Bonds shake as inflation hits new highs – SABC News

Stocks stabilized in Asia on Wednesday as Shanghai emerged from a two-month lockdown and a drop in oil prices held out the prospect of respite from rising energy prices, but nerves tied to inflation kept investors and bond markets on edge.

Soaring food and energy prices pushed euro zone inflation to a record high of 8.1% in May, data showed overnight, beating market expectations and fueling concerns about rising rates not just in Europe but globally.

Yields on two-year German Bunds hit their highest level in more than a decade as investors sold.

Benchmark 10-year Treasury yields rose 10 basis points (bps) and rose another 2.5bps to 2.8749% in early Asian trading.

MSCI’s broadest index of Asia-Pacific stocks outside Japan fell 0.1% and the Japanese Nikkei rose 0.5%.

S&P 500 futures rebounded 0.5% after the index slipped 0.6% on Tuesday.

The US dollar, meanwhile, stabilized after falling during the second half of May and rose slightly against the euro and the yen in early trading on Wednesday.

The U.S. Federal Reserve begins cutting assets built up during the pandemic on Wednesday and traders expect it to raise rates by 50 basis points at meetings this month and next.

“Markets are pricing in June rate hikes in the UK, US, Sweden, Australia and Canada,” said Societe Generale analyst Kit Juckes.

“The more markets focus on inflation data and central bank action, the more likely we are to have a bumpy start to the summer in risk sentiment and a strong dollar.”

The Bank of Canada is expected to raise its benchmark target rate by 50 basis points to 1.5% when it meets later today.

Australia’s economic growth slowed in the first quarter, data showed on Wednesday, but domestic demand helped it grow a little better than expected, paving the way for further interest rate hikes.

POSITIVE

Some relief after an overnight pullback in oil prices and hope that China’s slowdown is approaching its nadir helped ease investor concerns. After two months of frustration, desperation and economic loss, a draconian lockdown of Shanghai’s 25 million people ended at midnight.

Small groups in the city’s former French concession whistled and shouted “ban lifted”.

Chinese factory activity data for May, released on Tuesday, was not as bad as traders feared and showed the pace of contraction had slowed.

“Compared to a few weeks ago, this is clearly positive for sentiment,” said Westpac analyst Sean Callow, adding, however, that inflation was among other “clear negatives”.

Stocks in Hong Kong and Shanghai held on to Tuesday’s gains and opened steadily.

Currency markets were in a cautious mood and the dollar’s three-week decline halted.

It stood at a two-week high of 128.18 yen on Wednesday and rose 0.2% to $1.0709 per euro.

The Aussie hovered at $0.7172.

Oil prices fell on Tuesday after the Wall Street Journal reported that oil-producing nations were considering excluding Russia from a production deal, paving the way for Middle Eastern countries to increase production.

Brent crude futures fell from a nearly three-month high after the report and last stabilized at $116.18 a barrel.

The stronger dollar pushed spot gold a fraction lower to $1,834 an ounce.

Bitcoin held on to early week gains at $31,838.

Garland K. Long