Stocks slip on inflation concerns as oil prices rise further By Reuters
© Reuters. FILE PHOTO: A screen shows Nikkei index after a ceremony marking the end of trading in 2021 at the Tokyo Stock Exchange (TSE) in Tokyo, Japan December 30, 2021. REUTERS/Kim Kyung-Hoon
By Herbert Lash and Lawrence White
NEW YORK/LONDON (Reuters) -Strong U.S. and European corporate results helped stock markets initially rebound on Wednesday from the prior day’s sell-off, but rising crude prices kept inflation concerns alive even as bond yields eased after they touched fresh multi-year highs.
An index of Europe’s 600 biggest stocks rose as much as 0.8% as robust earnings from luxury majors Burberry and Richemont countered pressure from rising yields. Buoyant reports from UnitedHealth Group Inc (NYSE:), Procter & Gamble (NYSE:) Co and others also supported initial gains on Wall Street.
But the early gains couldn’t hold as investor concerns about rising inflation and higher yields put the market in a holding pattern as investors await next week’s Federal Reserve policy meeting for word on the central bank’s plan to tackle inflation.
“The market is still grappling with how do you adjust to higher rates and what are the companies that are impacted by higher rates?” said Jon Maier, chief investment officer at Global X ETFs.
“The market was very excited that maybe the Goldman Sachs (NYSE:) numbers (on Tuesday) weren’t so bad. Then reality sunk in.”
MSCI’s all-country world index fell 0.11%, while the broad STOXX Europe 600 index rose 0.14%.
On Wall Street, the rose 0.10%, the added 0.11% and the slid 0.11%.
U.S. Treasury yields hit fresh two-year highs and Germany’s 10-year yield broke into positive territory for the first time since May 2019, as investors hike bets that policymakers will curb years of stimulus in order to fight rising asset prices.
The rise above 0% for the bund – the euro zone’s benchmark – marks a turning point for regional debt, reflecting record-high inflation that is being exacerbated by supply chain disruption.
“This inflationary episode is unusually challenging in that it is driven by both strong demand and shortages of supply,” said Guy Foster, chief strategist at wealth manager Brewin Dolphin (OTC:).
Oil prices hit their highest since 2014 amid an outage on a pipeline from Iraq to Turkey and global political tensions that stoked fears of more persistent inflation and helped prop up the dollar, which hovered near one-week highs.
The market is making interest rate adjustments throughout the major industrialized economies, said Marc Chandler, chief market strategist at Bannockburn Global Forex.
“Those countries that seem to be ahead of the U.S. in the queue of raising grades – Canada, the UK and Norway – have stronger currencies this year against the dollar,” he said. “Other areas like the Euro, Swiss franc are softer on the year.”
The , which tracks the greenback versus a basket of six currencies, fell 0.15%. The euro rose 0.16% at $1.1343, while the yen was down 0.30% at $114.2700.
Overnight in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.4% as tech stocks in particular suffered as they had on Tuesday in Europe and on Wall Street.
Australia shed 1.0%, while hit a three-month low as worries over new curbs on businesses to halt a record surge in coronavirus cases curbed risk appetite.
The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was down 2.8 basis points at 1.012%. The yield on fell 2.7 basis points to 1.841%.
Oil prices rose for a fourth day after a fire on a pipeline from Iraq to Turkey briefly stopped flows, increasing concerns about an already tight short term supply outlook.
was up $1.37 at $88.88 a barrel. was up $1.92 at $87.35 a barrel.
Gold rose more than 1% as a retreat in the dollar and geopolitical tensions surrounding Ukraine burnished safe-haven bullion’s appeal.
rose 1.49% at $1840.54 per ounce. [GOL/]