Global shares slide as interest rate risk rises

LONDON — Global shares slipped on Monday, after a run of upbeat economic data suggested interest rates will have to rise further and stay higher for longer, while a stronger dollar and political turbulence hit risk-linked assets.

Last week’s blockbuster U.S. jobs report sent investors scurrying to load up on dollars to the detriment of emerging market assets and lower-yielding currencies like the yen.

Government bonds, which usually perform well when there is a dash for safe havens, have come under intense pressure, sending 10-year Treasury yields toward one-month highs above 3.603 per cent.

The U.S. military said on Sunday it is searching for remnants of the suspected Chinese surveillance balloon it shot down a day earlier, while Beijing on Monday urged Washington not to escalate matters.

Turkey’s under-pressure lira hit record lows after a powerful earthquake struck Turkey and Syria on Monday, killing more than 1,400 people. The currency sank after data last week showed a worryingly large monthly rise in consumer inflation.

Friday’s U.S. data showed 517,000 jobs were created in January, well above expectations for 185,000, while revisions for 2022 figures led to nonfarm payrolls increasing by 586,000 for the year. Deutsche Bank strategist Jim Reid called the report “astonishing.”

By Monday, the dollar had touched a three-week high of 132.60 against the loweryielding yen following reports the Japanese government had offered the job of central bank governor to current deputy Masayoshi Amamiya, viewed as less of a monetary policy hawk than his predecessor.

The dollar was last up 0.7 per cent on the day at 132.08 yen, pushing up its index by 0.13 per cent to 103.26, which jumped 1.2 per cent on Friday. The euro fell 0.2 per cent to $1.077, while sterling was flat against the dollar at $1.205 and up 0.2 per cent against the euro at 89.40 pence.

The MSCI All-world share index was down 0.6 per cent on the day, driven in part by a 0.9 per cent fall in European blue-chips as the STOXX 600 came under pressure.

The drama over the balloon, which Beijing reiterated was a civilian airship that accidentally strayed into U.S. airspace, has further strained already-tense relations and led Washington to cancel a planned visit to Beijing by Secretary of State Antony Blinken.

Chinese equities fell on Monday, while the offshore yuan touched a onemonth low against the dollar. It has fallen by almost two per cent in the space of three days.