Here’s our full story on the stock market selloff in Europe, and beyond, today:

Reuters have more details of James Bullard’s comments on inflation:

Signs of rising inflation, far from being feared by the U.S. Federal Reserve, are instead an encouraging sign that the Fed’s new approach to monetary policy is working, St. Louis Federal Reserve President James Bullard said on Tuesday.

“We are going to see more inflation in 2021, maybe 2.5 to 3%. ... I expect some of that to hang on in 2022, maybe 2.5%,” Bullard told CNBC at a time when markets show growing concerns about an inflation outbreak.

“It is encouraging for the Fed’s policy that we will be able to get inflation up and over 2%. ... We are trying to make up for past misses of inflation to the low side of our (2%) inflation target.

Another Federal Reserve policymaker, James Bullard of the St. Louis Fed, is on the wires - and pushing back against calls to change monetary policy yet.

Bullard also suggested that it’s a little early to be seeing big growth in employment, speaking to CNBC....

...and indicates that some of the jump in inflation will linger into next year:

Federal Reserve policymakers have been discussing the state of the US economy today.

San Francisco Federal Reserve Bank President Mary Daly has said she hopes he U.S. economy will be in a much stronger position next year, once transitory bottlenecks have been worked through.

Daly told the Community Bankers of Washington, Northwest Conference that:

“My modal outlook is quite positive; I’m bullish about where the economy will be at the end of this year,”

“I’m very hopeful that by next year we are going to feel like we are really starting to move ourselves out of the deep hole that COVID has caused.”

(thanks to Reuters for the quote)

Philadelphia Fed President Patrick Harker, meanwhile, has pointed to health concerns and lack of child care as factors that are slowing the jobs recovery.

Harker told a virtual event organized by CFA Society Philadelphia that Fed policy is going to “hold steady” for now, saying:

We’ll keep the federal funds rate very low and continue making more than $100 billion in monthly Treasury bond and mortgage-backed securities purchases.

While the economic situation is improving, recovery is still a work in progress, and there’s no reason to withdraw support yet.

Harker also echoed the comment about the economy climbing out of a ‘very deep hole’, predicting rapid growth of around 7% this year:

We can credit increased vaccinations, falling COVID-19 case rates, and a huge dose of fiscal stimulus for the reviving national economy.

We’re digging out of a very deep hole — and we have a long way to go — but for now, I’m anticipating national GDP growth to come in around 7 percent for 2021, before moderating to 3 percent growth next year.

Back on Wall Street, technology stocks are reviving, helping the Nasdaq to recover from its earlier 2% slide.

It’s now pretty much flat for the day.

But, the wider market is still lower, with the S&P 500 index down around 0.8%.

The Dow Jones industrial average is also in the red, currently down 459 points or 1.3% at 34,293 points.

Perhaps the most startling story of the day is that a senior manager at Goldman Sachs in London has quit the US investment bank after making millions from investing in Dogecoin.

My colleague Richard Partington has the details:

City sources said Aziz McMahon, a managing director and head of emerging market sales, had resigned from the bank after making money from investing in the digital currency based on the Doge internet meme...

Little is known about how much money McMahon made exactly from betting on Dogecoin, after his departure was first reported by the website efinancialcareers. The banker, who has worked for Goldman Sachs for 14 years, did not respond to requests for comment. However, sources said they believed it was a substantial sum and that he had since left Goldman Sachs.

It is believed Aziz made the money investing on his own personal account and was not involved in trading cryptocurrencies for Goldman Sachs.

More here:

AstraZeneca suffered a substantial shareholder rebellion today, over proposals to hand its its chief executive Pascal Soriot, bigger bonus awards for the second consecutive year.

Nearly 40%voted against the policy, which could hand him pay and perks of nearly £18m for 2021.

At the company’s annual meeting in Cambridge, the Anglo-Swedish drugmaker managed to win approval for its remuneration policy, which required support from shareholders holding more than 50% of the firm’s stock, but investors owning 39.8% of the shares opposed it.

Here’s the full story:

Today’s 6.7% drop in Renishaw’s shares came after Bloomberg reported that the engineering firm was struggling to attract takeover interest, due to “a hefty price tag and list of ownership demands”.

Bloomberg says:

Rival engineering companies Hexagon AB, Schneider Electric SE and Siemens AG all decided against pursuing Renishaw, the people said, asking not to be identified discussing confidential information.

While several competitors viewed Renishaw and its technology as attractive, they were turned away by a high valuation that makes a deal prohibitively dilutive to earnings, the people said.

The firm develops a range of high-precision engineering equipment, starting with the “touch-trigger probe” created in the 1970s to inspect the Olympus engines used in Concorde.

Renishaw put itself up for sale in early March, when its founders Sir David McMurtry and John Deer - both in their 80s - decided it was time to step back.

They said a buyer would need to respect the Gloucestershire-based firm’s heritage, culture, and commitment to the local communities.

All the major European stock indices fell today.

Germany’s DAX and France’s CAC both lost more than 1.8%, with the FTSE 100 down almost 2.5%.

Michael Hewson, chief market analyst at CMC Markets UK, says the jump in China’s factory gate prices (how much manufacturers charge) early today has fuelled inflationary worries:

Investors do appear to be freaking out a little bit over the recent sharp rise in commodity prices that we’ve seen in the past few weeks, and which has seen US 5-year inflation expectations push sharply higher. We’ve also seen similar moves in EU 5-year inflation expectations but we are only back at levels last seen at the end of 2018.

While this is a concern it also needs to be set in the context of where prices were 12 months ago, which saw oil prices hit some of their lowest levels in years and which saw prices collapse spectacularly as a result of the various lockdowns. There was always going to be a rebound in prices, and we are seeing that now, with the only concern now being over whether it will pass once these base effects wash out.

The biggest losers appear to be in consumer discretionary with IAG shares amongst the worst performers after raising another $800m of seven-year debt as it looks to bolster its balance sheet further against the risks that a return to normal may take a little longer than previously anticipated. It is no secret that airline bosses want to see the introduction of travel corridors, with BA in particular keen to see the resumption of a UK/US transatlantic route as soon as possible.

Other airline stocks also appear to be being caught up in the downdraught of today’s sell off with EasyJet, Ryanair and Lufthansa nursing quite heavy losses.

Richard Hunter, head of markets at interactive investor, points out that it’s hardly surprising that inflation is rising, when compared to the economic turmoil of a year ago:

“The FTSE100 has come under renewed pressure following a shaky start on the other side of the pond.

The spectre of inflation is the most central cause for concern at the moment, which in turn could lead to interest rate rises earlier than investors had been anticipating. Potential blockages in the supply chain and the release of pent-up consumer demand could both place further pressure on prices.

However, set against a year ago when global economies were in lockdown, the oil price was plunging and growth outside of big tech was rare, the comparative increase is unsurprising.

For its part, the Federal Reserve has repeatedly pointed out over recent weeks that the spike in inflation is transitory and that fears of it remaining permanently are overdone.

At the same time, the Dow Jones and the S&P500 have continued to test record highs in recent sessions, such that letting some air out of the tyres was almost inevitable.

The FTSE 100 is still up over 7% this year too, despite today’s losses:

The London stock market continues to be pummeled.

With less than half an hour to go, the FTSE 100 index is down around 197 points, or 2.8%, at 6926 points, with every stock still down.

Markets across Europe continue to sag too, with the pan-European Stoxx 600 down 2.3% - still on track for its worst day of 2021.

Today’s global selloff should be a “reality check for investors” says Nigel Green, chief executive and founder of deVere Group.

Green explains that the process of readjusting after the pandemic is bound to create supply shortages, and inflationary pressures, as families and firms emerge from the lockdown.

It is to be expected that there would be a jump in prices and supply shortages, in goods like chips and some commodities, as economies re-open and pent-up demand is unleashed by households, businesses and entire industries.

“We’re at a point of major readjustment following an unprecedented economic shock and this is fuelling concerns that rising inflation will trigger central banks to tighten monetary policy which will hit asset prices.

“It is this scenario that is rattling markets and triggering a global sell-off.”

But the selloff in technology companies means that some investors will be ‘judiciously’ buying stocks, he adds:

Savvy investors will be drawn to the massive growth that tech offers and this sell-off will used as a buying opportunity. Nobody seriously believes the future isn’t online.”

Even lumber prices are down, IG flags:

Lumber prices have been soaring for months amid widespread supply shortages and heated demand from housebuilders and DIY enthusiasts alike, leaving sawmills struggling to keep up.

Here’s a handy chart showing that many tech stocks have fallen at least 10% from their highest levels of the 12 months (which will be record highs, in many cases)

Video conferencing firm Zoom tops that chart, having more than halved since hitting its record high of $588 last October.

Zoom’s shares boomed early in the lockdown, amid a surge of interest in video calling friends and colleagues. But with lockdown easing, and vaccine rollouts running fast, its shares fell back in recent months, and are now trading around $287 today.

Tesla’s shares dropped over 4% at the open, but are now rebounding a little - down 2% at $616.

Bloomberg points out that “fresh signs of trouble emerged for its China business” today:

China’s Passenger Car Association said Tuesday that Tesla sold 25,845 locally made vehicles in April, a 27% drop from March.

Reuters reported separately that the Model 3 maker decided against acquiring more land next to its Shanghai plant, as U.S.-China trade tensions undercut plans to turn the site into an export hub.

CEO Elon Musk, meanwhile, has been running a Twitter poll on whether Tesla should accept dogecoin - just days after describing the meme crypto-currency as a “hustle” during his Saturday Night Live appearance.

Dogecoin is currently trading around $0.50 today, having soared to $0.70 before Musk’s SNL appearance, and then tumbling during it.

Volatility, as measured by the VIX index, has risen sharply in recent days:

Rising inflation expectations are bad news for technology stocks, because their high valuations are based on the prospect of higher profits in the future.

If interest rates go up, then those future earnings are less valuable today (under the Discounted Cash Flow model used by analysts).

Nick Hyett, equity analyst at Hargreaves Lansdown, explains:

“A 2% fall in the UK stock market follows a 1% slide in the US last night – when it comes to stocks and shares, if the US sneezes the world catches a cold. But it should be no surprise that today’s inflation driven market sell-off started across the pond.

All things being equal higher inflation implies higher interest rates, and higher interest rates are particularly toxic for companies that promise little in the way of profits today, but rapid growth in the years to come. That’s a pretty accurate description of many tech stocks, and the US market is increasingly dominated by US tech names.

Hyett argues, thought, that inflation pressures may not be sustained in the longer term:

However, despite the market jitters investors shouldn’t be abandoning the tech sector just yet. This time last year the oil price had just plummeted into negative territory for the first time ever, and that alone means costs are going to be higher now than they were a year ago, in turn driving goods prices higher.

A temporary boost in inflation was inevitable. What matters is whether inflationary pressure is sustained – there’s no convincing evidence that’s the case yet.”

It’s going to be a nervy Wall Street open....

Every stock in the FTSE 100 is down, highlighting the spread of the selloff today.

Engineering firm Renishaw (-7.2%), tech-focused investor Scottish Mortgage Investment Trust (-6.6%) and airline group IAG (-6.1%) are the top fallers.

As things stand, it’s going to be the worst day for European stock markets this year.

Takeover news: Farrow & Ball, the upmarket UK seller of wackily-named paints, is being bought by the Danish coatings manufacturer Hempel.

Farrow & Ball were founded in Dorset back in 1946, and are known for unusually titled, high end paints - such as Ammonite (‘subtle grey’), Sulking Room Pink (“a muted rose”), or Dutch Orange (no prizes for this one).

With 5-litre pots costing £84, it’s rather pricier than a simple white emulsion - but popular with those seeking an impressive interior design.

Farrow & Ball paints are sold worldwide - both in 60 Farrow & Ball showrooms and over 1,700 third party retail locations, plus online. The company is being sold by private equity firm Ares Management, who bought Farrow & Ball in 2014 for £275m.

The FT say the Hempel deal values Farrow & Ball at almost £500m:

The deal comes after a year in which protracted lockdowns and a shift to working from home have made some consumers more willing to spend on high-end interior design.

Anthony Davey, chief executive of Farrow & Ball, said revenues had risen more than 30 per cent in the year to March 2021. “The home turned into a new frontier,” he said.

“It was a school, it was an office, it was a place where old hobbies were revisited and new hobbies began. As a consequence people invested more time and more money [in their homes].”

UK savers deposited record sums at Post Office branches in April, taking the total to more than £1bn for the second month in a row.

The Post Office said it was the first time that personal deposits have topped £1bn for two successive months. A total of £1.07bn was paid in over its counters, following cash deposits of £1.12bn in March. Last September was the only other month when personal cash deposits exceeded £1bn.

Businesses also paid in more cash-in-hand takings, a total of £769m, up 8.8% from the previous month – the highest amount deposited since last October, excluding Christmas. More here:

Wall Street’s so-called ‘Fear Index’, the CBOE volatity index (or VIX) has risen to its highest level since March 25th.

The VIX is up around 10% this morning, having also jumped on Monday.

It’s still relatively low, as this chart shows, but a rising VIX suggests investors are getting more nervous:

The markets love an acronym - so hat-tip to Reuters for flagging that BATs and FANGs are both giving the markets a fright.

With talk of tighter regulation from Beijing, Chinese tech heavyweights Baidu, Alibaba and Tencent, collectively dubbed the BATs, all dropped more than 3%. Food delivery major Meituan tumbled as much as 9.8% too, leaving its value $30 billion lower in a week.

That followed a 3.6% plunge in the FANG+ index of large tech firms last night, with Tesla tumbling 6.4%.

Rising concerns about inflation, leading to higher interest rates, are one factor, as Mizuho’s head of multi-asset strategy Peter Chatwell explains:

“The underlying driver is that there is still a rotation out of duration (higher interest rate) sensitive parts of the market and this is why tech stocks are coming under pressure now,.

“Given the rise in the earnings power of these firms different governments will also seek to raise more tax revenue from them in the coming years.”

More here: FANGS and BATS sell-off spooks world stocks

US tech stocks could be heading for further falls today, with Nasdaq futures currently down over 1% in pre-market.

Jeffrey Halley, senior market analyst at OANDA, says investors are concerned that tech stocks may have soared too high:

The falls overnight on equity markets, notably technology, are likely to be just as much due to extended shorter-term valuations and nervous investors than to inflation prospects. Goldman Sachs may also be partially responsible, publishing a report on technology stocks highlighting that regulatory risks are the biggest threat to the big-tech story.

That report also cited other possible threats: “High market concentration, changes in the tax code, rising interest rates and lofty valuations” could all be potential risks to the FAAMG sector (Facebook, Amazon, Apple, Microsoft and Google/Alphabet), as CNBC explains here.

The selloff isn’t abating. Instead, it’s getting a bit worse.

After more than an hour’s trading, the FTSE 100 index is down over 2.2% - shedding 160 points to trade around 6964.

That drags the blue-chip index away from its recent 14-month highs, and back below the 7,000 point mark, which it hit last month for the first time since the pandemic.

Neil Wilson of Markets.com says “the risk-off tone” is spreading through the whole market. It’s not just a tech selloff, even though it began with the Nasdaq’s fall last night.

NatWest fell over 3% to 190p after the government offloaded a 5% stake at this price. IAG fell close to 5% as investors showed more displeasure at the government’s green list.

Scottish Mortgage dropped over 4% on its exposure to the US and other tech stocks.

Whilst this was a tech-led sell-off, the worst sectors are the reflation plays (i.e, the new ‘momentum’ stocks) - basic materials, financials and energy. On the Stoxx 600, the worst sectors this morning are consumer cyclicals, tech and basic materials with only a handful of stocks in the green.

He also agrees that inflation worries are weighing on the market -- with the jump in Chinese factory gate prices showing that cost pressures are building.

If you are looking for inflation signals, China’s factory gate prices are a pretty good leading indicator. So today’s report showing that producer price inflation rose 6.8% from a year earlier in April, the fastest pace in more than three years, could be of concern. Tomorrow’s US CPI numbers are going to be closely watched. On Friday we saw the market show that an easier-for-longer Fed ought to help risk assets. But whatever the Fed tries and sticks to in terms of its employment mandate, the bond market will move if inflation takes off.

The wage component of the jobs report was underappreciated. A lack of employees will drive up wages and end prices. Wage-push inflation is more ‘dangerous’ than cost-push. My worry is we have a perfect storm of wage-push, cost-push and demand-pull pressures that won’t be as transitory as the Fed thinks (ignoring the fact that inflation is here already, has been for years in asset prices, just not in the narrow gauges used by central banks).

Supermarket chain Morrisons has seen a jump in fuel sales and takeaway food, as the easing of lockdown restrictions helped people return to more normal times.

My colleague Julia Kollewe explains:

Fuel sales at the supermarket group jumped 17.5% in the 14 weeks to 9 May, its first quarter, contributing to a 5.3% rise in total sales. Like-for-like sales were up 2.7% excluding fuel, and 4.7% higher including fuel.

“The pandemic is not yet over, but it is in retreat across Britain and there is much to be positive about as something approaching normal life begins to take shape,” said David Potts, the Morrisons chief executive.

“Our forecourts are getting busier, we are seeing encouraging recent signs of a strong rebound of food-to-go, takeaway counters and salad bars, and our popular cafes will soon fully reopen. The nation has a summer of socialising and sport to look forward to and we’ll all be able to rediscover the joys of meeting up and eating well together.”

Potts has also told reporters that people will want to celebrate this summer, at events such as the postponed Euro 2020 football tournament, as the pandemic eases.

“That sense of optimism is percolating through the country and it will lead to people wanting to celebrate events.

“We’ll be doing everything we can to be part of that.

Shares in Morrisons are up 0.8%, near the top of the FTSE 250 risers (the index of medium-sized companies in London.

There are 600 European companies in the Stoxx 600 share index...and currently 585 of them are down, with just 13 risers defying the selloff and two stocks resolutely flat.

The top riser is The Hut Group, whose shares have surged 15% after it struck a deal with Japanese conglomerate Softbank, which values THG’s new business-to-business tech arm at $6.3bn.

My colleague Rupert Neate explains:

The deal, announced on Monday, values THG Ingenuity, which Moulding described as a “social media influencer platform” used to promote products, at about the same amount that the whole company floated at last year.

Under the terms of the $1.6bn deal SB Management, a division of SoftBank, has bought an option to buy a 19.9% stake in THG Ingenuity that values the division at $6.3bn. SBM will also take a $730m stake in The Hut Group by taking part in a share placement.

European markets also opened sharply lower, with the pan-European Stoxx 600 index dropping by 1.6%.

Both Germany’s DAX and France’s CAC shed 1.7% in a wide-spread selloff.

Every sector of the Stoxx 600 is in the red, with travel and leisure firms, technology companies, and miners all hit hard.

Reuters has more details:

European tech shares tumbled 2.2% to their lowest level since late March, while miners handed back some of their strong gains in the previous session.

Travel and leisure stocks slumped 3.7% as Sweden’s Evolution Gaming Group tumbled 9.6% after the bookrunner announced the pricing of block trades.

The FTSE 100 is a classic ‘sea of red’, with every constituent dropping in early trading.