Global equities mixed amid U.S. inflation worries; Treasuries rise

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WASHINGTON (Businesshala) – World stock indexes retreated from record highs on Tuesday as a solid rise in producer prices last month fueled concerns over inflation, while US Treasury yields eased.

FILE PHOTO: A street sign for Wall Street is seen in the Financial District in New York, US, November 8, 2021. Businesshala / Brendan McDermid

The U.S. Labor Department said producer prices rose solidly in October, with investors buying up heavily on government-backed debt obligations. The data indicated that high inflation, which has become a bigger concern for investors than the COVID-19 crisis, may persist as supplies remain tight.

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The pan-European STOXX 600 index lost 0.11%, while MSCI’s worldwide shares fell 0.28%, having reached less than a point away from an unchanged high in the prior session.

Global equities were hovering near all-time highs as investors braced for stronger earnings, easing travel restrictions and US infrastructure spending against inflationary risks, which could lead to a tightening of monetary policy.

Emmanuel Kau, head of European equities strategy at Barclays, said: “Markets have accelerated and strengthened, there has been a strong rebound, but the catalyst provided by the third quarter earnings season is coming to an end.”

Kau said market conditions were far from extreme and many investors remained prudent despite there being no imminent threat to a rally.

He argued that it was “healthy” to see markets pause to digest corporate earnings and news of major central bankers in no hurry to raise interest rates.

Fears of a sudden tightening of monetary policy triggered a fixed-income sell-off in October, but government bond yields have tumbled.

“Central bank pushback against the initial tightening supports a pro-risk stance,” analysts at JPMorgan told clients in a note.

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The Dow Jones Industrial Average is down 0.56%, and the S&P 500 is down 0.43%. The Nasdaq Composite dropped 0.46%.

The benchmark 10-year Treasury yield was down 5.1 basis points at 1.4462% at noon. The yield on the 10-year Treasury inflation-protected securities stood at -1.159%, the lowest since early August, reflecting rising inflation concerns.

Germany’s 10-year inflation-linked bond, which reflects the so-called real return, fell to a record low of -2.09%.

Yields of both US and Euro zone benchmarks are trading near one-month lows.

Market analysts await Wednesday’s US consumer price data. A stronger-than-expected reading will resume talk of the Federal Reserve raising interest rates sooner than expected.

The dollar fluctuated after Tuesday’s US producer price data, but was up 0.081% last time, with the euro falling 0.11% to $1.1573.

The Japanese yen gained 0.23% to $112.98 per dollar, while sterling weakened 0.24% to $1.3529.

Among cryptocurrencies, bitcoin fell 1.23%.

Oil prices rose slightly on the passage of the US infrastructure bill and China’s export growth, supporting the outlook for energy demand.

Saudi Arabia’s state-owned producer Aramco also raised the official selling price for its crude.

US crude rose 0.98% to $82.73 a barrel as Brent was up 0.43% at $83.79.

Gold prices retreated from higher levels since early September as the dollar edged slightly ahead of US inflation data at the end of the week.

Spot gold fell 0.1% to $1,822.30 an ounce at 10:17 a.m. ET (1517 GMT), having hit its highest level since Sept. 3 at $1,830.35.

Lincoln Feast, Editing by Ed Osmond, Alison Williams and Richard Chang

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