- US stocks fall as higher oil fuels inflation risk
- The dollar hits its highest level against the yen since late 2018
- Anguish over Chinese real estate developer Evergrande could keep Asia in suspense
NEW YORK, Oct. 11 (Reuters) – U.S. stocks fell on Monday, after swinging between gains and losses as surging oil prices to multi-year highs fueled fears about rising prices and tightening monetary policy, bringing the dollar close to a three-year high against the yen.
A rally in commodities and energy stocks following the rise in oil prices initially pushed up major US stock indexes. But the gains faded as investors focused on the start of the US corporate earnings season next week.
Some analysts expect companies to report slower growth due to supply chain issues and rising prices. read more They warned that could cause US stocks to fall.
“Whether the final chapter of the mid-cycle transition ends with a 10% or 20% correction in the S&P 500 will be determined by the deceleration in earnings growth or the outright decline,” Morgan analysts said Stanley in a note.
“We gain confidence in a steeper deceleration but the timing is more uncertain.”
The Dow Jones Industrial Average (.DJI) fell 0.72%, the S&P 500 (.SPX) fell 0.69%, and the Nasdaq Composite (.IXIC) fell 0.64%.
The pan-European STOXX 600 index (.STOXX) was little changed, rising only 0.05%, while the gauge of MSCI stocks across the world (.MIWD00000PUS) lost 0.33%.
As Tuesday approaches, the mood in Asia could also be affected by news that Chinese property developer Evergrande (3333.HK) could miss its third round of bond payments in as many weeks and that rivals Modern Land and Sinic became the last to delay deadlines. Read more
Oil prices, which jumped on Monday following a rebound in demand and reduced supply, gave up some of their initial gains but still ended the session higher.
Brent crude rose 1.5% to $ 83.65 a barrel, after climbing to $ 84.60, its highest since October 2018.
U.S. West Texas Intermediate crude also rose 1.5% to close at $ 80.52, after hitting its highest level since late 2014 at $ 82.18.
Analysts are divided on whether energy supplies are tight enough to warrant testing of oil at $ 100 a barrel, but most seemed to agree that prices are expected to remain high in the near term.
This helped commodities and energy stocks in the S&P 500. They jumped 0.96% and 0.88% respectively, according to data from Refinitiv, outperforming the broader market.
The rise in prices is also fueling bets that major central banks will tighten monetary policy as soon as possible, taking the dollar to an almost three-year high against the Japanese yen.
In the United States, investors expect the Federal Reserve to start tightening its policy by announcing a cut in its massive bond purchases next month. This hampered the yen, which is generally sensitive to interest rate differentials.
The yen weakened 1.02% against the greenback to 113.38 per dollar, and the dollar index rose 0.238%.
A stronger dollar caused the euro to fall 0.14% to $ 1.1551.
Gold, generally viewed as an inflation hedge, fell as a stronger dollar offset inflation-induced gains. Spot gold fell 0.2% to $ 1,753.42 an ounce. US gold futures fell 0.15% to $ 1,753.60 an ounce.
Bitcoin, a barometer of investor risk appetite, fell slightly but was still up 4.4%.
Additional reporting by Tom Arnold in London and Wayne Cole in Sydney; Editing by Simon Cameron-Moore, Jacqueline Wong, Alex Richardson, Andrew Heavens and Dan Grebler
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