Stocks struggle for momentum on inflation and taxation fears

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World stocks started the week on the backfoot on Monday, slipping to 2-1/2 week lows on further signs of accelerating inflation as well as tax and regulatory pressures on the world's biggest companies.

"We will see more of the state finding ways to extract funding from those it deems most capable of providing it," said Tom O'Hara, portfolio manager at Janus Henderson.

"The market has been looking through inflation levels, assuming they are transitory and that interest rates won't go up much but the conundrum is that wherever we look, we see inflation, whether on supermarket shelves or at the petrol pump," O'Hara added.A market gauge of euro zone inflation expectations rose to its highest since mid-2015 on Monday in a further sign that investor perceptions over the direction of future inflation is shifting .

U.S. consumer prices, due on Wednesday, are also seen easing a touch, albeit to a still-high 4.2%, while the spread of the Delta COVID variant may have softened retail sales. BNP Paribas, while expecting the S&P 500 to stay unchanged by end-2021, highlighted risks from "higher yields and taxes, at a time when earnings momentum has slowed from excellent to good".Treasury 10-year yields, currently at 1.33%, posted their third weekly gain last week, the longest streak since mid-March and tension will likely build before the Sept. 21-22 U.S. Federal Reserve meeting. .

 

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