Global Bonds, Stocks Fall as Inflation Fears Mount: Markets Wrap

(Bloomberg) — Global bond yields rose and most stocks fell on Monday as surging energy prices cemented worries about inflation and reinforced bets on policy tightening.

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Consumer and retail shares led declines in Europe’s Stoxx 600, with luxury companies slipping after publication of a presidential speech advancing tax legislation to reduce a wealth disparity. U.S. futures fell after the S&P 500 chalked its best week since July. Shares in Asia were mixed as China’s economy slowed in the third quarter.

The global bond selloff gathered pace, with U.K. yields surging after Bank of England Governor Andrew Bailey moved to strengthen the case for raising interest rates. Tapering expectations have also picked up the U.S., Australia and New Zealand, where inflation accelerated to the fastest pace in 10 years. Ten-year Treasury yields extended a climb to 1.6%.

Oil prices built on their eighth weekly gain, with West Texas Intermediate crude rising to the highest since 2014. Brent approached $86 a barrel. The dollar gauge rose.

Investors continue to grapple with worries that energy shortages and supply-chain disruptions will drive up living costs in most economies. At the same time, the recovery remains patchy and central bankers are inching closer to paring back stimulus. U.S. consumer sentiment fell unexpectedly in early October, but retail sales advanced.

“We are starting to see some cracks in the transitory narrative that we’ve been hearing for quite some time,” Meera Pandit, global market strategist at J.P. Morgan Asset Management, said on Bloomberg Radio. “Rates will continue to ground higher from where we are. But I don’t think from a Fed perspective, when you think about the short end of the curve, that they are going to move much earlier than 2023. They are going to be a little bit more patient than the market expects right now.”

Mohammed El-Erian, the chief economic adviser at Allianz SE and a Bloomberg columnist, said investors should prepare for increased market volatility if the Federal Reserve pulls back on stimulus measures set in motion by the Covid-19 pandemic.

In China, People’s Bank of China Governor Yi Gang said authorities can contain risks posed to the Chinese economy and financial system from the struggles of China Evergrande Group.

Elsewhere, Bitcoin rallied back above $62,000 as the first U.S. Bitcoin futures ETF may debut Monday.

For more market analysis, read our MLIV blog.

Events to watch this week:

  • Earnings roll in, including from AT&T Inc., Barclays Plc, Johnson & Johnson, Netflix Inc. and Tesla Inc.

  • Bank Indonesia rate decision and briefing, Tuesday

  • China’s NPC Standing Committee starts a meeting Tuesday that goes on through Oct. 23. A review of anti-monopoly regulations is on the agenda

  • U.S. housing starts, Tuesday

  • EIA crude oil inventory report, Wednesday

  • China property prices, loan prime rates, Wednesday

  • U.S. Conference Board leading index, U.S. existing home sales, jobless claims, Thursday

  • Fed Chair Jerome Powell takes part in policy panel discussion, Friday

Some of the main moves in markets:

Stocks

  • The Stoxx Europe 600 fell 0.4% as of 9:35 a.m. London time

  • Futures on the S&P 500 fell 0.2%

  • Futures on the Nasdaq 100 fell 0.3%

  • Futures on the Dow Jones Industrial Average fell 0.2%

  • The MSCI Asia Pacific Index rose 1.3%

  • The MSCI Emerging Markets Index rose 1.3%

Currencies

  • The Bloomberg Dollar Spot Index rose 0.2%

  • The euro fell 0.1% to $1.1586

  • The Japanese yen was little changed at 114.33 per dollar

  • The offshore yuan was little changed at 6.4330 per dollar

  • The British pound fell 0.2% to $1.3725

Bonds

  • The yield on 10-year Treasuries advanced three basis points to 1.60%

  • Germany’s 10-year yield advanced four basis points to -0.13%

  • Britain’s 10-year yield advanced six basis points to 1.16%

Commodities

  • Brent crude rose 0.9% to $85.63 a barrel

  • Spot gold fell 0.3% to $1,762.74 an ounce

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