London: European stocks sank, peripheral debt yields soared and the euro fell on Thursday as concern that Greece will have to restructure its debt gathered pace while Chinese inflation returned as an investment concern.
Wall Street looked set to open lower, with the spotlight on the possible impact of rising raw material costs on corporate margins.
World stocks were 0.4% lower despite a burst of corporate activity that would usually lift investors’ spirits.
Glencore, the world’s largest commodities trading company, plans to raise up to $12.1 billion in a London and Hong Kong stock market flotation that is London’s biggest ever. Shares in Japan’s Isuzu Motors jumped on a report that Volkswagen was considering buying all or part of it.
European shares, as measured by the FTSEurofirst 300, were down three quarters of a percent, only around half a percent higher than at the end of last year.
Greek bond yields soared, with short-dated paper coming under the most intense pressure, as markets priced in a greater probability that Athens would be forced to restructure its runaway debt.
Yields of other peripheral euro zone states also rose sharply.
European stocks were also pressured, however, by concern that Chinese inflation is returning.
Hong Kong’s Phoenix TV, citing an unnamed source, said China’s annual rate of inflation in March was likely to be 5.3-5.4%, a 32-month high and just above an estimate in a Reuters poll.
Investors are particularly concerned about Chinese inflation in case government attempts to restrain it prompt a ‘hard landing´ for the economy.
“Inflation in emerging economies has become a serious issue, as the impact from high commodity prices is stronger for those countries,” said Arnaud Scarpaci, fund manager at Paris-based Agilis Gestion.
Earlier, the Nikkei benchmark closed up 0.1%, held back by continued worries about the impact of its earthquake, tsunami and nuclear disasters.
The Reuters Tankan survey of 400 large firms found on Thursday that power shortages caused by the crippled Fukushima nuclear plant had hit nearly 60% of local companies, disrupting production and supply chains.
The euro slipped broadly, hitting a session low versus the dollar on debt restructuring worries.
It fell to the day’s trough around $1.4376. Earlier in the day it had hit a session high around $1.4515 but came under additional selling pressure after a break under $1.4450 triggered stop-loss orders.
The euro struggled across the board, falling roughly 1.2% on the day against the yen to 121.03 yen according to Reuters data.
Earlier, the dollar hit a 16-month low against a basket of major currencies, but pared back the losses.