Global bond sell-off eases as investors welcome inflation figures

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Global bond markets rebounded on Friday at the end of a quarter of heavy losses, helped by signs of easing inflation in the eurozone.

Yields on European sovereign debt slid after data showed that the eurozone’s harmonised index of consumer prices fell to 4.3 per cent from 5.2 per cent. Core inflation, which excludes energy and food and is closely watched by the European Central Bank, fell more than expected to 4.5 per cent, down from 5.3 per cent in August.

Italian 10-year government bond yields fell 0.17 percentage points to 4.75 per cent, having hit their highest level in a decade on Thursday. German 10-year bond yields dropped 0.12 percentage points to 2.84 per cent, having also hit a 10-year high during the previous trading session. Bond yields move inversely to prices.

The yield on benchmark 10-year US Treasuries, which this week hit its highest level since 2007, slipped 0.05 percentage points to 4.54 per cent.

US inflation figures are due out later in the day, with “core” prices expected to have increased 3.9 per cent year on year in August, down from 4.2 per cent in July.

Despite the expectations of slowing inflation, markets have been grappling with the prospect of interest rates remaining high for an extended period. Investors have also had to weigh the impact of surging oil prices, which have risen 35 per cent in the past two months on lower global output.

Brent crude futures rose 0.6 per cent in morning trade to more than $96 a barrel while the US benchmark WTI contract also rose 0.6 per cent, to $92.22.

In equity markets, Europe’s region-wide Stoxx 600 added 1 per cent and Germany’s Dax rose 0.8 per cent.

London’s FTSE 100 was up 0.8 per cent after fresh data showed the UK economy recovered from the pandemic faster than previously estimated, while France’s Cac 40 index gained 0.8 per cent after domestic inflation increased at a slower annual pace than expected in September.

Contracts tracking Wall Street’s benchmark S&P 500 and the tech-heavy Nasdaq 100 gained 0.4 per cent and 0.6 per cent respectively. An index tracking the dollar against a basket of six peers weakened 0.4 per cent.

Chinese tech stocks jumped on Friday morning after the country’s top internet regulator released a draft rule simplifying cross-border data transfers.

Hong Kong’s Hang Seng index rose 2.5 per cent, while the Hang Seng Tech index, a gauge tracking the top 30 technology companies, climbed 3.7 per cent.

Internet companies Tencent and Alibaba rose 2.9 per cent and 3.1 per cent respectively, while electric vehicle start-ups Xpeng and Nio gained 3.2 per cent and 2.4 per cent respectively. Trading was closed in mainland China for a holiday.

With additional reporting by Gloria Li in Hong Kong

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