Yields Jump, Stocks Waver as Inflation Fears Mount: Markets Wrap

(Bloomberg) — Stocks in Asia fluctuated and Treasuries sold off across the curve as oil jumped, adding to worries about how aggressive central banks will need to be to rein in inflation without derailing growth.

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Technology stocks underpinned gains in Hong Kong, while China rose as data showed factory activity shrinking at a slower pace and Shanghai eased its Covid lockdown. Equities fell in Japan. US futures edged up, suggesting a calmer start after the Memorial Day holiday. Europe contracts dipped.

Treasury yields jumped more than 10 basis points, joining a selloff in German bunds and European bonds Monday. German inflation hit an all-time high, adding to pressure on central bank policy makers to tame rising prices. The dollar advanced.

Crude oil rose to above $118 a barrel after the European Union agreed to pursue a partial ban on Russian oil in response to the invasion of Ukraine. Higher energy and food costs are keeping upward pressure on prices globally and squeezing consumers.

Global stocks are on track to end the month with modest gains amid skepticism about whether the market is near a trough and as volatility stays elevated. Fears that central bank rate hikes will induce a recession, stubbornly high inflation and uncertainty around how China will boost its flailing economy are keeping investors watchful.

“The mood is temporarily better in markets,” Chris Iggo, chief investment officer for core investments at AXA Investment Managers, said in a note. “I think the worst is over for bond markets but picking the bottom in equities is trickier. Iggo said another 10%-15% drop in equity markets couldn’t be ruled out.

Story continues

Inflation prints in Europe came before a crucial European Central Bank meeting where officials are set to announce the conclusion of large-scale asset purchases and confirm plans to raise interest rates in July for the first time in more than a decade.

In the US, Federal Reserve Governor Christopher Waller said he wants to keep raising interest rates in half-percentage point steps until inflation is easing…


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