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European stocks open lower after Wall Street drops overnight

European stock markets fell on Friday, following Wall Street’s overnight plunge, after data showed US inflation rose to a 40-year high.

The Stoxx 600 equity gauge in the region fell 0.7% in initial trades, while the UK’s FTSE 100 lost 0.6%.

The latest inflation report on Thursday showed that US consumer prices rose 7.5% in the year to January, prompting the US Federal Reserve to speculate a quick increase in borrowing costs after profit taking. their main deposit rate to zero as of March 2020.

The report sent yields on standard 10-year Treasury notes – inversely proportional to the price of government debt guarantees and underpinning global mortgage rates and corporate borrowing costs – above 2% for the first time since 2019.

Money markets rallied as the rate rallied further and by Friday morning had predicted the fund’s rate would climb to nearly 1.8% in December. The dollar index, which measures the US currency against six other coins, up 0.4%.

Wall Street stocks fell sharply on Thursdaywith the tech-heavy Nasdaq Composite closing 2.1% lower as the prospect of tighter monetary policy weighed on valuations of more speculative businesses.

Standard Chartered strategist Steve Englander wrote in a note to clients.

Deutsche Bank strategist Jim Reid “even increases the likelihood of the first consecutive rate hike since 1994 and before that since 1979,” added Deutsche Bank strategist Jim Reid. , refers to the usual policy of central banks to make monetary policy decisions at their scheduled meetings.

“The market is currently pricing in some risk of an emergency rally before March.”

James Bullard, the president of the St Louis Fed and a voting member of the Federal Open Market Committee, told Bloomberg on Thursday he would like to see a 100 basis point (1 percentage point) worth of rate hikes by the end of the year. July 1st.

Yields on the 10-year Treasury note fell 0.02 percentage points to 2.01% on Friday, while the German equivalent yield fell 0.03 percentage points to 0.27%, around around the highest level since late 2018.

Inflation has spiked in the US and Europe in recent months as energy costs recover from pandemic-era lows and supply chains remain disrupted by resurgent commodity demand.

Pressure on central banks to act has curbed investors’ appetite for fast-growing but appreciated tech stocks, with Nasdaq now down more than 9% this year. .

European stock markets, with a higher weighting of bank stocks benefiting from rate hikes, and energy and resource groups boosted by higher commodity prices, outperformed . London’s FTSE 100 is up 3.4% this year while the Stoxx 600 is 3.8% lower. On Friday morning, European energy, mining and telecom groups traded steady.

In Asia on Friday, mainland China’s CSI 300 share index fell 0.8%. Tokyo’s Nikkei 225 index closed 0.4% higher as exporters were boosted by a stronger US dollar.

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