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U.S. yields jump to 3-year highs, stocks slide on CPI outlook

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© Reuters. FILE PHOTO: A man wearing a protective mask, amid the coronavirus disease (COVID-19) outbreak, walks past an electronic board displaying graphs (top) of Nikkei index outside a brokerage in Tokyo, Japan, March 10, 2022. REUTERS/Kim Kyung-Hoon
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By Herbert Lash

NEW YORK (Reuters) – A gauge of global stocks skidded on Monday, pulled lower by technology shares, as U.S. Treasury yields marched higher ahead of inflation data that could prompt the Federal Reserve to tighten policy enough to slow a rebounding economy.

The euro rose against the dollar and was set to snap a seven-day losing streak as the single currency rallied after French leader Emmanuel Macron beat far-right challenger Marine Le Pen in France’s first round of presidential voting.

But the dollar held below two-year highs against a basket of currencies and strengthened against the Japanese yen, up almost 1%, and versus the commodity currencies – the Canadian, Australian and New Zealand dollars.

The yield on benchmark 10-year Treasuries rose 5 basis points to 2.765%.

Economists polled by Reuters forecast the non-seasonally adjusted U.S. consumer price index on Tuesday would post an 8.4% year-over-year increase in March.

Yields have surged in anticipation of Fed rate hikes, which Dec Mullarkey, managing director of investment strategy and asset allocation at SLC Management, expects to be by 50 basis points at each of the Fed’s next three policy meetings.

“The Fed is going to move aggressively. The market has appropriately priced it in,” said Mullarkey. “They don’t want to be an issue in the midterms,” he said, referring to elections in November that will determine whether Republicans can wrest control from President Joe Biden’s Democrats in the U.S. Senate and House of Representatives. “They also do not want to be in the position where they don’t have inflation under control.”

Technology shares in Europe and on Wall Street led the major stock indices lower.

MSCI’s gauge of stocks across the globe shed 1.01%, while the pan-European STOXX 600 index lost 0.61%.

On Wall Street, the Dow Jones Industrial Average fell 0.43%, the S&P 500 lost 1.09% and the tech-heavy Nasdaq Composite dropped 1.79%.

Volatility gripped French blue-chips on the outlook for a tight Macron-Le Pen race in the final round of voting. French assets have underperformed as markets are uneasy about Le Pen’s agenda of protectionism, tax cuts and nationalization.

The CAC 40 has shed 1.7% so far in April, while the STOXX 600 is up about 0.4%.

“I don’t expect the French equity markets to rally until we have the second round, we expect a lot of volatility and range-bound trading,” said Mathieu Racheter, head of equity strategy at Julius Baer. “It is really a close call in the runoff.”

Oil prices dropped by $4 a barrel, with Brent crude tumbling below $100 on plans to release record volumes of crude from strategic reserves and on continuing coronavirus lockdowns in China.

U.S. crude fell 4.3% to $94.03 per barrel and Brent was at $98.42, down 4.24% on the day.

{{2126|The dodollar index rose 0.092%, with the euro up 0.15% to $1.0892. The yen weakened 0.95% versus the greenback at 125.51 per dollar.

Spot gold gained 0.2% to $1,950.04 an ounce after hitting its highest since March 14 at $1968.91.

Bitcoin fell 3.17% to $40,800.00.

China’s inflation figures surprised on the high side on Monday although were still relatively modest at 1.5% year-on-year in March.

But that still saw yields on China’s ten-year government bonds fall below U.S. Treasury yields for the first time in 12 years on Monday.

Title: Us-China, https://fingfx.thomsonreuters.com/gfx/mkt/myvmnqlakpr/us-china.JPG

U.S. yields jump to three-year highs, stocks slide on rate outlook

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