U.S. inflation data hits global stocks, lifts benchmark yields By

By Chris Prentice and Tommy Wilkes

WASHINGTON/LONDON (Reuters) – Major global stock indexes fell on Thursday under pressure from crucial U.S. inflation data, falling technology shares and rising benchmark bond yields.

U.S. consumer prices rose solidly in January, leading to the biggest annual increase in inflation in 40 years, which could fuel financial market speculation for a 50 basis points interest rate hike from the Federal Reserve next month.

Wall Street retreated. The fell 1.47% to end at 35,241.59 points, while the lost 1.81% to 4,504.06. The dropped 2.1% to 14,185.64. It was the seventh time in 2022 that the Nasdaq lost more than 2% in a session.

The S&P 500 is now down about 5% in 2022, and the Nasdaq is down about 9%.

Tech stocks, which boosted U.S. shares to steep gains earlier in the week, fell 2.75%.

The MSCI world equity index fell after clinging to gains throughout much of the session.

The pan-European index closed down 0.2% as rising bond yields. The heavyweight technology sector fell more than 1%, with losses in France’s Atos a drag.

Meanwhile, the rose 0.38% and the German edged up 0.05%.

“While inflation continued to overshoot the Fed’s target in January, fundamental drivers of inflation are starting to improve,” said Bill Adams, chief economist for Comerica (NYSE:) Bank. “Remember, a big part of the surge in prices was from shortages, and the economy is making big strides to reduce shortages.”

A pullback in government bond yields in recent days and a tech-fueled rebound had supported the broader stock market rally this week. But most markets remain down sharply for the year – the tech-dominated by 8% – after a January in which investors panicked about the impact of higher rates and less cheap money on highly valued shares.

The Fed is broadly expected to begin raising rates at its March meeting.

Federal funds rate futures have increased the chances of a half percentage-point tightening by the Federal Reserve at next month’s meeting following the U.S. consumer prices report.

In Asia, Chinese blue chips lost 0.26% as investors took profits and worries about U.S. sanctions continued to weigh on sentiment.

Japan’s blue-chip closed 0.42% higher.

Long-term bond yields had been continuing Wednesday’s retreat when U.S. inflation data sent them whipsawing. The yield on the benchmark 10-year U.S. Treasury note topped 2% for the first time since August 2019. [US/]

Germany’s benchmark 10-year yield soared to its highest since December 2018. [GVD/EUR]

Bond yields have been climbing as investors anticipate the Fed will begin to tighten monetary policy as well as expectations the U.S. central bank will begin to wind down its balance sheet.

Money markets are expecting a first rate hike by the European Central Bank as soon as June after ECB President Christine Lagarde signaled…