Inflation Fears Top Recovery Hopes As Global Stocks Slide

Stocks fell worldwide Thursday as profit-taking and growing inflation worries overshadowed optimism about an expected strong economic recovery as the coronavirus crisis eases, and US stimulus hopes.

All three major indices on Wall Street finished lower, as did bourses in Europe and Asia.

"Aside from the caution stemming from the recent spike in yields, stocks were also hampered by a range of mixed, but largely uninspiring economic and corporate earnings reports," a stock market note from Charles Schwab said.

New US jobless claims -- which have been elevated for months due to the coronavirus pandemic -- rose 13,000 in the week ended February 13, to 861,000, while the prior week was revised upward, halting the tentative signs of improvement.

In other US economic releases, new home construction projects fell in January for the first time in five months, although building permits increased.

Investors also frowned on results from Walmart, which reported a disappointing quarterly loss and announced higher capital spending in the coming year that will pinch profits. Shares fell 6.5 percent.

Global equities have enjoyed bumper gains on mounting confidence the world economy is poised to rebound from last year's collapse as Covid-19 vaccination programs allow people to slowly get back to a semblance of normality.

Underpinning that optimism has been vast amounts of government spending as well as ultra-loose central bank monetary policies and pledges of continued support until the recovery is well underway.

At the same time, that has stoked fears over a surge in inflation and produced a spike in US Treasury yields to around one-year highs.

"Stocks desperately need a real pick me up as the index level's lack of enthusiasm was palatable today," Axi analyst Stephen Innes said.

And analyst Connor Campbell at Spreadex said: "Given their recent levels, it's not really a surprise that certain markets were in danger of moving sharply lower at the slightest provocation."

For London's FTSE 100 that has been the strength of the pound, which approached $1.40, a level unseen in nearly three years.

"With sterling's surge creating a nightmare for its numerous multinationals, the FTSE sank," Campbell said.

Many multinationals listed on the FTSE make most of their earnings in dollars, so a strong pound weakens sales and profits when they are converted.