NEW YORK, April 12 — Global stock markets fell yesterday, pulled lower by technology shares in Europe and on Wall Street, as US Treasury yields jumped ahead of inflation data that could prompt the Federal Reserve to tighten policy enough to slow a rebounding economy.
The euro rose against the dollar to snap a seven-day losing streak as the single currency rallied after French leader Emmanuel Macron beat far-right challenger Marine Le Pen in France’s first round of presidential voting on Sunday.
The dollar held just below almost two-year highs against a basket of currencies and strengthened against the Japanese yen, up 0.88 per cent, and versus the commodity currencies — the Canadian, Australian and New Zealand dollars.
The yield on benchmark 10-year Treasuries rose more than 7 basis points to 2.793 per cent, the highest level since January 2019.
Yields have surged in anticipation of Fed rate hikes, which Dec Mullarkey, managing director of investment strategy and asset allocation at SLC Management, expects to be by 50 basis points at each of the Fed’s next three policy meetings.
“The Fed is going to move aggressively. The market has appropriately priced it in,” Mullarkey said.
“They don’t want to be an issue in the midterms,” Mullarkey added, referring to elections in November that will determine whether Republicans can wrest control from President Joe Biden’s Democrats in the US Senate and House of Representatives. “They also do not want to be in the position where they don’t have inflation under control.”
Economists polled by Reuters forecast the US consumer price index (CPI) today would post an 8.4 per cent year-over-year increase in March. Separately, they also saw the probability of a recession next year at 40 per cent.
Technology shares, which have been underpinned by record low interest rates, fell 2 per cent in Europe and 2.6 per cent on Wall Street.
MSCI’s gauge of stocks across the globe closed down 1.33 per cent and the pan-European STOXX 600 index slid 0.59 per cent as regional bourses fell with the exception of France’s CAC 40.
On Wall Street, the Dow Jones Industrial Average fell 1.19 per cent, the S&P 500 lost 1.69 per cent and the Nasdaq Composite .IXIC dropped 2.18 per cent. All 11 S&P 500 sectors fell.
Volatility gripped French blue chips on the outlook for a tight Macron-Le Pen race in the final round of voting. French assets have underperformed as markets are uneasy about Le Pen’s agenda of protectionism, tax cuts and nationalization.
The CAC 40 index, which is off 1.5 per cent so far in April as the STOXX 600 gains about 0.4 per cent, closed up 0.12 per cent.
“I don’t expect the French equity markets to rally until we have the second round — we expect a lot of volatility and range-bound trading,” said Mathieu Racheter, head of equity strategy at Julius Baer. “It is really a close call in the runoff.”
Overnight in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.6 per cent and the Nikkei 225 in Tokyo slid 0.61 per cent.
Oil prices dropped by US$4 (RM16.92) a barrel, with Brent tumbling below US$100 on plans to release record volumes of crude from strategic reserves and on continuing Covid-19 lockdowns in China.
US crude futures fell US$3.97 to settle at US$94.29 a barrel while Brent settled down US$4.30 at US$98.48.
Palladium steadied after jumping as much as 5 per cent on supply concerns following a recent suspension on trading of the metal sourced from Russia in the London metals hub, while gold was buoyed by inflation fears.
US gold futures settled up 0.1 per cent at US$1,948.20 an ounce.
Bitcoin BTC=BTSP fell 5.66 per cent to US$39,748.60.
China’s inflation figures surprised on the high side yesterday although they were still relatively modest at 1.5 per cent year-on-year in March.
But that still saw yields on China’s 10-year government bonds fall below US Treasury yields for the first time in 12 years yesterday. — Reuters
