Global equities mixed amid U.S. inflation worries; Treasuries rise

WASHINGTON (Reuters) -World stock indexes retreated from record highs on Tuesday as a solid rise in producer prices last month deepened concerns over inflation, while U.S. Treasury yields edged lower.

FILE PHOTO: A street sign for Wall Street is seen in the financial district in New York, U.S., November 8, 2021. REUTERS/Brendan McDermid

After the U.S. Labor Department said producer prices increased solidly in October, investors heavily bought government-backed debt obligations. The data indicated that high inflation, which has become a bigger concern for investors than the COVID-19 crisis, could persist as supplies remain tight.

The pan-European STOXX 600 index lost 0.11% while MSCI’s gauge of stocks across the globe shed 0.28% after reaching less than a point away from uncharted highs earlier in the session.

Global equities had hovered near all-time highs as investors weighed strong earnings, easing travel curbs and U.S. infrastructure spending against inflation risk that may lead to tighter monetary policy.

“Markets have risen fast and strong, there’s been a vigorous rebound but the catalyst provided by the third-quarter earnings season is coming to an end,” said Emmanuel Cau, head of European equity strategy at Barclays.

Cau noted that market positioning was far from extreme and that many investors remained prudent despite no imminent threat to the rally.

He argued it was “healthy” to see markets pause to digest upbeat corporate earnings and news that major central bankers were in no rush to raise interest rates.

Fears of a sudden tightening of monetary policy sparked a fixed-income sell-off in October but government bond yields have since turned lower.

“Central bank pushback against early tightening supports a pro-risk stance,” JP Morgan analysts told clients in a note.

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The Dow Jones Industrial Average fell 0.56%, and the S&P 500 lost 0.43%. The Nasdaq Composite dropped 0.46%.

The benchmark 10-year Treasury yield was down 5.1 basis points at 1.4462% at midday. The yield on 10-year Treasury Inflation Protected Securities was -1.159%, the lowest since early August, indicating growing inflation concerns.

Germany’s 10-year inflation-linked bond, which reflects the so-called real yields, fell to a record low of -2.09%.

Yields for both the U.S. and the euro zone benchmark are trading close to one-month lows.

Market analysts awaited Wednesday’s U.S. consumer prices data. A stronger-than-expected reading would rekindle talk of the Federal Reserve raising interest rates sooner than expected.

The dollar wavered after Tuesday’s U.S. producer prices data, but last rose 0.081%, with the euro down 0.11% at $1.1573.

The Japanese yen strengthened 0.23% to 112.98 per dollar, while sterling weakened 0.24% to $1.3529.

Among crypto currencies, Bitcoin fell 1.23%.

Oil prices rose slightly as the passage of the U.S. infrastructure bill and China’s export growth supported the outlook for energy demand.

Saudi Arabia’s state-owned producer Aramco also raised the official selling price for its crude.

U.S. crude increased 0.98% to $82.73 per barrel as Brent was up 0.43% at $83.79.

Gold prices retreated from highs since early September as the dollar firmed slightly ahead of U.S. inflation data due out later in the week.

Spot gold fell 0.1% to $1,822.30 per ounce by 10:17 a.m. ET (1517 GMT), after reaching its highest since Sept. 3 at $1,830.35.

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