Risk Aversion Seen at the Start of Busy Week

European bonds fell on signs inflation was quickening in Germany and equities retreated. The dollar weakened earlier as Donald Trump’s order halting some immigration reverberated around the world.

Government debt in the periphery was hardest hit, with yields in Italy and Portugal rising after consumer prices soared in Saxony as markets prepare for a busy week of central bank meetings. Stocks in Europe, Japan and Australia dropped with U.S. futures. The dollar pared an earlier decline and gold erased gains after Trump’s limits on immigration from seven predominantly Muslim nations sparked a knee-jerk risk-off reaction in Asia hours. The rand led declines in emerging markets currencies.

Faster-than-expected price growth prompted a sell-off in bonds on bets inflation of more than 2 percent in some parts of Germany will give the European Central Bank leeway to brake monetary stimulus sooner. Meanwhile, Trump’s immigration ban gave cause for concern that he may follow through with isolationist policies touted on the campaign trail.

Bloomberg

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