Bonds tremble as inflation hits new records

Singapore, June 1 (BNA): Shares in Asia were flat on Wednesday as Shanghai appeared choppy after two months of lockdown, lower oil prices triggered the prospect of a respite from higher energy prices, but tensions over inflation kept investors and bond markets on alert. edge.

Overnight data showed that rising food and energy costs pushed inflation in the euro zone to a record high of 8.1% in May, exceeding market expectations and raising concern about higher interest rates not only in Europe but globally.

German 2-year bond yields hit their highest levels in more than a decade as investors sold off. The benchmark 10-year Treasury yield rose 10 basis points and rose another 2.5 basis points to 2.8749% early in the Asian session.

MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.1% and Japan’s Nikkei rose 0.5%.

S&P 500 futures rebounded 0.5% after the index fell 0.6% on Tuesday. Meanwhile, the US dollar stabilized after falling in the second half of May and rose slightly against the euro and the yen in early trading on Wednesday.

The US Federal Reserve will begin reducing the asset holdings that have built up during the pandemic on Wednesday and traders expect it will raise interest rates by 50 basis points at meetings this month and the next period.

“Markets are pricing in June’s price increases from the UK, US, Sweden, Australia and Canada,” said Kate Jukes, analyst at Societe Generale.

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“The more markets focus on inflation data and central bank actions, the more likely we are to have a rough start to the summer in risk sentiment and a strong dollar.”

The Bank of Canada is expected to raise the benchmark interest rate by 50 basis points to 1.5% when it meets later in the day.

Data on Wednesday showed that Australian economic growth slowed in the first quarter, but domestic demand helped it come in slightly better than expected, paving the way for further interest rate increases.

Positives

A little relief from the overnight slump in oil prices and hope that the Chinese slowdown may approach bottoms helped validate investor fears.

After two months of frustration, despair and economic loss, the strict lockdown of Shanghai’s 25 million residents ended at midnight.

Small groups in the city’s former French Concession whistled and shouted “ban lifted.”

China’s factory activity data for May, which was released on Tuesday, wasn’t as bad as traders feared either and showed the pace of deflation has slowed.

“Compared to the past two weeks, this is a clear positive for sentiment,” Westpac analyst Sean Callow said, adding, however, that inflation was among the other “clear negatives.”

Shares in Hong Kong and Shanghai extended gains on Tuesday and opened flat.

Currency markets have been in a cautious mood and the dollar’s decline has stalled for three weeks. It settled at a two-week high of 128.18 yen on Wednesday and rose 0.2 percent to $1.0709 per euro. The Australian dollar hovered at $0.7172.

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Oil prices fell on Tuesday after the Wall Street Journal reported that oil-producing countries are considering excluding Russia from the production deal, paving the way for Middle Eastern countries to increase production.

Brent crude futures retreated from a nearly three-month high after the report and last settled at $116.18 a barrel.

The stronger dollar pushed spot gold slightly lower to $1,834 an ounce. Bitcoin clung to the gains made at the beginning of the week at $31,838.






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