Global stock markets on Tuesday, February 13, staged a strong rebound since a brutal sell-off that began late January on worries about rising inflationary pressure.
Stock markets on Tuesday pulled away from two-month lows from the previous week, when shares were roiled by some of the sharpest falls on record, shaking confidence across markets.
Higher inflation could prompt the Federal Reserve to tighten its policy faster thiiian expected. Alternatively, if the Fed doesn’t act fast enough and falls behind the curve on policy, it could end up pushing up long-term bond yields. In either scenario, traders worry that U.S. growth could be hampered.
There were some indications such fears are beginning to subside, with Wall Street shares rebounding strongly on Monday and MSCI’s all-country world index of stock performance rising 1.2 perceniStill, market players are on guard for more volatility.
The 10-year U.S. bond yield hit a four-year high of 2.902 percent while the 30-year yield rose to 11-month high of 3.199 percent.
“Rise in long-term bond yields lifts mortgage lending costs and is likely to cool the economy,” said Minori Uchida, chief FX analyst at the Bank of Tokyo-Mitsubishi UFJ.
Uchida said the dollar is likely to remain under pressure against the yen.
The South African rand slipped 0.3 percent to trade at 11.96 rand to the dollar, surrendering early gains made after reports the ruling African National Congress party executive committee had decided to “recall” or remove President Jacob Zuma as head of state.
