Global bonds, stocks fall as inflation fears mount

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.
Consumer and retail shares led declines in Europe’s Stoxx 600, with luxury companies slipping after publication of a Chinese presidential speech advancing tax legislation. US futures fell after the S&P 500 chalked its best week since July. Apple Inc. fell in pre-market trading, while Tesla Inc. advanced. Shares in Asia were mixed as China’s economy slowed in the third quarter.
The global bond selloff gathered pace, with UK yields surging after Bank of England Governor Andrew Bailey warned on the need to respond to price pressures. Rate-hike bets have also picked up in the US, 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. US 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.
Meanwhile, Governing Council member Ignazio Visco said the European Central Bank should keep a high degree of flexibility in its post-crisis stimulus measures, including by buying more European-Union issued debt.
People’s Bank of China Governor Yi Gang said authorities can contain risks posed to the country’s economy and financial system from the struggles of China Evergrande Group.
Elsewhere, Bitcoin rallied back above $62,000 as the first US Bitcoin futures ETF was expected to debut on Monday.
The Stoxx Europe 600 fell 0.4% as of 11:12 a.m London time. Futures on the S&P 500 fell 0.4%.Futures on the Nasdaq 100 fell 0.5%. Futures on the Dow Jones Industrial Average fell 0.3%.The MSCI Asia Pacific Index rose 1.3%. The MSCI Emerging Markets Index rose 1.3%.
The Bloomberg Dollar Spot Index rose 0.3%. The euro fell 0.2% to $1.1578. The Japanese yen fell 0.2% to 114.42 per dollar. The offshore yuan was little changed at 6.4311 per dollar. The British pound fell 0.2% to $1.3726.
The yield on 10-year Treasuries advanced four basis points to 1.61%. Germany’s 10-year yield advanced four basis points to -0.12%. Britain’s 10-year yield advanced six basis points to 1.17%.
Brent crude rose 0.8% to $85.51 a barrel. Spot gold fell 0.4% to $1,760.88 an ounce.