Fear of inflation in the United States floods European stock markets: 230 billion lost in one session

Markets fear that higher prices linked to a shortage of raw materials could persuade central banks to accelerate monetary tightening. A generalized increase in government bond prices

Black Tuesday for European Stock Exchanges costs financial markets € 230 billion: in a single trading day, European listings burned 60% of Ftse Mib’s value in Piazza Avari. London lost 2.47%, Frankfurt 1.82%, Paris 1.86%, Milan 1.64%: the hubbub is not badly damaged by the severity of the fall, but because only on the eve of that, the indicators have restored their pre-coronavirus values. February 2020 when the global pandemic wasn’t even a hypothesis.

The concern is that the acceleration in raw material prices – due to the impractical increase in demand on the one hand and on the other hand to their scarcity – is driving sales to final consumers, thus convincing central banks to expect the end. Support measures for the economy.

At this point, the US inflation figure for April risks becoming a turning point in monetary policy decisions. Especially if – as analysts assume – the CPI will move from + 2.6% in March to expected + 3.6% in April: this will be the largest increase since 2006.

Concern over monetary tightening leading to higher interest rates translated into a general decline in government bond prices with the consequent rise in yields. Of course, the Fed asserts that the rate hike is only temporary, and although Treasury Secretary Janet Yellen no longer rules out the start of tapers (tapering stimulus, ed); Jerome Powell, number one at the Federal Reserve, reassured markets that he was ruling out an imminent cut in fiscal stimulus.

However, the problem – according to analysts – is serious because not only the prices of energy products have risen with raw materials, but so have the prices of food and semiconductors. Also because the supply chain is unable to keep up with the pace of demand with a supply that still does not exist: the shortfall, in all likelihood, will continue into next year.

At this point, central banks’ decisions will be guided by prices: if the expected April fire does not return by summer, the pressure will come close. For markets, a much harsher correction than the one we saw last year with Covid could start.