(Bloomberg) — Global bond markets sold off this week as investors worried about lingering inflationary pressures and heavy government borrowing.
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A selloff in the $28 trillion US Treasury market deepened after a blowout employment report reinforced bets among traders and Wall Street economists that the Federal Reserve will hold off on further interest-rate cuts. Britain’s latest bond turmoil has drawn comparisons with the Liz Truss mini-budget debacle of 2022, while yields in Japan climbed to the highest in over a decade.
Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy, markets and geopolitics:
World
The Treasury market is looking intimidating again, and politicians should take notice, as should everyone else. This selloff is more complicated and ominous than some. It’s also not limited to the US. Bond markets in the bigger European economies are also testing a high made late in 2023. There was a belief that policy rate cuts, made by all the main central banks, would ensure that remained the peak. It’s now coming into question.
A US dockworkers union reached a tentative deal on a new labor contract with a group of ocean carriers and terminal operators, potentially easing global supply-chain strains that a World Bank gauge says are the worst since the pandemic.
US & Canada
The US economy last month added the most jobs since March and the unemployment rate unexpectedly fell, capping a surprisingly strong year and supporting the case for a pause in Fed interest-rate cuts.
US consumers’ long-term inflation expectations jumped to the highest since 2008 on concerns about potential tariffs from the incoming Trump administration.
A preliminary estimate of the financial impact of the Los Angeles blazes ranks the incident among the costliest ever natural disasters in the US, and likely the nation’s most expensive ever wildfire. The disaster will likely cause between $52 billion to $57 billion in damage and economic loss, according to AccuWeather Inc.
The end of Prime Minister Justin Trudeau’s nine-year reign in large part reflects mounting discontent over the cost of living and weak economic growth. Now, as Canada prepares for the Donald Trump era, its Conservative Party is in prime position to take power and push the country away from the progressive policies that defined Trudeau’s tenure.
Story continues
Europe
Over the past few days, long term UK borrowing costs have soared and the pound has fallen – a rare combination that can signal investors have lost faith in the government’s ability to keep a lid on the national debt and control inflation. The events echo the 1976 debt crisis “nightmare” that forced the government to ask the International Monetary Fund for a bailout, according to former Bank of England rate-setter Martin Weale.
Euro-area inflation accelerated last month, supporting the European Central Bank’s gradual approach to reducing interest rates, without derailing them altogether. The pickup will come as no surprise to the ECB, which has repeatedly warned that the path back to its 2% target will be bumpy. It only expects to sustainably hit that milestone toward year-end.
The aspiration to turn Germany into a semiconductor superpower, described by insiders as personally driven by Chancellor Olaf Scholz, now looks increasingly hopeless. Germany’s attempt at reinvention as a semiconductor hub is part of a worldwide race to win control over the oil of the digital age, and the driving force behind future technologies such as artificial intelligence.
Asia
India’s government lowered its economic growth projection for the fiscal year to the weakest since the pandemic, with economists saying even that forecast may be too optimistic. Gross domestic product is estimated to expand 6.4% in the year through March, the Statistics Ministry said, down from 8.2% in the past financial year.
Investors in China’s $11 trillion government bond market have never been so pessimistic about the world’s second-largest economy, with some now piling into bets on a deflationary spiral mirroring Japan’s in the 1990s.
China said it has sufficient fiscal firepower to respond to external challenges, vowing to better execute pro-growth measures ahead of Donald Trump’s return to the White House later this month. Vice Finance Minister Liao Min repeated a pledge that the 2025 deficit-to-GDP ratio will rise, adding details will be announced after due legal process.
Emerging Markets
The leaders of Malaysia and Singapore formalized an agreement establishing a special economic zone linking their two nations’ border region, with the aim of attracting 50 projects in the first five years of its establishment. Officials in Johor have previously said they expect the zone to create as many as 100,000 new jobs and add $26 billion per year to the Malaysian economy by 2030.
Argentines are turning more optimistic about the future of their nation’s beleaguered economy, a shift that stands to embolden austerity-minded President Javier Milei ahead of midterm elections later this year.
–With assistance from Philip Aldrick, Ram Anand, John Authers, Ruchi Bhatia, Liz Capo McCormick, Finbarr Flynn, Patrick Gillespie, Erik Hertzberg, Kamil Kowalcze, Christina Kyriasoglou, John Liu, Lucille Liu, Brian Platt, Greg Ritchie, Yasufumi Saito, Augusta Saraiva, Thomas Seal, Anisah Shukry, Brian K. Sullivan, Randy Thanthong-Knight, Fran Wang, Alexander Weber, Joanne Wong and Ye Xie.
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