- European stocks shrugged off a renewed rise in bond yields on Tuesday, as evidence grew that stubbornly high inflation has yet to succumb to aggressive monetary policy.
- After paring a loss, the Stoxx 600 traded little changed, with February forecast to gain 2.1%.
- The yield on two-year German government bonds, which are among the most sensitive to policy changes, jumped to 3.17%, the highest since 2008, following reports of accelerating inflation in France and Spain.
- Investors are becoming more pessimistic, according to positioning data, as they accumulate short bets in both US and European equity futures. In Europe, bets on the euro Stoxx 50 falling tripled, albeit from a low base.
- Both US and European stocks ended last week with their biggest five-day drop of the year, on fears that central banks will step up their battle against inflation, which appears impervious to aggressive policy.
- The ECB is expected to raise rates until February 2024, with a 4% ECB terminal rate fully priced.
- Oil was set to fall for the fourth month in a row as concerns about tighter monetary policy and rising stockpiles in the United States outweighed optimism about rising demand in China. Gold is on track to have its worst month since the middle of 2021.
