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Global stocks slump amid rising bond yields and inflation fears

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LaToya Harding
·Contributor
·3-min read
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WATCH: European stock falls

European stocks fell deep in to the red on Friday as a rise in bond yields kept inflation concerns at the forefront of some traders’ minds.

In London, the FTSE 100 (^FTSE) fell 1.63% by afternoon trade, dragged down by a fall in energy stocks, while France’s CAC (^FCHI) tumbled 0.95%.

Rising COVID-19 infections weighed on stocks in France today after the country announced new regional lockdowns for some 21 million people in 16 areas, including Paris, from midnight on Friday.

The German DAX (^GDAXI) initially surged 1.23% after the bell but quickly joined the global sell-off, retreating 1.05%.

It came as the UK government borrowed £19.1bn ($26.6bn) last month, the highest February borrowing since monthly records began in 1993.

Central government bodies spent £72.6bn on day-to-day activities, £14.2bn more than in February 2020, including £3.9bn on coronavirus job support schemes, according to figures from the Office for National Statistics (ONS).

READ MORE: UK sells £1.1bn NatWest stake as government borrowing hits £19bn

“Governments around the world are borrowing eye watering amounts to keep their respective economies afloat as the lockdowns have stifled growth and the UK is no different,” said David Madden, market analyst at CMC Markets.

Rising treasury yields in the US, now at a 14-month high, hit interest rate sensitive stocks on Thursday. Photo: Roy Rochlin/Getty Images
Rising treasury yields in the US, now at a 14-month high, hit interest rate sensitive stocks on Thursday. Photo: Roy Rochlin/Getty Images

“Earlier this month, Rishi Sunak, Britain’s Chancellor of the Exchequer, revealed various schemes to provide much needed assistance to the economy, so the national debt is on track to keep on increasing in the months ahead.”

Across the pond, the S&P 500 (^GSPC) dipped 0.32% and the tech-heavy Nasdaq (^IXIC) traded flat, up 0.07%.The Dow Jones (^DJI) edged 0.79% lower on opening.

“Rising treasury yields in the US, now at a 14-month high, hit interest rate sensitive stocks and the ongoing rotation from high growth into cyclical stocks was best reflected by the Nasdaq, which saw a decline of 3% [on Thursday],” Richard Hunter, head of markets at Interactive Investor said.

WATCH: Fed says not ready to remove extra economic help

Asian stock markets followed Wall Street’s lead into the red overnight after rising US bond yields dampened buying enthusiasm. Shanghai, Tokyo, Hong Kong and Sydney all retreated.

The Shanghai Composite Index (000001.SS) sank 1.69% and the Nikkei 225 (^N225) in Tokyo lost 1.41%. The Hang Seng (^HSI) in Hong Kong lost 1.61%.

It came as the Bank of Japan moved away from aggressive monetary stimulus in favour of a more "sustainable" policy, adding that it would allow more fluctuation in 10-year bond yields.

Spreadex analyst Connor Campbell said: "A stumble from the Dow Jones last night, a shift in policy from the Bank of Japan, frosty words between the US and China, and a third covid-19 wave in France all undermined sentiment this Friday.

"Though the Federal Reserve and Bank of England made it clear they wouldn't be turning the stimulus taps off any time soon, that hasn't stopped the Bank of Japan's decision to move to a more 'sustainable' monetary policy from upsetting the apple cart."

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