European shares fell on Friday after surging U.S. inflation, after falling in Asia, as traders focused on how the end of pandemic-era monetary stimulus could weigh on stocks.

The Stoxx 600 in Europe was down 0.6% in early trade, while London’s FTSE 100 was flat. In Hong Kong, the Hang Seng fell 0.2% and Japan’s Nikkei 225 closed down 1.3%.

Futures markets suggested the blue-chip S&P 500 would gain 0.1% in early New York trade after falling 1.4% on Thursday.

Inflation data on Wednesday showed U.S. consumer prices rose 7% per annum In December, it was the fastest pace in nearly 40 years. A day later, separate data showed U.S. wholesale prices rose 9.7% in December, the highest level since 2010, when companies were first calculated to pay suppliers.

“If inflation goes higher, then the fear factor does come in,” said Aneeka Gupta, head of research at ETF provider WisdomTree.

Officials at the Federal Reserve, whose main funds rate affects global borrowing costs and stock market valuations, also support The first rate hike in the pandemic era in March.

Prices in the swap market rose gradually, with the funds rate ending the year at 1% or less. But investors in stocks that have made double-digit gains over the past two years are questioning whether such forecasts are too optimistic.

Geraldine Sundstrom, managing director and portfolio manager at Pimco, added: “The market is in this transition period and of course there will always be some doubts.”

“We’re moving from an era where inflation is considered transitory and central banks are going to stay accommodative as far as the eye can see, to an era where some monetary easing is naturally expected to be unwinded, but that should be a question of how much it should be done for everyone. mark,” she added.

On Friday, the Stoxx technology index was one of the worst performers in Europe, down 1.4%. Earlier, Wall Street’s Nasdaq Composite fell 2.5%. Thursday’s meeting.

Ultra-low interest rates can boost tech and other high-growth stocks by lowering the discount rate professional investors use to value stocks, which in turn makes expected future cash flows more valuable.

“Tech valuations inflate when interest rates are very low,” WisdomTree’s Gupta said. “As interest rate expectations start to rise,” she added, “those valuations come down.”

In the government bond market, the yield on the US 10-year Treasury note, which is inversely proportional to price, rose 0.04 percentage point to 1.75%. The two-year U.S. Treasury yield, which is closely linked to interest rate expectations, rose 0.03 percentage point to 0.93%.

The U.S. dollar index, which measures the greenback against six other currencies, was flat.

Moscow’s benchmark Moex stock index fell 1.8%, down more than 4% on a weekly basis, a sign that geopolitical tensions in Russia are starting to seep through financial markets.

Brent crude, the oil benchmark, rose 1.3% to $85.57 a barrel.