As global stock markets edged lower in November 2020, sterling has recovered somewhat

LONDON/HONG KONG, Sept 27 (Reuters) – Global stock markets rose to a 21-month low on Tuesday and sterling suffered a record fall against the dollar a day earlier on UK plans for tax cuts.

US S&P futures rose 0.94% after Wall Street plunged deeper into a bear market on Monday, with the 10-year Treasury yield falling from the previous session’s 12-year and the dollar falling from the 20-year in a basket of currencies.

However, markets remain jittery after US Federal Reserve officials on Monday said their priority was to contain domestic inflation. read more

“US rate expectations have risen significantly,” said Andrew Hardy, investment manager at Momentum Global Investment Management, although he added that “there is already a large amount of inflation in the markets.”

Markets are pricing in a 76% probability of another 75 basis point move at the next Federal Reserve meeting in November.

Central bank speakers on Tuesday included Fed President Jerome Powell and ECB President Christine Lagarde.

MSCI World Equity Index (.MIWD00000PUS) It rose 0.29% on Monday after hitting its lowest level since November 2020. European shares rose more than 1%, as did Britain’s FTSE (.FTSE) Up 0.6%.

Sterling fell to a record low of $1.0327 on Monday as government tax cut plans announced on Friday came on top of huge energy subsidies.

The British currency recovered 4.6% from Tuesday’s low to $1.0801.

After the pound’s collapse, the Bank of England said it would not hesitate to change interest rates and was monitoring markets “very closely”. read more

Bank of England Chief Economist Huw Bill will address a panel at 1100 GMT.

A lack of confidence in the government’s strategy and its funding hammered gilts on Friday and again on Monday.

The yield on five-year gilts rose as much as 100 basis points in two trading days, though it fell to Tuesday’s high.

“(It’s) definitely something that’s coming out…we’re just at a very early stage of seeing how the market digests that kind of information,” said Yuting Shao, macro strategist at State Street Global Markets.

“Of course the tax cut program itself is really intended to stimulate growth and ease household burdens, but it raises the question of what the implications are in terms of monetary policy.”

Spillover from Britain kept other assets on edge.

A bond selloff in Japan pushed Bank of Japan yields to the ceiling and prompted more unplanned purchases from the central bank.

Germany’s 10-year bond yield briefly hit a fresh nearly 11-year high of 2.142%.

Ten-year U.S. Treasury yields were down 3.2 bps after hitting a high of 3.933% on Monday.

MSCI’s broadest index of Asia excludes Japan (.MIAPJ0000PUS) It hit a new two-year low before jumping 0.5%. Nikkei of Japan (.N225) Up 0.5%.

The dollar index fell 0.13% to 113.72, its strongest since May 2002, after touching 114.58 on Monday.

The European single currency rose 0.24% to $0.9629 on the day after hitting a 20-year low a day earlier.

Oil rose more than 1% after falling to a nine-month low a day earlier, amid signs that producer alliance OPEC+ may implement production cuts to avoid further falls in prices.

U.S. crude rose 1.4% to $77.70 a barrel. Brent crude was up 1.27% at $85.20 a barrel.

Gold, which hit a 2-1/2-year low on Monday, rose 0.8% to $1,634 an ounce.

Bitcoin broke above $20,000 for the first time in a week as cryptocurrencies jumped, along with other risk-sensitive assets. read more

Xie Yu report; Editing by Edmond Claman, Muralikumar Anantharaman, and Raisa Kasolowski

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