2/2 © Reuters. A man wearing a protective mask, amid the outbreak of coronavirus disease (COVID-19), walks past an electronic dashboard showing the Shanghai Composite Index, the Nikkei Index and the Dow Jones Industrial Average out of a brokerage in Tokyo, Japan, March 7, 2022. REUTER
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By Tom Wilson and Tom Westbrook
LONDON v SINGAPORE (Reuters) – European equities rose slightly on Wednesday, as the dollar strengthened as investors became more concerned about rising inflation and the impact on global growth of impending gains. interest rate.
The European index rose 0.3%, and the London and Paris stock markets rose 0.2% and 0.4%, respectively.
Banks and car stocks won, although data showed that German retail sales fell more than expected in April, as consumers felt the pinch of higher prices.
Rising food and energy costs brought eurozone inflation to a record 8.1% in May, Tuesday’s figures showed, fueling concerns about rising rates not only in Europe but around the world.
The Bank of Canada is the latest central bank to raise interest rates, with economists expecting a 1.5% rise from 1.0% later on Wednesday.
Market players were looking at whether attempts to dampen inflation by central banks around the world with tighter monetary policy would lead to a recession, which in turn could reduce interest rate hikes.
“It’s just an incredibly uncertain environment right now,” said Mike Bell, global market strategist at JP Morgan Asset Management. “At times like this, it only makes sense to moderate the size of risk positions.”
Investors were also concerned, Bell said, about whether a European Union agreement on a embargo on Russian imports would be retaliated against by Moscow. The ban aims to stop 90% of Russia’s crude imports from the bloc of 27 nations by the end of the year.
Wall Street echoed gains in Europe. they rose 0.4% recently, strengthening trade in London.
The MSCI Global Equity Index, which tracks the actions of 50 countries, was steady.
Earlier, Shanghai emerged blinking after two months of confinement, but as the data showed a sharp drop in factory activity in Asia due to depleted demand from China, relief in the region was short-lived.
The broader Asia-Pacific equities index outside of Japan fell 0.4%, dragged down by the Hong Kong index.
Eurozone bond yields fell at the start of trading after a rise on Tuesday after the bloc’s inflation data was much higher than expected.
As worries about global inflation erupted again, the US dollar rose to a two-week high against the yen, driven by higher Treasury yields. The dollar has stalled a three-week low and reached a two-week high of 129.23 yen.
Measuring the currency against six major counterparts, including the Japanese, rose 0.2% to 102.05, up 0.4% from Tuesday.
ROTATIONS
The U.S. Federal Reserve on Wednesday begins lowering the stakes of assets accumulated during the pandemic. Traders expect rates to rise by 50 bp at meetings this month and next and after that they are unsure and increasingly worried.
The president of the Federal Reserve of St. Louis, James Bullard, and New York Fed Chairman John Williams will also have to speak Wednesday and will be on the lookout for clues about the outlook.
“We are now in this kind of twilight zone where it is very difficult to know what the Fed will do after the July meeting,” said Bank of Singapore analyst Moh Siong Sim.
“Depending on who says what and how the data will be reproduced, there will be many rounds over the next few weeks.”
In commodity markets, oil prices rose steadily after the EU’s agreement on a partial and gradual ban on Russian oil and when the Shanghai blockade by COVID-19 ended. [O/R]
futures rose 0.3% to $ 115.95 a barrel.