Global stocks slip and bonds hit as bets on Fed action rise

Global stocks slip and bonds hit as bets on Fed action rise

Global share prices eased and US Treasury yields hit multi-year highs on Wednesday as investors bet that the US Federal Reserve will couple shrinking of its balance sheet next month with a big interest rate hike to quell decades-high inflation. Investors also waited for details of the latest package of coordinated sanctions on Russia from the United States and its allies over civilian killings in Ukraine. The dollar hit its highest in almost two years, while expectations of new sanctions raised oil supply concerns to send crude prices higher. The STOXX stock index of 600 European companies fell 0.8 per cent, while the MSCI All-Country stock index shed 0.4 per cent. Fed Governor Lael Brainard said overnight that she expected a combination of interest rate rises and a rapid balance sheet runoff to take US monetary policy to a “more neutral position” later this year. “What we are getting here is a knee-jerk reaction to the prospect of not only a 50 basis points increase, but we could also start to see the outline of balance sheet reduction a lot earlier than markets have been currently pricing in,” said Michael Hewson, chief markets analyst at CMC Markets. The focus of