Inflation woes keep European shares below record highs

European shares held just below record highs on Monday as investors remained worried that a jump in inflation could spark a sudden tapering of ultra-loose global monetary policy, while travel stocks sank on a spike in Covid-19 cases across Asia.

The pan-European Stoxx 600 was down 0.1 per cent by 7.09am GMT, with travel-related stocks TUI, Ryanair Holdings and IAG among the biggest decliners.

The benchmark European Stoxx 600 tumbled from record highs just over a week ago as a surprisingly hawkish stance from the US Federal Reserve roiled global equity markets.

Although the index recovered to post gains of 1.2 per cent last week, it has so far been unable to cross its all-time closing high hit on June 16.

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Banks, industrials and mining stocks were down between 0.3 per cent and 0.5 per cent after leading gains last week.

In company news, Burberry Group shares tumbled 5.1 per cent to the bottom of the Stoxx 600 as it said chief executive Officer Marco Gobbetti was resigning.

Italian luxury group Salvatore Ferragamo, meanwhile, jumped 2.9 per cent after saying it had named Gobbetti as its new CEO.

Asian shares started the week in a cautious mood as a spike in coronavirus cases across the region over the weekend hurt investor sentiment while oil hovered around two and a half year highs.

MSCI’s broadest index of Asia-Pacific shares outside Japan was last a shade weaker at 702.57. Japan’s Nikkei slipped 0.2 per cent, with South Korea’s benchmark KOSPI down about the same amount.

Investors were concerned about a spike in coronavirus infections in Asia, with Australia’s most populous city of Sydney plunging into a lockdown after a cluster of cases involving the highly contagious Delta strain ballooned.

Indonesia is battling record high cases while a lockdown in Malaysia is set to be extended. Thailand too announced new restrictions in Bangkok and other provinces.

Chinese shares were a touch higher with the CSI300 index up 0.2 per cent. Data over the weekend showed profit growth at China’s industrial firms slowed again in May as surging raw material prices squeezed margins and weighed on factory activity.

Investors will keep a close eye on an official survey of Chinese factory activity due Wednesday. The manufacturing reading is expected to slow to 50.8 from 51. The private sector Caixin Manufacturing PMI will follow later in the week.

Futures pointed to a cautious open for share markets in Europe as well. Pan-region Euro Stoxx 50 futures slipped 0.05 per cent, while FTSE futures edged 0.01 per cent higher. S&P 500 futures added 0.05 per cent.

Global shares weakened about 0.1 per cent after reaching record highs last week as weaker-than-expected US inflation and news of a bipartisan US infrastructure agreement boosted risk appetite.

The infrastructure plan is valued at $1.2 trillion over eight years, of which $579 billion is new spending.

Oil prices slipped slightly after earlier climbing to their highest since October 2018 on expectations demand growth will outstrip supply and OPEC+ will be cautious in returning more crude to the market from August.

Brent futures lost 8 cents to $76.10 a barrel, while US crude was flat at $74.05.

In currencies, the US dollar was slightly firmer at 91.856 against a basket of other currencies. The euro eased to $1.19225, while the Japanese yen strengthened to 110.625 versus the greenback. – Reuters