Stocks, futures decline with bonds on inflation worry

Bloomberg

US futures fall with stocks as surging energy prices stoked inflationary pressures ahead of a key US employment report. Treasury yields extended an advance.
S&P 500 and Nasdaq 100 contracts declined, with tech giants such as Apple Inc and Facebook Inc down in premarket trading. European equities slid to a two-month low, with natural gas prices soaring even as the European Union (EU) pledged swift action to ensure the spiking costs don’t stifle the economy. MSCI Inc.’s Asia-Pacific index also dropped.
The pound weakened as a market-based measure of expected inflation in the UK over the next decade hit a 13-year high.
Markets have turned more volatile since global stocks hit a record last month, with the energy supply crunch adding to investor worries about inflation, slowing growth and the prospect of reduced Federal Reserve stimulus. A private US payrolls may offer clues on the country’s labour market ahead of Friday’s keenly-watched government data.
“Right now you’re seeing inflation risk really start to percolate and I do think that you’re going to see that really eat into margins as we go through the fourth quarter into 2022,” Erin Browne, multi-asset portfolio manager at Pimco, said on Bloomberg Television. “The energy crisis that’s starting to loom in Europe is a real risk that is being underestimated by the market right now.”
The yields on 10-year and 30-year US Treasuries both reached the highest since June, while oil edged lower from a seven-year high. Faster-than-expected US service-sector activity and price pressures from spiraling costs for crude oil and natural gas are adding to the case for a reduction in Fed bond-buying.
In the UK, the so-called 10-year breakeven rate climbed as much as 10 basis points to 4.08%, spurred by a spike in energy costs that may hike up consumer prices. In response, money market have almost fully priced a rate hike from the Bank of England as soon as December, in what would be its first increase in over three years.
Elsewhere, Bitcoin falls below the $51,000 mark.
The Stoxx Europe 600 falls 1.2% as of 8:27 am London time and futures on the S&P 500 also drop 0.7%.
While futures on the Nasdaq 100 drop 0.9%, futures on the Dow Jones Industrial Average also fall 0.6%. The MSCI Asia Pacific Index falls 0.6% and the MSCI Emerging Markets Index also slumps 0.5%.
While the Bloomberg Dollar Spot Index rises 0.3%, the euro falls 0.2% to $1.1572 and the Japanese yen also drops 0.1% to 111.61 per dollar. The offshore yuan falls 0.1% to 6.4579 per dollar and the British pound also sinks 0.4% to $1.3581.
While the yield on 10-year Treasuries advanced three basis points to 1.55%, Germany’s 10-year yield advanced three basis points to -0.16% and Britain’s 10-year yield advanced five basis points to 1.13%.
While Brent crude rises 0.5% to $82.97 a barrel, spot gold falls 0.5% to $1,751.64 an ounce.