Global shares traded up on Wednesday after a six-day slump amid investor optimism despite blurry inflation forecasts, while supply concerns following Russia's invasion of Ukraine helped push oil prices higher.
The Japanese yen weakened past the 126 yen per dollar mark on Wednesday for the first time since 2002, while the euro was pinned at a one-month low as investors bought the U.S. currency after hawkish comments by Federal Reserve officials.
The prospect of fast and aggressive U.S. interest rate hikes and growing market expectations that the Bank of Japan will keep rates ultra-low in the near term have fuelled the Japanese currency's declines against the dollar.
The pan-European STOXX 600 index lost 0.21% and MSCI's gauge of stocks across the globe gained 0.29%.
Data on Wednesday showed no let-up for Britain after inflation hit a 30-year high of 7%, although this came a day after a lower-than-expected U.S. print had given some traders cause to hope policy would be tightened more slowly.
"Another month, another jump in inflation figures around the world," said Oliver Blackbourn, portfolio manager at asset manager Janus Henderson.
"The increase in prices further ratchets up the pressure on the Bank of England to respond to dampen the squeeze on real incomes. However, fading growth forecasts show the danger to the economy from tightening too quickly or too far."
On Wall Street, the Dow Jones Industrial Average rose 0.22%, the S&P 500 gained 0.33% and the Nasdaq Composite added 0.93%.
Investors, poised for lackluster earning results from the largest U.S. banks, have been eyeing investment banking revenue, which has stalled after the Russian invasion of Ukraine in late February. In the first quarter, the total value of pending and completed deals fell to its lowest since the second quarter of 2020, according to Refinitiv data.
Overnight in Asia, much weaker-than-expected import data from China weighed on the outlook, but added to views that Beijing could ease policy further, helping MSCI's broadest index of Asia-Pacific shares outside Japan closed 0.73% higher.
Japan also posted weak machinery orders data, although its stocks closed higher on the U.S. inflation data that had shown consumer prices rose by the most in 16-1/2 years in March as war in Ukraine boosted the cost of gasoline to record highs, although underlying inflation pressures moderated.
OIL, GOLD FIRMER
After the prior day's fall, the yield on 10-year Treasury notes rose on Wednesday and was last down 5.3 basis points to 2.674%, compared to an over three-year peak of 2.836%, before the inflation data.
The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was down 7 basis points at 2.319%.
"The most important issue this year is how the Federal Reserve is going to respond to the rising levels of inflation," said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance in Charlotte, North Carolina.
"Short-term interest rate expectations have jumped and long-term interest rates have moved higher."
In the euro zone, meanwhile, a key gauge of long-term inflation briefly breached 2.4% on Wednesday, above the European Central Bank's 2% target ahead of its next meeting on Thursday.
In response, bond yields in the bloc climbed, with Germany's 10-year yield at 0.810%.
Oil prices rose after Russian President Vladimir Putin said that on-and-off peace talks with Ukraine had hit a dead end, fuelling supply worries, with U.S. crude up 2.13% to $102.74 per barrel.
Brent was at $107.16, up 2.41% on the day.
Gold bounced off its lows to add 0.6% to $1,977.85 an ounce.
In currency markets, the euro was last up 0.26% to $1.0854. The U.S. dollar soared to a nearly 20-year high against a sluggish yen on Wednesday, as aggressive tightening from the Federal Reserve contrasted sharply with the Bank of Japan's ultra-loose monetary policy.
The greenback rose as high as 126.32 yen, its strongest level since June 2002. However, it last traded down 0.179%.[FRX]
The New Zealand dollar was down 1.1% after the Reserve Bank of New Zealand raised interest rates by 50 basis points -- its most aggressive hike in over two decades -- but tempered its rate outlook.
The Bank of Canada meets later on Wednesday and is also expected to deliver a sharp hike.
(Additional reporting by Simon Jessop and Alun John in LondonEditing by Kim Coghill, Alexander Smith and Chizu Nomiyama)
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)