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Global bond markets rebounded on Friday after a quarter of heavy losses, driven by signs of slowing inflation in the euro zone.
Data showed that the Eurozone unified consumer price index fell from 5.2% to 4.3%, causing European sovereign debt yields to fall. Core inflation, which excludes energy and food and is closely watched by the European Central Bank, fell to 4.5% from 5.3% in August, a larger-than-expected decline.
Italy’s 10-year government bond yield fell 0.17 percentage points to 4.75%, hitting its highest level in a decade on Thursday. The German 10-year government bond yield fell 0.12 percentage points to 2.84%, having also hit a 10-year high in the previous session. Bond yields are inversely related to prices.
The benchmark 10-year U.S. Treasury yield hit its highest level since 2007 this week, falling 0.05 percentage point to 4.54%.
U.S. inflation data will be released later in the day, with “core” prices expected to increase by 3.9% year-on-year in August, down from 4.2% in July.
Markets have been grappling with the prospect of interest rates remaining high for an extended period despite expectations for slower inflation. Investors must also weigh the impact of surging oil prices, which have risen 35% in the past two months as global production declines.
Brent crude oil futures rose 0.6% in early trading to above $96 a barrel, while the U.S. benchmark WTI contract also rose 0.6% to $92.22 a barrel.
In the stock market, the Stoxx 600 index in Europe rose 1%, and the German Dax index rose 0.8%.
The latest data showed that the UK economy is recovering from the epidemic faster than previously expected, with London’s FTSE 100 rising 0.8% and France’s CAC 40 rising 0.8% after domestic inflation fell at a lower-than-expected annual rate in September.
Contracts tracking Wall Street’s benchmark S&P 500 and the tech-heavy Nasdaq 100 rose 0.4% and 0.6%, respectively. An index tracking the dollar against a basket of six currencies fell 0.4%.
Chinese technology stocks rose on Friday morning after the country’s top internet regulator released draft rules to simplify cross-border data transfers.
Hong Kong’s Hang Seng Index rose 2.5%, while the Hang Seng Technology Index, which tracks 30 technology companies, rose 3.7%.
Internet companies Tencent and Alibaba rose 2.9% and 3.1% respectively, while electric vehicle startups Xpeng Motors and NIO rose 3.2% and 2.4% respectively. Markets in mainland China were closed for a holiday.
Additional reporting by Gloria Li in Hong Kong
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