Global stocks fall after US consumer prices post their fastest gain in 13 years, while bitcoin drops to $31,900

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Global stocks edged lower on Wednesday after US consumer prices rose at their fastest monthly rate since 2008, raising fears the Federal Reserve may have to wind down some of the accommodative polices it’s had in place since the pandemic sooner than expected.

The Consumer Price Index reading rose 0.9% between May and June, higher than the consensus forecast for a rise of 0.5% according to a Bloomberg poll. This marks the fastest monthly gain in prices since a 1.0% increase in April 2008.

Futures on the Dow Jones, S&P 500, and Nasdaq fell 0.2%, suggesting a lower start to trading later in the day.

Prices have been rising faster than ever over the past several months as demand for goods and services exceeds supply. The latest reading showed consumer inflation rose by 5.4% compared with last year, above the 4.9% economists expected. This was also the strongest rise in 13 years.

While most global asset managers see inflation as a transitory affair, Deutsche Bank said forecasts are still creeping up for next year. That indicates economists are starting to price in longer lasting inflation, which would make it more difficult for the Fed to maintain its argument that rising price pressures will be transitory, Deutsche research strategist Jim Reid said.

“Either that, or the transitory definition will have to be revised to cover several quarters rather than just months,” he said.

Bitcoin fell 4% to around $31,945 as of 4:00 a.m. ET, bringing losses over the last three months to 35%. Bitcoin bulls have long argued it is a hedge against inflation, but the idea that it serves a purpose similar to gold seems to be dwindling, particularly in light of Tuesday’s consumer price data.

Elsewhere in Europe, prices in the UK too rose at their fastest rate in three years in June. The Consumer Price Index rose 2.5% in the year to June, from 2.1% in May, higher than economists’ expectations for a 2.2% increase.

The release of eurozone industrial production later on Wednesday could give an insight into the recovery in the region’s manufacturing, mining, and utilities sectors.

London’s FTSE 100 fell 0.3%, the Euro Stoxx 50 fell 0.2%, and Frankfurt’s DAX fell 0.2%.

Asian markets lost ground as investors digested US inflation data. Investors will be tuning into Fed Chair Jerome Powell’s semi-annual testimony to Congress on Wednesday for any clues as to whether the central bank will take more aggressive action to halt rising prices.

The Shanghai Composite fell 1%, Tokyo’s Nikkei fell 0.3%, and Hong Kong’s Hang Seng fell 0.5%.

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