(Bloomberg) — European stocks stuttered and euro zone bond yields rose Tuesday as inflation reports increased bets by the region’s central bank to combat price pressures.
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The Stoxx 600 pared an early loss to trade little changed after posting a 1.7% gain in February. US contracts were range bound after a solid day of gains for the S&P 500 and the tech-heavy Nasdaq 100 on Monday.
The yield on two-year German government bonds jumped as much as 9 basis points to 3.17%, the highest since 2008, on reports showing accelerating inflation in France and Spain. Treasury yields advanced, with the benchmark 10-year index rising two basis points but still below a key 4% threshold.
The latest set of data is likely to harden central banks’ resolve to keep raising rates to calm still-high inflation and resilient economies. French inflation accelerated to a record in February, while Spanish inflation unexpectedly accelerated in February due to rising electricity and food costs, increasing pressure on the European Central Bank for further increases in Interest rates.
“It’s too early to expect signs of disinflation,” said Agnes Belaisch, chief Europe strategist at the Barings Investment Institute. “This is why the ECB insists on the continued need to adjust until the data signals become clearer.”
Read more: Markets see ECB rates at 4% after inflation surprises in France and Spain
Both US and European stocks ended last week with their biggest five-day slide this year on growing concern that central banks are losing control of inflation and will have to keep borrowing costs high for longer. .
Investor sentiment toward stocks is turning more bearish as they build short bets on US and European stock futures, according to strategists at Citigroup Inc. In a “notably lower” swing last week, investors Traders added nearly $3 billion of new shorts to S&P 500 futures positioning and netted $5.1 billion of exchange-traded funds, the team led by Chris Montagu said. In Europe, bets on a drop in the Euro Stoxx 50 tripled, albeit from a low base, they said.
US data on Monday further outlined the challenge facing the central bank. Pending home sales rose in January to the most since June 2020. Durable goods orders fell, but after accounting for a drop in transportation equipment, they rose more than expected. Orders placed with factories for commercial equipment also increased.
Traders are now pricing US rates at a high of 5.4% this year, up from 5% just a month ago. Federal Reserve Governor Philip Jefferson stood firmly by the central bank’s 2% inflation target on Monday. A series of hawkish comments from the Fed this month has trimmed January gains across all markets.
Read more: Traders see the US economy as a balloon run by multiple forces
Elsewhere, oil was headed for its fourth straight monthly decline as concerns about tightening monetary policy and rising US reserves overshadowed optimism about rising demand in China. Gold was heading for its worst month since mid-2021.
Key events this week:
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US Wholesale Inventories, Conf. Consumer Confidence Council, Tuesday
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China PMI Manufacturing, Non-Manufacturing PMI, Caixin Manufacturing PMI, Wednesday
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Eurozone S&P Global Eurozone manufacturing PMI, Wednesday
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US Construction Spending, ISM Manufacturing, Light Vehicle Sales, Wednesday
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Eurozone CPI, unemployment, Thursday
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Initial jobless claims in the US, Thursday
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Eurozone S&P Global Eurozone Services PMI, PPI, Friday
Some of the main movements in the markets:
Stocks
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The Stoxx Europe 600 fell 0.1% at 10:47 a.m. London time
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S&P 500 futures were little changed
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Nasdaq 100 futures were little changed
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Dow Jones Industrial Average futures rose 0.1%
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The MSCI Asia Pacific Index fell 0.3%
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The MSCI Emerging Markets Index fell 0.5%
coins
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The Bloomberg Dollar Spot Index was little changed
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The euro was little changed at $1.0612
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The Japanese yen fell 0.4% to 136.67 per dollar
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The offshore yuan was little changed at 6.9579 to the dollar.
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The British pound rose 0.2% to $1.2093
CRYPTOCURRENCIES
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Bitcoin fell 0.2% to $23,349.13
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Ether fell 0.1% to $1,625.58
Captivity
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The 10-year Treasury yield rose two basis points to 3.93%.
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Germany’s 10-year yield rose five basis points to 2.63%.
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The UK 10-year yield rose two basis points to 3.83%
raw Materials
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Brent crude rose 1% to $83.28 a barrel
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Spot gold fell 0.4% to $1,809.09 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With the assistance of Richard Henderson, Tassia Sipahutar and Sagarika Jaisinghani.
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