Stocks and bonds fall with UK inflation Reality check: market in shambles

(Bloomberg) — European stocks fell and bond yields rose after the latest U.K. price data cast doubt on hopes that price pressures have been overcome.

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The pan-European Stoxx 600 fell 0.4% and Britain’s FTSE 100 fell 0.3% after data showed UK inflation slowed less than expected last month, raising questions about when the Bank of England may start cutting interest rates. The pound strengthened and gilts tumbled, pushing the two-year yield up around 12 basis points.

Bond yields across Europe rose, while US Treasury borrowing costs also rose.

The numbers reinforced concerns that global inflationary pressures will remain sticky, preventing central banks from easing policy as soon as currently anticipated. On Wednesday morning, the Reserve Bank of New Zealand left interest rates unchanged and signaled that policy will remain tight for longer, while Federal Reserve Governor Christopher Waller said on Tuesday that he needs to see several more good inflation numbers to start interest rate cuts.

“Both the RBNZ and UK inflation data highlight the tense nature of the current environment, with investors struggling to assess the timing and extent of long-awaited central bank easing cycles,” said the head of rates strategy of Rabobank, Richard McGuire, in a statement. observation.

U.S. stock futures were little changed after the S&P 500 hit another record high on Tuesday, with artificial intelligence benchmark Nvidia Corp. expected to release results after the market closes. It is forecast to post a 243% gain in revenue, according to Wall Street estimates, but a 90% year-to-date stock rally means it may struggle to meet sky-high expectations.

Among individual movers in premarket trading, Lululemon Athletica Inc. fell as much as 4% after announcing organizational changes, while Tesla Inc. fell as much as 4%.

In Europe, Anglo American Plc shares weakened. as investors waited to see whether rival BHP Group Ltd. would launch its takeover bid to create a global copper giant. BHP has until 5pm London time to announce its firm intention to make an offer. Among other key stock movers, Marks & Spencer Group Plc jumped to its highest level since November 2018 after issuing better-than-expected results and a robust outlook.

The story continues

Energy stocks lost ground as Brent crude futures fell for the third day in a row.

Gold, silver and copper also declined after reaching all-time highs, although the recent rise in metals and cereal prices has renewed inflationary fears, with the Bloomberg spot commodity index remaining close to its peak. of the last 16 months.

Traders have scaled back expectations for Fed interest rate cuts this year, currently seeing about 40 basis points of rate cuts in 2024 versus the 50 basis point reduction priced in last week. Minutes from the Fed’s latest policy meeting, scheduled for Wednesday, may offer more clues into the thinking of rate-setters.

Main events this week:

• US Existing Home Sales Wednesday

• Fed Minutes, Wednesday

• Nvidia Earnings Wednesday

• Eurozone S&P Global Manufacturing and Services PMIs, Consumer Confidence, Thursday

• G-7 financial meeting, May 23-25

• US new home sales, initial unemployment claims, Thursday

• Fed’s Raphael Bostic Speaks Thursday

• US Durable Goods Consumer Sentiment Friday

• Fed’s Christopher Waller Speaks on Friday

Some of the main movements in the markets:

Actions

• The Stoxx Europe 600 was down 0.4% at 10:18 a.m. London time

• S&P 500 futures fell 0.1%

• Nasdaq 100 futures little changed

• Futures on the Dow Jones Industrial Average were little changed

• The MSCI Asia-Pacific index fell 0.2%

• The MSCI Emerging Markets index rose 0.3%

Coins

• The Bloomberg Dollar Spot index was little changed

• The euro was little changed at $1.0844

• The Japanese yen fell 0.2% to 156.48 per dollar

• The offshore yuan was little changed at 7.2486 per dollar

• The British Pound rose 0.1% to $1.2722

Cryptocurrencies

• Bitcoin rose 0.4% to $69,968.91

• Ether little changed at $3,748.2

Titles

• The yield on the 10-year Treasury note rose two basis points to 4.44%

• Germany’s 10-year yield rose three basis points to 2.53%

• Britain’s 10-year yield rose nine basis points to 4.22%

goods

• Brent crude fell 1.3% to $81.77 a barrel

• Spot gold fell 0.2% to $2,416.91 an ounce

This story was produced with help from Bloomberg Automation.

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