European stocks rise and yields rise as markets adjust interest rate expectations

London — The European Equity Index rose slightly on Tuesday, but US and European government bond yields have been in the years as investors adjusted their expectations for rate hikes in response to hawkish comments from the US Federal Reserve. It has risen to the highest price for the first time.

Federal Reserve Chair Jerome Powell said central banks could move “more aggressively” to raise interest rates, perhaps more than 25 basis points at a time, to combat inflation.

The market has scrambled to readjust the likely rise of 50bps. On Tuesday morning, the money markets were priced in May with an 80% chance of rising 50 bps.

At 0853 GMT, the US 10-year Treasury yield was 2.3497%, the highest since 2019.

“It was easy to wonder if it was possible to hike 75bps or even go into a meeting,” Tom Porcelli, chief US economist at RBC Capital Markets, wrote in a note to the client during his speech.

“Both results look incredibly extreme, but when you hear Powell talking about inflation, he seems incredibly worried to us.”

Eurozone government bond yields have also risen, with Germany’s benchmark 10-year yield reaching a 2018 high of 0.51%.

Although Wall Street fell in response to Powell’s comments, the European stock market rose slightly and the MSCI World Equity Index, which tracks stocks in 50 countries, rose 0.2% on the day.

The STOXX 600 rose 0.5% as it reached its monthly highs in recent sessions. London’s FTSE 100 rose 0.6%.

In a note to the customer, JP Morgan’s strategist said, “Risks are leaning upwards as they are lightly positioned, weakly sentimental, and likely to mitigate geopolitical risks over time. I’m thinking. “

JP Morgan said 80% of its clients plan to increase their record-high equity exposure.

The conflict in Ukraine continued to weigh on emotions.

Oil prices continued to rise overnight following news that some European Union member states were considering imposing sanctions on Russian oil.

However, prices fell around 0800 GMT, Brent crude oil futures fell 0.9% by 0916 GMT, and West Texas Intermediate futures fell 0.7%.

The US dollar index rose 0.1% to 98.61, while the euro fell slightly to $ 1.1009.

The Japanese yen plunged by more than 120 levels against the dollar due to differences in interest rate hike expectations between the United States and Japan.

UniCredit said, “The recognition that the yen could become a safe currency after the Bank of Japan reveals that it does not want to raise current rates further helps the US dollar and the yen exceed the 120 major criteria. “. In the client note.

In cryptocurrencies, Bitcoin was up 3.6% to about $ 42,515.

Elizabeth Howcroft