World stocks nudge up, bonds rally in bright end to grim quarter
By Naomi Rovnick and Dhara Ranasinghe
LONDON (Reuters) — World shares nudged higher on Friday, while better-than-expected euro zone inflation data boosted government bonds, with both asset classes still set for their worst quarter in a year in response to central banks' pledge to keep interest rates high.
MSCI's broad index of global stocks gained 0.4% on Friday, while European and U.S. government bonds rallied strongly to reflect markets resetting interest rate bets.
In a surprise bout of good news for hawkish central banks, data showed headline inflation in the euro area rose 4.3% in September year-on-year, below economists' forecasts for a 4.5% rise and its lowest in two years.
The yield on Germany's two-year bond, which tracks rate expectations and falls as the price of the debt rises, dropped 7 basis points (bps) to 3.23%.
Germany's 10-year government bond yield fell 12 bps to 2.848%, with the euro area debt benchmark heading for its best trading day in more than a month.
And with strong sentiment flowing across the Atlantic, the yield on the 10-year U.S. Treasury fell 6 bps to 4.6%.
That provided a bright end to a torrid quarter for government bonds. Germany's 10-year yield has shot up 45 bps this quarter, reflecting the worst three-month sell-off since the third quarter of 2022.
The yield on the 10-year U.S. Treasury is up 72 bps since July, also its worst quarterly performance since the same quarter last year.
The debt market relief came as some analysts argued bonds had become too beaten up in recent months.
The European Central Bank and the U.S. Federal Reserve have signaled that the best investors could hope for, following their sharpest monetary tightening cycle in decades, was a long period of
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