Global stocks fall on concerns over extended high interest rates

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European and Asian stocks retreated on Tuesday, as investors readjusted their expectations that interest rates will stay higher for longer to tame global price growth.  

Europe’s region-wide Stoxx Europe 600 fell 0.5 per cent at the opening bell, extending losses into the fourth successive trading session, while France’s Cac 40 declined 0.7 per cent and Germany’s Dax gave up 0.4 per cent. 

In Asia, Hong Kong’s Hang Seng index dropped 1.5 per cent, China’s CSI 300 and Japan’s Topix both fell 0.6 per cent. 

Government bond yields across the US and Europe steadied after hitting multiyear highs in the past week, as hawkish central bank officials indicated that borrowing costs will remain at elevated levels for longer than the market expected. 

Yields on the benchmark 10-year Treasury were flat at 4.54 per cent, remaining near their post 2007-high. Yields on the 30-year note were also flat at 4.65 per cent.

Yields on the 10-year German Bunds, a regional benchmark in Europe, slipped 0.09 percentage points to 2.80 per cent on Tuesday, remaining near their highest level since 2011.

Contracts tracking Wall Street’s benchmark S&P 500 gave up 0.8 per cent while those tracking the tech-heavy Nasdaq 100 lost 0.9 per cent ahead of the New York opening bell.

The euro slipped 0.2 per cent to trade at €1.0576 against the dollar, hitting its lowest level since March of this year.

Christine Lagarde, president of the European Central Bank, reiterated in a speech on Monday that rates in the eurozone will remain high for as long as necessary to bring inflation back to the 2 per cent target, even as activity begins to slow. 

Last week the ECB lifted its benchmark deposit rate by 0.25 percentage points to an all-time high of 4 per cent, in what was likely the last round of tightening scheduled for this cycle.

Investors are turning their attention to preliminary inflation data due later this week, which is expected to show that annual consumer prices in the 20-country bloc dropped to 4.5 per cent in September, down from 5.2 per cent in August.

Adding to concerns over inflation, oil prices have risen almost 30 per cent since June, as some of the world’s leading producers of the fossil fuel announced a series of supply cuts to last until the end of this year. 

Brent crude, the international oil benchmark, declined 1 per cent to trade at $92.38 on Tuesday, and the US equivalent West Texas Intermediate fell by 1 per cent to $88.76.