A look at the day ahead from Dhara Ranasinghe.
U.S. and European bond yields are up sharply, stock market futures are deep in the red and oil is holding near multi-year highs. Yes, it's going to be one of those days.
Inflation angst continues to grip world markets with U.S. and German bond yields rising to their highest in over three months.
A 25 basis point rate hike from New Zealand's central bank, although long anticipated, is a reminder to edgy markets that central banks are now willing to take back post-pandemic stimulus as inflation picks up.
The Reserve Bank of New Zealand lifted its key rate to 0.5%, delivering its first rate hike in seven years. And it flagged further tightening ahead.
For a graphic on RBNZ hikes rates:
One of the biggest sources of unease at the moment is the relentless rise in energy prices -- U.S. crude rose to its highest level since 2014, Brent crude is near three-year highs while European gas prices surged past 100 euros per megawatt hour on Tuesday, a new record.
And while the bond selloff rages, Britain is at the heart of the storm, as investors fret that a toxic mix of high inflation and weak growth is now a key risk.
So while benchmark German and U.S. 10-year bond yields rose 3-5 basis points each in Tuesday's selloff, UK gilt yields jumped 8 bps. Deutsche Bank (DE: DBKGn ) analysts point out this incredible stat -- inflation-linked gilts now imply a 7% annual inflation print by April 2022.
Note, PepsiCo (NASDAQ: PEP ) Inc said on Tuesday it would likely raise prices again early next year, as it looks to overcome supply-chain challenges that include everything from a shortage of Gatorade bottles to a lack of truck drivers.
Who said inflation was transitory?
Elsewhere, U.S. President Joe Biden said on Tuesday that his Democrats might make an exception to a U.S. Senate rule to allow them to extend the government's borrowing authority without Republican help. That could head off an economically crippling debt default.
Key developments that should provide more direction to markets on Wednesday:
- New Japan PM Kishida off to rocky start in polling
- German industrial orders fell more than expected in August on weaker demand from abroad
- Facebook (NASDAQ: FB ) 'operating in the shadows' says whistleblower as U.S. lawmakers demand probes
- Bayer AG (DE: BAYGN ) shares up 2.5% pre-market after firm won first trial over Roundup weedkiller
- Poland, Iceland central bank meets
- German industrial orders fall more than expected in Aug
- Manufacturing PMIs
- Euro zone retail sales
- US ADP (NASDAQ: ADP ) payrolls
- Atlanta Fed’s Rafael Bostic, ECB's Centeno speaks
Add Chart to Comment
We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:
- Enrich the conversation
- Stay focused and on track. Only post material that’s relevant to the topic being discussed.
- Be respectful. Even negative opinions can be framed positively and diplomatically.
- Use standard writing style. Include punctuation and upper and lower cases.
- NOTE: Spam and/or promotional messages and links within a comment will be removed
- Avoid profanity, slander or personal attacks directed at an author or another user.
- Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
- Only English comments will be allowed.
Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.