Stocks rise despite global energy shortage

US futures is signaling a stock market rebound following a sharp fall on Tuesday— its biggest since May 2021. But the global energy shortage continues to fuel inflation fears amongst investors.

As investors continue to fear a looming inflation and the policies of the central bank amid the severe shortage of energy all over the world, the U.S. debt ceiling also remains a major cause for concern.

S&P 500 futures are now up 0.65% following the the 2.04% index tumble just yesterday. Nasdaq 100 futures has risen by 0.84%, while Dow Jones futures is also 0.52% up.

Just as it happened with the U.S stocks, Asian stocks also fell across board, during the night. Tokyo’s Nikkei 225 fell by 2.12%, while China’s CSI 300 index dropped 1.02%.

European stocks, which also fell on Tuesday, have also now rebounded barely a day later. The London’s FTSE 100 rose 0.77%, and the Stoxx 600 is up 0.78%

Although, a lot of factors could have been responsible for sending global equities crashing on Tuesday, but the one that stuck out is the sharp increase in global bond yields. This increase, surely makes the returns on stocks a lot less enticing.

Comparing the global bond yields even as stocks rises

On Tuesday, the yield on the 10-year US Treasury note rose to 1.534%— its highest rise in 3 months, right after the Federal Reserve announced that it may start to reduce its support for the economy as early as November.

In the UK, the yield on the 10-year gilt rose past 1% for the first time since March last year, and following after the Bank of England also announced its plans to tighten monetary policy quite soon. Of course, yields move in inverse proportion to prices.

Global energy crunch continues

In addition to the pressure as a result of stocks falling on Tuesday, global energy costs also experienced a sharp rise. For the first time in 3 years, global benchmark oil price topped $80 a barrel, pushing up bond yields.  Traders and investors can already feel the inflation coming strong enough, to force central banks to action.

As at Wednesday, both oil prices and bond yields have slipped a little after Tuesday’s big rises. The yield on the 10-year US Treasury note fell 2.5 points to 1.512%.

Brent crude oil, which is the global benchmark, fell 0.74% to $77.77, while the U.S benchmark, WTI crude also slipped 0.86% to $74.66.

At the moment of writing this report however, natural gas prices have remained at record highs in Europe and even higher  in both China and the US. It is as a result of this hike in energy prices, that investors are now fearful about inflation.

Source: Business Insider