US interest rates jump to 3-year highs, stocks fall on the CPI outlook

A trader works on the trading floor of the New York Stock Exchange (NYSE) in Manhattan, New York City, USA, April 11, 2022. REUTERS / Andrew Kelly

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NEW YORK, April 11 (Reuters) – Global stock markets fell on Monday, dragged down by technology stocks in Europe and on Wall Street, as US government interest rates jumped ahead of inflation data that could cause the Federal Reserve to tighten policy enough to slow a recovery in the economy.

The euro rose against the dollar and suffered a seven-day losing streak as the single currency rose after French leader Emmanuel Macron beat far-right challenger Marine Le Pen in France’s first round of Sunday’s presidential election. Read more

The dollar held just below almost two-year highs against a basket of currencies and strengthened against the Japanese yen, up 0.88%, and against commodity currencies – the Canadian, Australian and New Zealand dollars.

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The benchmark interest rate on 10-year government bonds rose more than 7 basis points to 2.793%, the highest level since January 2019.

Interest rates have risen in anticipation of Fed rate hikes, which Dec Mullarkey, chief investment officer and asset allocator at SLC Management, expects to be 50 basis points at each of the Fed’s next three policy meetings.

“The Fed will move aggressively. The market has appropriately priced it,” Mullarkey said.

“They do not want to be a problem in the midterm period,” Mullarkey added, referring to the November election, which will determine whether Republicans can relinquish control of President Joe Biden’s Democrats in the U.S. Senate and House of Representatives. “They also do not want to be in the position where they do not have inflation under control.”

Economists polled by Reuters predicted that the US Consumer Price Index (CPI) on Tuesday would show a rise of 8.4% year-on-year in March. Separately, they also saw the probability of a recession next year of 40%. Read more

Technology stocks, which have been supported by record low yields, fell 2% in Europe (.SX8P) and 2.6% on Wall Street (.SPLRCT).

MSCI’s benchmark for equities across the globe (.MIWD00000PUS) closed 1.33% and the pan-European STOXX 600 index (.STOXX) fell 0.59% as regional exchanges fell with the exception of France’s CAC 40.

On Wall Street, the Dow Jones Industrial Average (.DJI) fell 1.19%, the S&P 500 (.SPX) lost 1.69% and the Nasdaq Composite (.IXIC) fell 2.18%. All 11 S&P 500 sectors fell.

Volatility gripped French blue chips about the prospect of a close Macron-Le Pen race in the final round of voting. French assets have underperformed as markets are troubled by Le Pen’s agenda of protectionism, tax cuts and nationalization.

The CAC 40 index (.FCHI), which has fallen 1.5% so far in April as the STOXX 600 rises around 0.4%, closed up 0.12%.

“I do not expect the French stock markets to rise until we have the second round – we expect a lot of volatility and interval-bound trading,” said Mathieu Racheter, head of stock strategy at Julius Baer. “It really is a close call in the runoff.”

During the night in Asia, MSCI’s broadest index of Asia-Pacific equities outside Japan (.MIAPJ0000PUS) fell 1.6% and the Nikkei 225 (.N225) in Tokyo fell 0.61%.

Oil prices fell by $ 4 per barrel. barrel, where Brent fell below $ 100 due to plans to release record amounts of crude oil from strategic reserves and due to continued COVID-19 lockdowns in China.

U.S. crude oil futures fell $ 3.97 to $ 94.29 per share. barrel while Brent fell $ 4.30 to $ 98.48.

Palladium stabilized after jumping as much as 5% on supply concerns following a recent suspension of trade in the metal sourced from Russia in London’s metal hub, while gold was backed by fears of inflation.

US gold futures rose 0.1% to $ 1,948.20 per share. ounce.

Bitcoin fell 5.66% to $ 39,748.60.

China’s inflation figures surprised on the high side on Monday, although they were still relatively modest at 1.5% year-on-year in March. Read more

But it still saw interest rates on China’s 10-year government bonds fall below US government bonds for the first time in 12 years on Monday.

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Reporting by Herbert Lash, further reporting by Samuel Indyk and Elizabeth Howcroft in London, Sruthi Shankar in Bengaluru; Edited by Philippa Fletcher, Angus MacSwan, Will Dunham and David Gregorio

Our standards: Thomson Reuters Trust Principles.

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