Stocks lower on inflation fears; Bitcoin hits new record

Crypto prices have been driven higher by both institutional demand and retail buying

European and US stock markets ended Tuesday's trading in the red, dragged lower by continued inflation concerns and fatigue on Wall Street after a string of record-setting sessions.

The cryptocurrency market, however, reached a new summit as bitcoin surged to $68,513.

The three major US equity indices finished lower after closing at records on Monday for the second session straight as traders cheered good jobs data and passage of a massive infrastructure overhaul legislation.

A pullback was imminent, analysts said, and Karl Haeling of LLBW told AFP the drop was "technical in nature. The market is overbought and due for a slight correction, for a pause."

Europe's major stock exchanges were higher for most of the session, but slipped back towards the close of trading, weighed down by Wall Street's weakness.

US government data showed wholesale prices remained high in October and with signs of accelerating again, as the world's largest economy battles a wave of inflation.

The US Labor Department will release consumer price data on Wednesday, which economists also expect to show an acceleration last month.

"Because of rising energy costs and supply chain constraints, inflation is likely to have surged," said AvaTrade analyst Naeem Aslam.

Bitcoin, meanwhile, scaled new historic heights as the combined value of all cryptocurrencies topped $3 trillion, according to data provider CoinGecko.

While investors remain upbeat about the outlook, the Federal Reserve warned the recent equity rally could reverse if sentiment takes a jolt or the recovery falters Photo: AFP / Daniel SLIM

"Crypto prices have been driven higher by both institutional demand and retail buying, as evidenced by soaring market capitalization of cryptos, which has roughly quadrupled since the end of 2020," ThinkMarkets analyst Fawad Razaqzada said.

"As well as growing expectations over widespread adoption and use of cryptos, there is undoubtedly a level of speculative buying that is causing prices to rally as traders take advantage of the moment in the hope of making profit from even higher prices."

The specter of inflation continues to loom large, with prices at multi-year highs owing to supply chain snarls, surging energy costs and a pick-up in demand as the economy returns to normal.

The Federal Reserve has said it will be patient in hiking borrowing rates, though Vice Chair Richard Clarida on Monday said the economy could be ready for liftoff by the end of next year.

Other top Fed officials have taken an even more dovish view on the outlook and the timing of a rate increase, but some economists think the central bank will have to be more aggressive to contain inflation.

"So, the conclusion is that just like the market, Fed officials are not a hundred percent sure how inflation dynamics will play out," said Rodrigo Catril at National Australia Bank.

New York - Dow: DOWN 0.3 percent at 36,319.98 (close)

New York - S&P 500: DOWN 0.4 percent at 4,685.25 (close)

New York - Dow: DOWN 0.6 percent at 15,886.54 (close)

London - FTSE 100: DOWN 0.4 percent at 7,274.04 (close)

Frankfurt - DAX: DOWN 0.04 percent at 16,040.47 (close)

Paris - CAC 40: DOWN 0.06 percent at 7,043.27 (close)

EURO STOXX 50: DOWN 0.2 percent at 4,344.63 (close)

Tokyo - Nikkei 225: DOWN 0.8 percent at 29,285.46 (close)

Hong Kong - Hang Seng Index: UP 0.2 percent at 24,813.13 (close)

Shanghai - Composite: UP 0.2 percent at 3,507.00 (close)

Euro/dollar: UP at 1.1594 from $1.1587

Pound/dollar: DOWN at $1.3558 from $1.3563