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The ramifications for global markets are significant, with Washington and Beijing's determination to loosen dependence on each other fraying long-established supply chains. Many central banks target 2% inflation; market gauges of traders' long-term U.S. and European inflation expectations are running higher , . Anna Rosenberg, head of geopolitics at the Amundi Investment Institute, said Sino-U.S. tensions, provide a "new lens" through which to analyse emerging markets' growth prospects. But the performance of big U.S. tech stocks and global share indices are vulnerable to signs of Chinese retaliation. With China underperforming global stocks, investors are split on how to approach this market.

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The European Central Bank last week lifted rates to a record 4% and upgraded its inflation forecast for 2024, but the euro fell and has lost almost 2% against the dollar this month. Overall, Europe's central banks "would like to portray this idea of higher for longer (rates)," said Ed Hutchings, head of rates at Aviva Investors. The currency, which the central bank labeled "unjustifiably weak," barely caught a break and remains near a record low against the euro . He expected one the of big European central banks to be the first to cut rates. European central banks were "in a bind," Fiotakis added, as higher oil prices also threatened to push inflation higher.

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Passersby are reflected on an electric stock quotation board outside a brokerage in Tokyo, Japan April 18, 2023. "They almost certainly have to hike again this year because today's inflation data shows there's still more work to do." INFLATION WATCHGovernment bond yields in the euro zone rose broadly after inflation data suggested the ECB may still have to hike rates again. Germany's two-year bond yields rose 7 bps to 3.09% . Spanish inflation rose 2.6% in August, as economists polled by Reuters had expected.

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Yet a sharp drawdown in the excess savings created by COVID-19 could be a curve ball that slams into bullish sentiment. U.S. excess savings have fallen to around $500 billion from around $2.1 trillion in August 2021, the San Francisco Federal Reserve estimates. In Europe, Deutsche Bank reckons excess savings in Sweden, struggling to contain a property slump, have dwindled. Reuters GraphicsRUNNING OUTDefinitions for excess savings differ, but economists generally agree that this means savings that went beyond trend levels during the pandemic. Cardano chief economist Shweta Singh said U.S. pandemic excess savings are likely to be depleted by year-end.

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ECB chief Christine Lagarde said the central bank for the 20 countries that share the euro was not pausing. "This is a very restrictive policy and it will turn into credit tightening and that will bring a recession." The ECB has now increased its key deposit rate by some 375 bps since last July, from -0.5%. U.S. rates have jumped 500 bps, with the Federal Reserve hiking again on Wednesday while opening the door to a pause. Gareth Rudd, a European equity fund manager at Chelverton Asset Management, said he was negative on European bank stocks because regulators will want them to conserve capital instead of paying dividends.

Summary U.S. bonds set for worst month since SeptWild swings at start of year may continueLONDON, Feb 28 (Reuters) - March madness? After a euphoric January was followed by a somber February, with bonds and equities selling off as strong data renewed rate-hike bets, more wild swings could be next for world markets. February fallsData on Friday showing a key inflation U.S. gauge accelerated last month stoked rate hike bets. The ECB lifted its key rate by 300 basis points since last July to 2.5%. If upcoming data weakens, markets could resume their bullishness, Yardeni Research said.

The central bank lifted its main funds rate by 25 bps to its highest since 2007 as it continued its fight against inflation. Yet the S&P 500 (.SPX) hit a five-month high, as traders focused resolutely on the idea that the world's most influential central bank would change course soon. Government bond markets meanwhile continued to price in rate cuts by year-end as the economic cycle turns. Over in Europe, the European Central Bank delivered a hefty 50 bps hike on Thursday and promised more of the same for March and beyond. "In terms of the impact of (central bank) hawkishness on markets," he added, "this has significantly softened."

Summary Hawkish central banks dampen hopes of peak ratesEuro zone bonds yields surgeHawkish message a reality check for markets -analystsLONDON, Dec 15 (Reuters) - Forget a year-end rally in financial markets. The message from major central banks is loud and clear: the battle to tame inflation is far from over. Central banks in the United States, euro zone, Britain and Switzerland met on Wednesday and Thursday and all slowed the pace of aggressive rate moves. European Central Bank President Christine Lagarde said to expect more 50-basis-point rate increases for a period of time and that the ECB was not "pivoting" yet. Such sharp moves loosen the very financial conditions that central banks are trying to tighten in order to contain inflation.

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