Sign up for Reuters newsletters

A look at the day ahead in European and global markets

By Kevin Buckland, Correspondent

Data refreshes every time you open this email. For more European market news, click here. Please send any feedback to morningbid@thomsonreuters.com” style=”text-decoration: underline; color: #0274b6;” rel=”noopener”>morningbid@thomsonreuters.com.

Soaring bond yields continued to unnerve equity investors on Wednesday, with benchmark U.S. Treasuries pushing further above 4.5% in Tokyo hours and their Japanese counterparts hitting levels not seen since 2011.

Concerns that stubborn inflation will keep interest rates high for longer or even spur additional near-term hikes is at the heart of that movement, with a particular focus on the U.S. Federal Reserve.

 A woman shops in a supermarket as inflation affects consumer prices in Los Angeles, California, U.S., June 13, 2022. REUTERS/Lucy Nicholson

Unexpected improvement in U.S. consumer confidence has seen bets pared back for a Fed cut come September, helping lift Treasury yields, which in turn lifted the dollar, especially against the rate-sensitive yen.

That is feeding inflationary worries at the Bank of Japan, as the yen, at its weakest for 34 years, forces policymakers into a more hawkish posture. Market participants have reacted by bringing forward bets for additional Japanese rate hikes and a start to quantitative tightening.

The benchmark yield in Australia surged some 15 basis points after a hotter-than-expected consumer price index (CPI) added to the risk, albeit small, that the country’s next rate move is a hike instead of a cut.

The string of upward data surprises ups the ante ahead of today’s release of preliminary German CPI figures for May and consumer confidence surveys for Germany, France and Italy.

Graphics are produced by Reuters.

The upshot in Asia was stock markets under water pretty much everywhere except mainland China.

And while high-flying Nvidia may have pulled the Nasdaq out of bonds’ gravitational pull to reach record heights on Tuesday, futures point to a weaker restart.

With equity indexes in many places sitting at or close to all-time peaks, there’s plenty of room to fall.

That makes the stakes particularly high for the week’s main macro event on Friday: the PCE deflator, the Fed’s preferred inflation measure.

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

Sponsors are not involved in the creation of newsletters or other Reuters news content.

Advertise in this newsletter or on Reuters.com

Morning Bid is sent every morning. Think your friend or colleague should know about us? Forward this newsletter to them. They can also sign up here.

Want to stop receiving this newsletter? Unsubscribe here.
To manage which newsletters you’re signed up for, click here.

Reuters Terms & Conditions and Privacy Statement