Higher-for-longer rate bets lift dollar, sap stocks
By Marc Jones
LONDON (Reuters) — World stocks slid for a third straight day on Thursday with Europe facing its worst run in five years, as new signs of sustained inflationary pressures and rising energy prices boosted the case for higher-for-longer interest rates.
The U.S. dollar was loitering close to its highest point since March against major peers, and touched a fresh 10-month top versus the Japanese yen, the traditional global funding currency where interest rates remain ultra-low.
Blistering-hot Institute for Supply Management (ISM) figures on Wednesday, at their strongest level since February, bolstered bets that the Federal Reserve could lift interest rates again before the end of the year.
Long-term Treasury yields hovered at a two-week high of nearly 4.28% and close to last month's post-financial crisis highs.
In contrast, German industrial numbers on Thursday were weak, showing the growing divide in fortunes. German bund yields shuffled down to 2.63%, although they too were near two-week highs following talk from a number of ECB policymakers in recent days about raising rates again next week.
«The U.S. ISM services number was just amazing really. I felt like ringing them up and asking them to check it,» Robert Alster, chief investment officer at Close Brothers Asset Management, said.
«The strength of the U.S. economy is just incredible — so this whole elongated theory (about rates staying higher for longer) has been given legs,» he added, saying that the German data had pointed to a «serious slowdown» there.
Brent crude also stayed above $90 a barrel amid tightening supply, adding to inflation worries.
MSCI's broadest index of world stocks was down for a third day although Europe's STOXX 600 index was down
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