Shares are falling, returns are soaring according to US inflation data

MILAN, May 11 (Reuters) – World equities fell on Wednesday and bond yields soared after US data showed that inflation there had slowed less than expected last month, cementing expectations of aggressive interest rate hikes from the Federal Reserve.

US futures turned negative after data showed that US annual consumer price inflation slowed to 8.3% in April from 8.5% in March, indicating that inflation is likely to have peaked. However, the figure was above 8.1[ads1]% the analyst had expected.

Paolo Zanghieri, senior economist at Generali Investments, said the data confirmed the view that returning inflation to more tolerable values ​​would take time.

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“In general, today’s data contributes to the case of the strong frontload demanded by (| Fed Leader Jerome) Powell in the last meeting, which also suggested the possibility of two more 50bps increases in June and July,” Zanghieri said. “But this will keep concerns about the possibility of a recession high, and ultimately weakening growth could cause the Fed to curb it to tighten after the summer.”

MSCI’s benchmark index for global equities (.MIWD00000PUS) was flat at 1247 GMT, having risen as much as 0.3% previously. On Tuesday, the index fell to its lowest level since November 2020 due to fears that austerity measures by the Fed could slow the global economy significantly.

US stock futures were sharply negative, with the Nasdaq and S&P 500 e-minis down 1% and 0.6%, respectively. The pan-European STOXX 600 (.STOXX) stock benchmark also trimmed the uptrend, last up 0.2%.

The money markets increased their efforts to raise Fed interest rates by the end of 2022 to 208 basis points after the US inflation figures, compared with around 195 bps before.

Earlier in Asia, stocks squeezed up from almost two years’ lowest level. Chinese blue chips (.CSI300) rose 1.4% after Shanghai officials said half the city had achieved “zero COVID” status, and after US President Joe Biden said he was considering eliminating Trump-era tariffs on China .

However, Chinese data released on Wednesday showed that consumer prices rose 2.1% from the previous year, more than expected and at the fastest pace in five months, partly due to food prices.


After falling to the lowest levels of almost a week earlier on Wednesday, the benchmark index for 10-year government bonds became positive after the inflation data, and marched back to the three-year high of 3.203% on Monday.

The 10-year interest rate was last up 6 basis points on the day to 3.0502%, while the 2-year interest rate, which often reflects the outlook from the Fed, jumped 11 bps to 2.717%.

Government bond yields in the euro area also sold out according to US data, sending the German 10-year yield up 8 bps to 1.084%.

Bets on aggressive Fed austerity have also supported the dollar this year.

The dollar index, which measures performance against six major companies, reversed its previous weakness and was last up 0.1% to 104.04, closer to the two-decade high of 104.19 reached at the beginning of the week.

The Fed raised interest rates by 50 basis points last week, and chairman Jerome Powell said that two more such increases were likely at the next political meetings.

There has also been speculation in markets that the US Federal Reserve will need to move by 75 basis points in one meeting, and currently money markets are pricing above 190 basis points with combined interest rate increases per year.

“The current problem is that the market is convinced that the Fed is determined to fight inflation and therefore willing to tolerate market volatility and some destruction of demand more than before. Personally, I am less convinced of this provision,” said Giuseppe Sersale, fund manager and Anthilia.

Morgan Stanley estimates that global economic growth in 2022 will be less than half of last year’s 2.9%, down from an earlier estimate of 3.2%. read more The US Bank also cut its target at the end of the year for the S&P 500 by 11% to 3,900 points, while increasing its US 10-year forecast by 55 bps to 3.15%.

The oil came back, driven by supply concerns as the EU works to get support for a ban on Russian oil.

Brent rose 2.6% to $ 105.12 a barrel and US oil rose 3% to $ 102.77.

Spot gold fell 0.1% to $ 1,836.2 per ounce.

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Reporting by Danilo Masoni in Milan, Sujata Rao in London and Alun John in Hong Kong, editing by William Maclean and Tomasz Janowski

Our standards: Thomson Reuters Trust Principles.

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