well as the reopening of world economies. This has caused concerns to grow that inflation is set to spike as products become more expensive.
But traders fear that rising prices will tempt central banks to hike interest rates or start to rein in their monetary stimulus, both of which have contributed to strong runs for equities in recent years.
This equity sell off could be in anticipation of a faster rise in consumer prices. These inflation fears grew overnight when figures from China showing that factory gate inflation rose at the fastest pace since 2017.The sell-off then spilled over in Europe today, with the FTSE 100 closing down 2.5 per cent, or 175 points, to 6,947 on Tuesday, with Germany's DAX and France's CAC 40 ending the day down around 1.8 per cent.
However in the US, the Nasdaq, Dow Jones and S&P 500 fell by around 1 per cent in early trading, with big tech stocks once again leading the sell-off.
After open shares in Google parent Alphabet Facebook were down around 1.3 per cent , Tesla fell 2.6 per cent, Facebook shares dropped 1 per cent, Microsoft shares were down 0.8 per cent and Amazon shares shed 0.7 per cent.