Global bond markets and stocks experienced a rebound on Friday after a quarter of heavy losses. This was supported by signs of easing inflation in the US and eurozone. Yields on European sovereign debt decreased following the release of data showing a decline in the eurozone’s harmonized index of consumer prices. In Italy, government bond yields reached their highest level in a decade on Thursday but fell by 0.17 percentage points to 4.75 percent. German 10-year bond yields also dropped by 0.14 percentage points to 2.82 percent after hitting a 10-year high previously. In the US, core PCE inflation decreased as expected, while headline inflation increased slightly.
In equity markets, Wall Street’s benchmark S&P 500 and the tech-heavy Nasdaq Composite saw modest gains. Europe’s Stoxx 600, Germany’s Dax, and London’s FTSE 100 all experienced increases as well. The UK economy showed a faster recovery from the pandemic than previously estimated, contributing to the positive sentiment. Chinese tech stocks also surged after the country’s top internet regulator released a draft rule simplifying cross-border data transfers. The Hang Seng index in Hong Kong rose by 2.5 percent, with the Hang Seng Tech index, which tracks the top 30 technology companies, increasing by 3.8 percent.
Despite the expectation of slowing inflation, markets still grapple with the possibility of interest rates remaining high for an extended period. The impact of surging oil prices, which have risen by 35 percent in the past two months, is also being considered. Brent crude futures remained steady, while the US benchmark WTI contract dropped slightly.