By Murat Aslan and Aysu Bicer
ISTANBUL (AA) – As rising inflation concerns push markets toward price tightening steps, all eyes will be on Bank of England (BoE) Governor Andrew Bailey’s highly anticipated remarks on Tuesday.
Bailey sent a fresh signal two days ago that the BoE could soon hike interest rates, warning that the British central bank must act to contain inflation, especially possible medium-term inflation.
Some analysts say the BoE may take action this year or by the start of 2022 to become the first central bank among the world’s advanced economies to raise interest rates.
With these developments two-year bond yields in the UK have increased by 12 basis points and five-year bond yields jumped by 8 basis points.
The British central bank is expected to increase the policy rate by 15 basis points at its next meeting on Nov. 4.
Observers will be looking for clues in Bailey’s remarks on Tuesday, with the governor’s recent comments boosting focus in European markets on tightening monetary policy.
All major indices in Europe closed in negative territory on Monday, shedding the gains seen last week.
London’s FTSE 100 dropped 30 points, or 0.42%, to 7,203, while Germany's DAX 30 lost 112 points, or 0.72%, to close at 15,474.
Meanwhile, after Russia’s Gazprom dashed hopes for more gas exports to Europe, natural gas futures surged by more than 10% before eventually dropping back to the initial level.
On the Asian side, China’s economic growth rate of 4.9% in the third quarter fell short of expectations, with the slowdown primarily due to deceleration in the property sector and an energy supply shortage.
The country’s industrial output also missed forecasts as it rose 3.1% in September.
Beijing’s announcement that it will continue to provide financial support to SMEs increased the risk appetite.
On the other hand, uncertainties regarding the bond payments of Chinese real estate giant Evergrande remain a point of concern.
China’s energy crisis could deepen as winter sweeps in and power plants are eager to stock up on coal, pushing prices to record highs.
In the US, 10-year bond yield fell from 1.63% to 1.58% and the flattening yield curve damped risk appetite.
US Treasury Secretary Janet Yellen has said the extraordinary measures implemented to ensure the country’s debt limit is not crossed will be extended until Dec. 3.
Most US stock exchanges closed mixed on Monday, but the S&P 500 and Nasdaq climbed back to positive territory to extend their winning streak for the fourth consecutive day.