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Confirmation signs emerge after the inflation frenzy


A man visits stock market monitors in Taipei on January 22, 2008. REUTERS / Nicky Loh / File Photo

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  • US inflation for nearly 40 years, China data, easing policy easing expectations.
  • The dollar is trading below the key support level

LONDON, Jan 13 (Reuters) – Global financial markets on Thursday showed signs of stabilization, with major stock markets and bond yields holding their ground and the dollar weakening after nearly 40 years of US inflation.

US consumer price inflation has been high at 7% since 1982, but it was widely expected that Federal Reserve officials would talk about rapid interest rate hikes and a reversal of the stimulus several weeks later. read more

The index of MSCI’s 50-country global stocks did not change much from where it started the year, while Europe fell partially after two days of solid gains and the euro rose to a two-month high. / FRX

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Asian markets weakened slightly on the back of softer-than-expected Chinese credit data and a sharp fall in the real estate sector, but futures markets indicated a steady resumption for Wall Street, which closed higher on Wednesday. read more

“As we can see, the inflation story will continue for some time to come,” said Eric Thierrett, a global macro strategist at Manlife Asset Management.

“We have had the biggest acceleration in the tightening of the central bank,” he added. Theoretically, when the US Federal Reserve raised interest rates in 2015, it had waited two years for its balance sheet to shrink, while this time it could begin by the end of the year.

“The challenge here is how the world economy responds to this default.”

In borrowing markets, 10-year US Treasury yields are up 1.74% and Germany’s 10-year yields are up 2 basis points to -0.039, a modest 2 basis points closer to positive yields, in line with expectations of a rate hike this year. For the first time since May 2019.

Italy was expected to sell three- and seven-year bonds for up to ில்லியன் 7 billion, while Ireland expected a bumper sale, as countries and corporations struggled to keep up with rising rates. The emerging market with nearly 30 sales this week set a record for corporate debt.

“This is a milestone in my life,” said Omodunde Laval, head of corporate debt for emerging markets in Bearings. “Most people are in the swamp, but you can see why the four central bank hikes are now priced.”

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Dollar Doltrums

In the currency markets, the dollar continued to fall to a 2-month low against a basket of currencies. The euro was a major beneficiary of the move and extended its rise to $ 1.1479, up 0.3% on the day, while the sterling and yen extended their recent gains. / FRX

The pound has been up more than 4% since the December low and traders have so far shrugged off the political crisis surrounding Prime Minister Boris Johnson, who apologized for attending a party at the Downing Street garden during the corona virus lockout.

The Central Bank of New Zealand has also begun to raise rates, with the New Zealand dollar rising 0.4% to $ 0.6876, the strongest since late November.

The Australian dollar, which tends to perform better as broader market sentiment improves, added 0.3% to $ 0.7305.

The Canadian dollar has risen more than 3.5% in three weeks, gaining with oil prices as investors see the possible economic downturn of the Omicron variant.

“There is no need to raise the dollar because the central bank is preparing for a tight cycle,” said Joe Kapurso, strategist at the Commonwealth Bank of Australia.

“This is not a simple equation of central bank rises for the dollar increase. The dollar is a counter-currency that depreciates as the world economy recovers.”

In Asia, Chinese blue chips (.CSI 300) Mainland bank loans fell 1.3% in December after data showed lower real estate and consumer sectors sank than expected.

Wide index of MSCI of Asia-Pacific equities outside Japan (.MIAPJ0000PUS) Wednesday was equal after recording its biggest daily profit in a month. Nikkei of Japan (.N225) It lost almost 1% after rising almost 2% the day before.

Oil prices also fell in commodity markets, almost a day after a two-month low.

Worldwide Brent crude was down 0.07% at $ 84.61 a barrel, while US West Texas Intermediate crude was down $ 82.58 a barrel. Spot gold was flat at $ 1,824.54 an ounce.

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Additional Report by Tommy Wilkes in London and Andrew Calbright in Shanghai Editing by Thomas Janowski

Our standards: Thomson Reuters Trust Principles.