Stagflation fears stalk shares, rising yields raise dollars


ছবি Photo from Reuters file: People wearing protective masks in the outbreak of coronavirus disease (Covid-1) are reflected on electronic boards that display Japanese stock prices outside Tokyo, Japan brokers, October 20, 2021.


By Tom Arnold

LONDON (Reuters) – Stagflation jolts halted global share growth on Monday as major central banks tightened monetary policy tightening bond yields and pushed the dollar to a nearly three-year high against the Japanese yen.

Prices have extended their bull run that was last observed towards the end of 2018, offsetting inflation concerns with gains across the energy complex.

OANDA analyst Jeffrey Haley said, “High energy prices, shortages will inevitably increase their value through the global price chain and create potential deficits in industry and consumer goods.”

“All of this makes continued inflation from central bankers around the world make the ‘temporary’ ring even more hollow.”

Rising commodity prices in Europe supported oil and mining stocks, but stagnation, an environment of economic stagnation and fears of rising prices continued.

Euro STOXX 50 traded 0.3% lower.

Nasdaq futures were down 0.6% and 0.3%, respectively.

The MSCI World Equity Index, which tracks shares in 50 countries, was up 0.1%.

The feeling of China was partly aided by the supportive arrangements designed for the troubled property markets of some cities.

China’s blue-chip CSI300 index rose 0.1%, while MSCI added 0.6% to the Asia-Pacific stock index outside Japan.

The fall of the yen provided a welcome stimulus that increased 1.6% against the initial losses.

The U.S. earnings season has begun this week and will likely bring with it stories of supply disruptions and rising costs. JPMorgan (NYSE 🙂 reported Wednesday, then BofA, Morgan Stanley (NYSE 🙂 and Citigroup (NYSE 🙂 Thursday, and Friday Goldman.

US inflation, retail sales

There will also be attention to US inflation and retail sales data and the minutes of the last meeting of the Federal Reserve which will ensure that the November tapping was discussed.

“Next week will be around the US CPI release on Wednesday, but it could be a touch back, as energy has increased in recent times and used car prices are back in March towards the end of the summer, which is likely to be caught in this week’s release.” Deutsche Bank (DE 🙂 ‘s Jim Reed wrote in a note to clients.

While the U.S. pay-roll number headline was disappointing on Friday, it was partly due to the reopening of problems in state and local education when private sector employment was strong.

Indeed, the unemployment rate fell to 4.8% due to a lack of labor, investors were more concerned about the risk of wage inflation and sharply increased Treasury yields.

Yields on the 10-year note traded up 1.62%, the biggest increase since March, jumping 15 basis points last week.

The U.S. holiday and the currency market are closed for the Monday holiday.

Germany’s 10-year bond yield is at its highest level since May, rising more than 2 basis points to -0.118%.

The British gilt yield has risen sharply, the highest in 10 years since May 2019, following the weekly remarks by Bank of England policymaker Michael Saunders that inflationary pressures should increase as households “significantly” prepare for previous rates.

By the end of 2022, the money market has gone full price with a 10 basis-point rate increase from the European Central Bank.

Analysts at BofA have warned that amid limited supply and strong reopening demand, global inflation will be further exacerbated by the pulse of fuel consumption, with oil potentially exceeding $ 100 a barrel.

The winners in such situations will be real assets, real estate, commodities, volatility, cash and emerging markets, while bonds, credit and stocks will be negatively affected.

Bridge, Australia and Canada are the products recommended by BofA as a hedge and significant asset for 20-25% of the major equity indexes; 20% in emerging markets; 10% in the euro zone, and only 5% in the United States, China and Japan.

The dollar depreciated as the US dollar outperformed Germany and Japan, pushing the yen to its highest at the end of 2018 at 112.90.

The euro hit a low of 15 1.1527 from July last year, reaching 15 1.1570. Held at 94.174, the most recent high of 94.504.

The strong dollar has weighed on the dollar and high yield gold, which gives no definite return, and has moved away to $ 1,754 per ounce.

Oil prices rose %% last week, the highest in almost seven years. [O/R]

Brent jumped 2.5% to .4 84.46, while US crude rose 3.3% to .9 81.98 a barrel.

Graphic: Oil vs. US Stock Market in 2021

Graphic: World FX Rate

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