Markets are on alert for rate rises in both the euro zone and
the United States after the ECB last week was considered to have
adopted a more hawkish tone. The United States reported stronger
than expected jobs and earnings data.
"The most dominant thing is still central banks and the
tightening we see there, that has led to the volatility," said
Matthias Scheiber, global head of portfolio management at
Allspring Global Investments.
German 10-year government bond yields hit three-year highs and
Italian 10-year yields hit their highest since May 2020, with
Italy seen particularly vulnerable to rate increases due to its
high levels of debt. [GVD/EUR]
Two-year U.S. Treasury note yields hit a two-year high and U.S.
10-year yields stayed close to two-year highs hit on Friday.
S&P 500 futures and Nasdaq futures fell around 0.2% after
turmoil last week in growth-sensitive tech stocks saw Amazon.com
Inc gain almost $200 billion while Facebook-owner Meta Platforms
Inc lost just as much.
European stocks were steady, though Italian stocks dropped
1.34%.. Britain's FTSE gained 0.3%.
ECB officials attempted to temper expectations of near-term
tightening ahead of comments by President Christine Lagarde
later on Monday.
ECB policymaker Martins Kazaks pushed back against market
expectations for a rate hike as soon as July in an interview
with Reuters. He said the bank could end its stimulus programme
earlier than planned but it was unlikely to raise its main
interest rate so quickly.
Klaas Knot, the Dutch Central Bank President and a member of the
ECB's governing council, said on Sunday he expects a hike in the
fourth quarter of this year.
"How much will we have to reprice yields, and spreads between
(European) peripheral debt and Bunds, on the back of reduced ECB
buying, is a question on much of the market's lips," said Kit
Juckes, strategist at Societe Generale.
After a bumpy ride last week, the MSCI world equities index was
flat.
The euro inched down 0.11% at $1.1435, having shot up 2.7% last
week in its best performance since early 2020 on the tightening
expectations.
The U.S. dollar index edged up 0.06% to 95.502, after shedding
1.8% last week.
The U.S. January payrolls report on Friday showed annual growth
in average hourly earnings climbed to 5.7%, from 4.9%, while
payrolls for prior months were revised up by 709,000 to
radically change the trend in hiring.
U.S. consumer price figures for January are due on Thursday and
could show core inflation accelerating to the fastest pace since
1982 at 5.9%.
As a result, markets moved to price in a one-in-three chance the
Fed might hike by a full 50 basis points in March and the
prospect of rates reaching 1.5% by year end.
The Russian rouble recovered to a three-week high against the
dollar as French President Emmanuel Macron traveled to Moscow
seeking commitments from Russian President Vladimir Putin to
dial down tensions with Ukraine, which Western leaders fear the
Kremlin plans to invade.
Oil prices fell as much as $1 as signs of progress in U.S.-Iran
nuclear talks that could lead to removal of U.S. sanctions on
Iranian oil sales offset concerns about tight supplies. [O/R]
Brent crude weakened to $92.90 a barrel, while U.S. crude fell
to $91.56.
MSCI's broadest index of Asia-Pacific shares outside Japan
dipped 0.14%.
China returned from the Lunar New Year break with jumps in
equities and commodities, with the blue-chip CSI300 and Shanghai
Composite up 1.54% and 2% respectively and metals and iron ore
rallying in Shanghai. [IRONORE/][MET/L]
Gold rose 0.29% to $1,813 an ounce, buoyed by inflation worries.
(Additional reporting by Wayne Cole and Tom Westbrook; Editing
by Lincoln Feast and Frank Jack Daniel)
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