Stocks fall, yields climb after US inflation data


MILAN, May 11 (Reuters) – Global stocks fell on Wednesday and bond yields rose after U.S. data showed inflation there slowed less than expected last month, bolstering expectations of aggressive rate hikes by from the Federal Reserve.

U.S. futures turned negative after data showed annual growth in U.S. consumer prices slowed to 8.3% in April from 8.5% in March, suggesting the inflation has probably peaked. The number, however, was higher than the 8.1% expected by analysts.

Paolo Zanghieri, senior economist at Generali Investments, said the data confirmed the idea that returning inflation to more tolerable values ​​will take time.

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“Overall, today’s data adds to the case for the strong anticipated boost requested by (Fed Chairman Jerome) Powell in the last meeting, which also suggested the possibility of two more hikes. by 50 basis points in June and July,” Zanghieri said. “However, this will keep worries about the possibility of a recession elevated, and eventually weakening growth could lead the Fed to moderate its tightening after the summer.”

MSCI’s benchmark for global stocks (.MIWD00000PUS) was flat at 12:47 GMT, having previously risen 0.3%. On Tuesday, the index fell to its lowest level since November 2020 on fears that Fed tightening could significantly slow the global economy.

US stock futures turned sharply negative, with the Nasdaq and S&P 500 e-minis down 1% and 0.6% respectively. The benchmark pan-European STOXX 600 equity index (.STOXX) also pared gains and last rose 0.2%.

Money markets raised bets on Fed rate hikes by the end of 2022 to 208 basis points after US inflation figures, from around 195 basis points previously.

Earlier in Asia, stocks tightened after near two-year lows. Chinese blue chips (.CSI300) rose 1.4% after Shanghai officials said half the city had achieved “COVID-free” status, and after US President Joe Biden said that he was considering eliminating Trump-era tariffs on China.

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

YIELDS INCREASE

After falling to near-week lows earlier on Wednesday, yields on benchmark 10-year Treasuries turned positive on inflation data, heading back towards the three-year high of 3.203% hit. Monday.

The 10-year yield last rose 6 basis points on the day to 3.0502%, while the 2-year yield, which often mirrors the Fed’s rate outlook, jumped 11 basis points. basis at 2.717%.

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

Bets on aggressive Fed tightening have also supported the dollar this year.

The dollar index, which measures its performance against six major peers, reversed earlier weakness and last rose 0.1% to 104.04, closer to a two-decade high of 104. 19 reached at the start of the week.

Last week the Fed raised interest rates by 50 basis points and Chairman Jerome Powell said two more such hikes were likely in upcoming policy meetings.

There has also been market speculation that the US central bank will have to move 75 basis points in a meeting and currently money markets are pricing in over 190 basis points of combined rate hikes per year.

“The current problem is that the market is convinced that the Fed is determined to fight inflation and therefore is ready to tolerate market volatility and some destruction of demand more than in the past. Personally, I am less convinced of this determination,” said Giuseppe Sersale. , fund manager at Anthilia.

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

Oil rebounded, buoyed by supply issues as the European Union scrambles to drum up support for a ban on Russian oil.

Brent rose 2.6% to $105.12 a barrel and U.S. crude 3% to $102.77.

Spot gold fell 0.1% to $1,836.2 an ounce.

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Reporting by Danilo Masoni in Milan, Sujata Rao in London and Alun John in Hong Kong, Editing by William Maclean and Tomasz Janowski

Our standards: The Thomson Reuters Trust Principles.


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