Stocks fall, yields rise after US inflation data

MILAN (Reuters) – Global stocks fell on Wednesday and bond yields rose after US data showed inflation there slowed less than expected last month, bolstering expectations of a Federal Reserve interest rate hike.

US futures turned negative after data showed US consumer price growth slowed to 8.3% in April from 8.5% in March, indicating that inflation has likely peaked. However, the figure was higher than the 8.1% analysts had expected.

Paolo Zangieri, chief economist at General Investments, said the data confirmed the view that it would take time for inflation to return to more probable values.

“Overall, today’s data adds to the case for the strong forward loading advocated by (| Fed Chairman Jerome) Powell at the last meeting, who also suggested the possibility of another two 50 basis points increase in June and July,” Zangiri said. “However, this will keep concern about the possibility of a recession high, and weak growth may eventually lead to the Fed easing its tightening after the summer.”

MSCI Global Equity Standard (.MIWD00000PUS) It was flat by 1247 GMT, having earlier gained 0.3%. On Tuesday, the index fell to its lowest level since November 2020 amid concerns that the Fed’s tightening could lead to a significant slowdown in the global economy.

US stock futures turned sharply negative, with the Nasdaq and S&P 500 electronics down 1% and 0.6%, respectively. stokes 600 pan europe (.stoxx) The benchmark stock index also trimmed its gains, rising 0.2%.

Money markets increased their bets on raising the federal interest rates by the end of 2022 to 208 basis points after US inflation figures, compared to about 195 basis points before.

Earlier in Asia, stocks pulled back from their lowest levels in nearly two years. Chinese blue chips (.CSI300) It rose 1.4% after Shanghai officials said half the city had achieved a “zero COVID” status, and after US President Joe Biden said he was considering eliminating Trump-era tariffs on China.

However, Chinese data released on Wednesday showed consumer prices rose 2.1% from a year earlier, more than expected and at the fastest pace in five months, due in part to food prices.

productivity rates

After dropping to nearly a week lows earlier on Wednesday, 10-year Treasury yields turned positive after the inflation data, heading towards a three-year high of 3.203% hit on Monday.

The 10-year bond yield rose 6 basis points a day to 3.0502%, while the two-year yield, which often reflects Fed rate expectations, jumped 11 basis points to 2.717%.

Eurozone government bond yields were also sold off after the US data, sending German 10-year bond yields up 8 basis points to 1.084%.

It also supported bets on the Federal Reserve’s strong tightening of the dollar this year.

The dollar index, which measures its performance against six major peers, reversed its previous weakness and was last up 0.1% to 104.04, closer to a two-decade high of 104.19 reached at the start of the week.

The Fed last week raised interest rates by 50 basis points, and Bank Chairman Jerome Powell said there are likely to be two more such increases at upcoming policy meetings.

There was also market speculation that the US central bank would need to move 75 basis points in a single meeting, and money markets are currently pricing in over 190 basis points for compound price hikes annually.

“The current problem is that the market is convinced that the Fed is determined to fight inflation, and therefore is prepared to withstand market volatility and some more demand destruction than it has been in the past. Personally, I am less convinced by that determination,” Giuseppe Cercil said. , fund manager at Anthillia.

Morgan Stanley expects global economic growth for 2022 to be less than half last year at 2.9%, down from the previous estimate of 3.2%. Read more The US bank also cut its year-end target for the S&P 500 index by 11% to 3,900 points, while raising its forecast for the US 10-year yield by 55 basis points to 3.15%.

Oil rebounded again, buoyed by supply concerns as the European Union works to win support for a ban on Russian oil.

Brent crude rose 2.6 percent to $105.12 a barrel, and US crude rose 3 percent to $102.77.

And the spot gold price fell 0.1 percent to $ 1836.2 an ounce.

Additional reporting by Danilo Masoni in Milan, Sujata Rao in London and Alun John in Hong Kong; Editing by William Maclean and Thomas Janowski

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