Stocks slip, bond yields bounce as oil fuels inflation angst

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  • Euro STOXX 600 falls 1.8%
  • German, French shares lead losses
  • U.S. crude worth highest since 2014
  • U.S. 10-year Treasury yields achieve 4.5 foundation factors

HONG KONG, Oct 6 (Reuters) – From Europe to Asia, shares fell and authorities bond yields rose on Wednesday as oil costs hit their highest in seven years, fuelling considerations about rising inflation.

The Euro STOXX 600 (.STOXX) fell 1.8%, denting positive factors made in its greatest day in 11 weeks on Tuesday, with tech shares (.SX8P) down greater than 2% and Germany (.GDAXI) main losses at 1.6%.

The temper was set to hit Wall Street, the place U.S. futures gauges pointed to losses of 0.9%-1.1%.

Weighing on fairness markets have been oil costs hitting their highest since Nov. 2014, with traders anxious that spiralling power prices may pressure central banks to lift charges extra shortly to fight rising inflation.

U.S. crude rose 0.4% to $79.22 a barrel, with Brent crude additionally climbing 0.4% to $82.87, near a three-year prime hit within the earlier session.

Concerns about power provide and a choice on Monday by producers to stay to a deliberate output enhance reasonably than elevating it additional have been behind the will increase.

Inflation angst drove a sell-off in longer-dated U.S. Treasuries and euro zone benchmark debt, and supported the greenback.

“Higher oil – and commodity prices in general in terms of gas and oil – are feeding through into higher bond yields, because it has an inflationary implication,” stated Mike Bell, world market strategist at JP Morgan Asset Management.

“The market is looking at that and thinking ‘is there a scenario in which inflation that everyone has said might be transitory, being a little bit more persistent?'”

Benchmark 10-year yields rose 4.5 foundation factors to hit 1.573% through the Asia session, having climbed almost 11 bps in three days. They have been final at 1.5519%.

Yields on 20-year and 30-year Treasuries additionally jumped to their highest since June.

Benchmark euro zone bond yields rose to new highs, with markets fearing inflation will likely be stickier than anticipated. Germany’s 10-year yield, the benchmark of the bloc, rose to its highest since late June.

The MSCI world fairness index (.MIWD00000PUS), which tracks shares in 50 international locations, fell 0.4%. MSCI’s broadest index of Asia-Pacific shares exterior Japan (.MIAPJ0000PUS) fell 0.3%.

“Growth started to peak 3-4 months ago but between last November and April this year markets got used to every data point exceeding expectations,” stated Grace Peters, EMEA head of funding technique at JP Morgan Private Bank.

“From April to the present day we are getting more data volatility and data that’s more open to interpretation. So the market is concerned about the glide path from here.”

Chinese markets remained closed for a public vacation, and shares of cash-strapped developer China Evergrande (3333.HK) have been suspended having stopped buying and selling on Monday pending an announcement of a big transaction.

DOLLAR UP, KIWI DOWN

The greenback edged increased in opposition to a basket of different main currencies , supported by rising yields, and was heading again in the direction of a one-year excessive hit final month.

The greenback rose 0.3% to 94.0232, gaining momentum throughout European hours.

The New Zealand greenback prolonged losses as U.S. yields rose after barely budging on the Reserve Bank of New Zealand lifting its official money price for the primary time in seven years.

The kiwi was final 0.9% at $0.6896.

The euro was pinned under $1.16 and was final down 0.2%, scarcely increased than the 14-month low it struck final week.

Reporting by Tom Wilson in London and Alun John in Hong Kong; Additional reporting by Sujata Rao in London; Editing by Stephen Coates and Alexander Smith

A pump jack operates in front of a drilling rig at sunset in an oil field in Midland, Texas U.S. August 22, 2018. REUTERS/Nick Oxford/File Photo

A man looks at stock market monitors in Taipei January 22, 2008. REUTERS/Nicky Loh

A pump jack operates in front of a drilling rig at sunset in an oil field in Midland, Texas U.S. August 22, 2018. REUTERS/Nick Oxford/File Photo