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Stocks fall as fear of rising interest rates dampens investor enthusiasm, while yields climb

Image: Reuters Berita 24 English - Bond yields rose after euro-zone GDP beat expectations, adding to bets of a more hawkish European Central...

Image: Reuters

Berita 24 English - Bond yields rose after euro-zone GDP beat expectations, adding to bets of a more hawkish European Central Bank. U.S. and European stocks fell on Wednesday as the prospect of rate hikes soured sentiment, while bond yields rose after euro-zone GDP beat expectations, adding to bets of a more hawkish European Central Bank.

Investors were jittery as they awaited an ECB meeting on Thursday and consumer price data from the United States on Friday, both of which will emphasize the conundrum they face. As central banks tighten policy to combat inflation, the economy may slow.

The White House predicted that Friday's headline inflation number will be "elevated." According to a Reuters poll, economists predict annual inflation to be 8.3 percent.

A spike in crude oil to 13-week highs fueled inflation fears, as Exxon Mobil shares closed at a fresh high for the first time since 2014.

Investors are concerned about the economy's prospects and how they will affect results. Intel Corp could pre-announce weaker-than-expected earnings for the second quarter, according to Citi Research analysts. Intel's stock dropped 5.3 percent.

Target shook the stock market on Tuesday by lowering its profit margin outlook after posting a significantly greater decline in quarterly profit in May than expected. According to Philip Orlando, chief equity market strategist at Federated Hermes, other corporations will follow and question second-quarter numbers.

"The market is rolling over here, and over the next couple of months, it will at a least retest the 3,800 level that we saw in early May, and it may go a little bit below that," he said. The latest rally, he said, was a dead-cat bounce.

When the S&P 500 fell more than 20% from its record closing height on Jan. 3 to an intraday low of 3,810.32 on May 20, it came close to confirming a bear market, but the benchmark ended higher.

Concerns about growth weighed on banking stocks, causing the STOXX 600 index to fall 0.57 percent, while MSCI's global stock index declined 0.56 percent.

The Dow Jones Industrial Average sank 0.81 percent, the S&P 500 dropped 1.08 percent, and the Nasdaq Composite dropped 0.73 percent on Wall Street.

Despite the crisis in Ukraine, data revealed that the euro zone economy grew substantially quicker in the first quarter of this year than in the previous three months, according to the European Union statistics agency, which revised earlier estimates sharply higher.

By September, money markets had priced in 75 basis points of rate hikes, as investors increased their expectations on ECB rate hikes.

After the euro area GDP figures beat expectations, German and US Treasury rates jumped, bolstering predictions on a more hawkish ECB.

The 10-year Treasury note rate increased by 6.6 basis points to 3.036 percent. On weak demand for the issuance of $33 billion in 10-year notes, yields also climbed.

The 10-year yield in Germany, the euro zone's benchmark, hit a record high of 1.368 percent for the first time since 2014.

The Organization for Economic Cooperation and Development (OECD) lowered its growth prediction for this year to 3% from 4.5 percent in December. The OECD also boosted its inflation forecasts, though it cautioned that the chance of "stagflation" was low.

The euro climbed to a seven-year high against the yen, boosted by an upward revision to first-quarter GDP. The euro was up 0.12% against the dollar, trading at $1.0712.

The dollar index increased, as the dollar surged to a new 20-year high against the yen. The yen fell to 134.47 per dollar, its lowest level since February 27, 2002.

Asian equities rose overnight, with Chinese companies benefiting from the relaxation of COVID-19 restrictions, although mood was choppy, and European indexes dipped shortly after the market opened.

As private consumption remained resilient and businesses restored inventories, Japan's GDP fell somewhat less than previously estimated in the first quarter.

Despite a boost in domestic crude inventories, oil prices rose nearly 1% as U.S. crude touched a 13-week high, as supplies seemed set to tighten as China eased lockdowns and Norwegian oil workers planned to strike.

Brent crude prices jumped $3.01 to $123.58 a barrel, while US crude futures rose $2.70 to $122.11 a barrel.

In choppy trade, gold edged higher as fears about economic growth bolstered the metal's safe-haven appeal.

Gold futures in the United States ended the day at $1,856.50, up 0.2 percent.

Bitcoin is now worth $30,147.80, down 3.11 percent.

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