Stocks extended a global selloff Wednesday in the wake of a surge in Treasury yields, as the prospect of Federal Reserve monetary tightening to fight high inflation weighs on markets. The yield on the 10-year Treasury note rose 9.5 basis points Tuesday to 1.866%, the highest in about two years based on trading levels at 3 p.m. Eastern Time, according to Dow Jones Market Data. The yield on the 2-year Treasury note which is more sensitive to Fed policy expectations, shot up 7.3 basis points to 1.038% to reach the highest level since late February 2020. The Treasuries retreat is stirring expectations that the U.S. 10-year yield will top 2%. Speculation is growing that the Fed may deliver more than a quarter-percentage point March interest-rate hike. For the stock indexes in the U.S, the Dow Jones Industrial Average dropped 543.34pts to close at 35,368.47, the S&P 500 declined 85.74pts to end at 4,577.11 while the Nasdaq Composite sank 386.86 points to finish at 14,506.90. Focus today and Thursday will be on U.S housing data and jobless claims respectively.
Britain’s inflation rate surged unexpectedly to the highest since 1992, sharpening a squeeze on households and adding to pressure on the government and Bank of England to respond. Consumer prices surged 5.4% from a year ago in December, driven by a broad increase in the cost of food, drink, restaurant meals and furniture, the Office for National Statistics said Wednesday. Economists had expected a reading of 5.2%. Bank of England policy makers are concerned that inflation may top 6% in the first half of this year, triple their target. That’s fanned speculation of a rapid cycle of tightening for monetary policy after the BOE last month delivered the first increase since the start of the pandemic.
The economic research office of Banco Fomento Angola (BFA) believes that Angola’s economy may grow by up to 4% this year but warned of the dangers of an expansionist policy in an election year. “For the total economy, the Finance Ministry forecasts growth of 2.4%, while we expect an increase in economic activity of between 3.5 and 4.0%,” according to an analysis of Angola’s state budget for this year. In the report sent to clients to which Lusa had access, the BFA analysts said that “the budget is expansionist to try to stimulate the economy,” but warned that “the most worrying sign concerning expenditure comes from the significant increase in spending on general expenditure. They add, “spending that, to a large extent, does not seem to be allocated to specific programs; in that sense, it becomes more difficult to monitor them, and the state’s own planning,” in a year that will be marked by elections, scheduled for the end of August.
The latest IEA report shows that oil demand has so far defied the expected problems to have come from the omicron spread. IEA sees tighter oil market as demand withstands omicron wave and with that, they see demand estimates slightly raised for both 2021, 2022 as demand defied expectations with 4Q gain despite virus. The OPEC+ alliance is continuing with its plan to revive oil output halted during the pandemic, in monthly increments, with the next tranche coming in February. Brent crude rose 0.4% to $87.86/bbl while West Texas Intermediate crude for February delivery CLG22, 0.67% rose 1.9% Tuesday to settle at $85.43 a barrel, after gaining 6.2% last week.