European stocks and government bonds recouped some of their losses on Thursday after details of the March Federal Reserve meeting revealed the US central bankers’ willingness to aggressively raise interest rates in a bid to curb inflation.
The regional stock index Stoxx 600 then rose by 0.3 percent End of Wednesday down 1.5 percent amid concerns about the European Central Bank after the German government’s rapid monetary tightening combined with fears that sanctions on Russia could fuel further price increases. Germany’s Dax rose 0.3 percent while London’s FTSE 100 lost 0.3 percent.
The yield on the 10-year government bond, which falls as the instrument’s price rises, then fell 0.03 percentage points to 2.58 percent heavy sell-offs US and Eurozone sovereign debt in the previous two sessions.
The 10-year yield, which is a global benchmark for bank loan rates and stock valuations, is trading at levels not seen since spring 2019. Some analysts said higher borrowing costs and rising inflation are increasing the risk of an economic downturn. which means the Fed’s push tightening of monetary policy may have to be short-lived.
“The Fed is now summoning and likely to make big moves to tighten monetary policy at the May meeting. However, as the economic outlook worsens, it may already be too late,” said Philip Marey, Rabobank’s senior US strategist.
It’s possible, he added, that “this hiking cycle will end prematurely and could very well be followed by another recession.”
The yield on two-year Treasury bills, which closely tracks interest rate expectations, fell 0.06 percentage point to 2.44 percent, remaining near its highest level in more than three years.
While the US Federal Reserve behaved After cutting its benchmark interest rate by 0.25 percentage point last month, the minutes of its March meeting showed that several participants would have preferred a larger hike of 0.5 percentage point were it not for the uncertainty created by Russia’s invasion of caused by Ukraine.
“Many” of the Fed decision makers said at least an increase of 0.5 percentage points would be appropriate this year, the minutes said. The document also showed that the Fed was willing to reduce its balance sheet, which had swollen to $9 trillion as a result of aggressive Treasury purchases to lower borrowing costs during the pandemic, by up to $95 billion a month.
Elsewhere, the 10-year German Bund yield fell 0.01 percentage point to 0.64 percent. Yields on Italian, Greek and Spanish government bonds also fell.
Brent crude, the international oil benchmark, rose 0.4 percent to $101.45 a barrel. Oil prices fell on Wednesday, according to the International Energy Agency called its 31 members would tap emergency supplies to counter price pressures, while French President Emmanuel Macron required Europe wants to ban Russian crude oil imports.
The US S&P 500 closed 1 percent lower on Thursday, while the tech-heavy Nasdaq Composite fell more than 2 percent.
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https://www.ft.com/content/f36deac7-4f93-4f5c-b07c-26c9859088e0 European stocks rise after sharp losses in the previous session