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Stocks in Europe and China fell on Wednesday as investors worried that stronger oil prices would drive up inflation and dampen the outlook for global growth.
In Europe, the Stoxx Europe 600 opened 0.6% lower after five days of losses. France’s Cac 40 fell 0.7 percent and Germany’s Dax fell 0.4 percent.
Chinese shares also fell, with the CSI 300 down 0.2% and Hong Kong’s Hang Seng down 0.1%.
Investors turned cautious on inflation as oil prices surged to their highest level since November 2022 on Tuesday after Saudi Arabia and Russia said they would extend voluntary output cuts until the end of the year.
International benchmark Brent crude fell 0.4% to $89.64 a barrel after surging above $90 a barrel for the first time this year earlier on Wednesday. US West Texas Intermediate crude also fell to $86.35 a barrel.
Saudi Arabia, which leads the expanding OPEC+ cartel with Russia, has cut an additional 1 million barrels a day from global markets since July in what was initially described as a temporary measure. Russia said its export cut of 300,000 barrels per day would also last through December.
The move could reignite inflationary pressures around the world as the world’s two largest oil producers try to lift prices, stoking investor concerns about what it means for central bank policy tightening.
The dollar fell 0.1% against a basket of six peers on Wednesday, but remained close to its highest level since March, when a crisis in the banking sector prompted investors to flee to safe-haven currencies.
“U.S. energy independence and its status as a net exporter put the dollar in a good position to weather higher energy prices,” said Chris Turner, head of markets at ING.
Purchasing managers’ indexes released a day earlier in Europe and China were below market expectations, suggesting weak global demand and high interest rates weighed on economic activity.
While a large majority of market participants believe the Fed will keep rates steady at its next meeting in September, few agree on how long it will take for the central bank to start easing policy.
In the government debt market, the yield on the policy-sensitive two-year U.S. Treasury note fell 0.02 percentage point to 4.95%, while the 10-year yield was flat at 4.26%. Bond yields rise as prices fall.
Contracts tracking Wall Street’s benchmark S&P 500 index fell 0.2% ahead of the New York open, while those tracking the tech-heavy Nasdaq 100 lost 0.3%.