Stagflation fears stalk shares, rising yields lift dollar

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  • Graphic: World FX Rates
  • US stock futures fall, Nikkei loses yen
  • Oil lifts energy complex, fuels inflation risk
  • Dollar hits highest level on yen since late 2018
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LONDON, Oct 11 (Businesshala) – Stagflation halted gains in global stocks on Monday, while major central banks bet on tightening monetary policy and raised bond yields and pushed the dollar against the Japanese yen to a near three-year low. reached the summit.

Brent oil prices extended their bull run to reach the ground last seen in late 2018, with inflationary concerns in the energy complex rising.

“High energy prices, shortages will inevitably make their way through global value chains in the form of rising prices and potential shortages of industrial and consumer goods,” said OANDA analyst Jeffrey Haley.

“All this makes all the more hollow to the persistent condemnation about the ‘temporary’ ring of inflation by central bankers around the world.”

In Europe, rising commodity prices supported oil and mining stocks, but fears remained about inflation, an environment of economic stability and rising prices.

The Euro STOXX 50 (.STOXX50E) was trading 0.3% lower.

Nasdaq futures and S&P 500 futures were down 0.6% and 0.3%, respectively.

The MSCI World Equity Index (.MIWD000000PUS), which tracks stocks in 50 countries, was up 0.1%.

Sentiment in China was partially helped by planned supportive measures by some cities for the troubled property market.

China’s blue-chip CSI300 index (.CSI300) rose 0.1%, while MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) gained 0.6%.

The decline in the yen provided a welcome boost to Japan’s Nikkei (.N225), which reversed early losses and extended 1.6%.

The US earnings season begins this week and is likely to bring stories of supply disruptions and rising costs. JP Morgan reported on Wednesday, followed by BofA, Morgan Stanley and Citigroup on Thursday, and Goldman on Friday.

US inflation, retail sales

The focus will also be on US inflation and retail sales data and minutes from the Federal Reserve’s last meeting, which should confirm that November’s tapering was discussed.

“The coming week will be centered around the US CPI release on Wednesday, but it could be a backward-looking touch as energy has recently risen and after a summer drop, used car prices are again in March which is likely Will be captured in this week’s release,” Deutsche Bank’s Jim Reid wrote in a note to customers.

While Friday’s headline US payroll numbers disappointed, it was partly due to reopening problems in state and local education, while employment in the private sector remained strong.

In fact, labor shortages reduced the unemployment rate to 4.8%, investors were more concerned about the risk of wage inflation and Treasury yields rose sharply.

The yield on 10-year notes was trading at 1.62%, the biggest increase of 15 basis points since March last week.

The US fixed income and currency markets are closed on Mondays as a holiday.

Germany’s 10-year Bund yield rose to its highest level since May, up more than 2 basis points to -0.118%.

British gilt yields rose sharply over the 10-year yield since May 2019 following comments from Bank of England policymaker Michael Saunders over the weekend, as inflation pressures pushed households “quite before” to raise rates. Must be ready.

Money markets moved from the European Central Bank to a full 10-basis-point rate hike by the end of 2022.

Analysts at BofA warned that energy costs would pick up the pulse of global inflation, with oil potentially above $100 a barrel amid limited supply and strong reopening demand.

The winners in such a scenario would be real estate, real estate, commodities, volatility, cash and emerging markets, while bonds, credit and stocks would be negatively affected.

BofA recommended commodities as a hedge and noted resources accounted for 20-25% of the main equity indexes in the UK, Australia and Canada; 20% in emerging markets; 10% in the euro area, and only 5% in the United States, China and Japan.

The dollar was lowered as US yields outpaced those in Germany and Japan, hitting a high of 112.90 on the yen since the end of 2018.

The euro was hovering at $1.1570, having hit its lowest level since July last year at $1.1527 last week. The dollar index stood at 94.174, having recently topped 94.504.

A stronger dollar and higher yields weighed on gold, which offers no fixed returns, leaving it at $1,754 an ounce.

US crude oil prices continued to climb to their highest level in nearly seven years after gaining 4% last week.

Brent jumped 2.5% to $84.46, while US crude rose 3.3% to $81.98 a barrel.

Brent vs. S&P Energy Sector vs. S&P 500
Reporting by Tom Arnold in London and Wayne Cole in Sydney; Editing by Simon Cameron-Moore, Jacqueline Wong, Alex Richardson and Andrew Heavens


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