Global stock markets are experiencing a sell-off while the Dollar is gaining strength. Analysts suggest that rising inflation concerns could be driving the negative investor sentiment.
The sell-off is attributed to two main factors. Firstly, the bond market is also experiencing a decline, leading to a sharp rise in bond yields worldwide. This is particularly affecting the French stock market, with 38 out of 40 stocks in the red, including banks. Secondly, there are concerns about the Federal Reserve delaying rate cuts in the future.
The recent surge in bond yields is a result of Australian inflation data, which showed a rise in annual CPI to 4% in May. This has sparked worries that deflation trends may be reversing, potentially leading to price increases in Europe and the US.
Australian inflation drivers, such as financial services and inflation costs, have contributed to the increase in price pressure. Despite goods prices falling, core inflation is on the rise once again, highlighting the persistence of price growth globally.
Australia’s strong inflation figures have had an impact on global markets, with bond yields spiking across Europe and the US. The 10-year Treasury yield, UK 10-year yields, and French yields have all increased, putting pressure on the French – German bond spread.
In the US, Federal Reserve Governor Michelle Bowman’s comments on the need for inflation to decrease before interest rates are cut have shifted market expectations. This has reduced the likelihood of a September rate cut, affecting bond prices and yields negatively.
Overall, the current market situation reflects concerns about rising inflation and potential delays in rate cuts, leading to increased volatility and downward pressure on bond prices.