By Sinéad Carew and Sophie Kiderlin
NEW YORK/LONDON, May 15 (Reuters) – Global equity indexes fell on Friday while bond yields soared as investor euphoria over tech stocks gave way to inflation fears and traders increased their bets that the Federal Reserve will hike interest rates this year.
U.S. President Donald Trump left China on Friday with no major breakthroughs on trade or tangible help from Beijing to end the Iran war.
Uncertainty over a Middle East peace deal on Friday drove oil prices again, adding to concerns about inflationary pressures after two batches of high inflation readings for April earlier this week.
The S&P 500 and the Nasdaq sold off on Friday after climbing to closing records on strength in artificial intelligence-related technology stocks in the previous two sessions.
“There’s a realization that the market had gotten way ahead of itself. It wasn’t paying enough attention to what the bond market and economic data was telling it. It was caught up in this momentum AI trade,” said Kenny Polcari, chief market strategist at Slatestone Wealth.
“The market is finally paying attention to what the bond market and the economic data is telling it. Inflation remains sticky and is potentially going to move higher in the months ahead.”
FALLS ON WALL STREET
On Wall Street at 10:52 a.m. (1452 GMT), the Dow Jones Industrial Average fell 432.76 points, or 0.86%, to 49,630.70, the S&P 500 fell 75.90 points, or 1.01%, to 7,425.34 and the Nasdaq Composite fell 387.22 points, or 1.45%, to 26,249.36.
MSCI’s gauge of stocks across the globe fell 15.80 points, or 1.42%, to 1,100.26.
The pan-European STOXX 600 index fell 1.56%.
Earlier, MSCI’s broadest index of Asia-Pacific shares outside Japan fell 2.54% and Japan’s Nikkei slid 1.99% after data showed wholesale inflation accelerated to 4.9% in April, the fastest pace in three years, keeping the Bank of Japan on track to raise rates.
In South Korea the Kospi index fell more than 6% on Friday after a run higher in recent months. It is still up 77.8% year-to-date.
GOVERNMENT BOND YIELDS SPIKE
In government bonds, longer-dated U.S. Treasury yields climbed to their highest levels in a year as elevated oil prices added to fears that ongoing energy disruptions in the Middle East could add to inflation.
Concerns about inflation had already hit demand for U.S. Treasuries. Demand was weak at auctions this week.
The yield on benchmark U.S. 10-year notes rose 11.6 basis points to 4.576%, from 4.459% late on Thursday while the 30-year bond yield rose 10.1 basis points to 5.1137%.
