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US futures point to stock market rebound after biggest drop since May, but global energy crunch fans fears of inflation

A trader blows out a chewing gum bubble while working on the floor of the New York Stock Exchange
US stocks fell sharply on Tuesday.

  • US futures climbed on Wednesday after stocks fell the most since May the previous day.
  • Rising bond yields helped send stocks tumbling on Tuesday as investors’ worries mounted.
  • A global energy crunch, the US debt ceiling and China’s Evergrande crisis are all causing concern.
  • See more stories on Insider’s business page.

US stock futures rose on Wednesday, pointing to a rebound at the open after equities suffered their biggest fall since May the previous day.

However, a global energy crunch kept investors on edge about inflation and central bank policy, and the US debt ceiling and China’s Evergrande also caused concerns.

S&P 500 futures were up 0.65% after the index tumbled 2.04% a day earlier. Dow Jones futures were 0.52% higher and Nasdaq 100 futures had risen 0.84%.

In Asia overnight, stocks followed the US example and fell across the board. China’s CSI 300 index fell 1.02% while Tokyo’s Nikkei 225 dropped 2.12%.

European stocks dropped on Tuesday, but rebounded on Wednesday. The continent-wide Stoxx 600 was 0.78% higher, while London’s FTSE 100 rose 0.77%.

A number of factors combined to send global equities tumbling on Tuesday, most importantly a sharp rise in global bond yields, which makes the returns on stocks look less attractive.

The yield on the 10-year US Treasury note rose to 1.534%, its highest since late June, on Tuesday after the Federal Reserve signaled that it may start to cut back on its support for the economy as early as November.

In the UK, the yield on the 10-year gilt rose past 1% for the first time since March 2020 after the Bank of England also said it could tighten monetary policy sooner than expected. Yields move inversely to prices.

Adding to the pressure on Tuesday was a sharp rise in global energy costs. The global benchmark oil price topped $80 a barrel for the first time in three years, helping push up bond yields, as traders bet inflation would be stronger and central banks could be forced to act.

On Wednesday, both oil prices and bond yields slipped after the previous day’s big rises. The yield on the key 10-year US Treasury note fell 2.5 basis points to 1.512%.

Brent crude oil, the global benchmark, fell 0.74% to $77.77, having pared its gains after topping $80 a barrel on Tuesday. WTI crude, the US benchmark, slipped 0.86% to $74.66.

However, natural gas prices remained at record highs in Europe and elevated in China and the US. Higher energy prices have added to investors’ fears about inflation.

“Given ongoing supply chain disruption in a range of sectors, labour shortages and higher commodity and energy prices, we expect to see at least some of these higher input costs being passed through to consumers,” said Chris Scicluna, head of research at Daiwa Capital Markets.

Another concern for investors is the US debt-ceiling crisis. The Republicans have blocked Democratic attempts to raise the government borrowing limit, heightening the risk that the US could default. Wrangling will continue on Capitol Hill on Wednesday.

In China, embattled property developer Evergrande faced another coupon payment on Wednesday for a dollar bond. Reuters reported bondholders were still in the dark about whether they would receive their money.

Elsewhere, bitcoin rose 1.2% to $42,287 after falling the previous two days as investors avoided risky assets.

Read the original article on Business Insider

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