Bond yields fall as Netflix fuels stock market selloff By Reuters

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© Reuters. FILE PHOTO: A man wearing a protective mask, amid the coronavirus disease (COVID-19) outbreak, stands in front of an electric board showing the Nikkei Index outside a brokerage in Tokyo, Japan, on January 21, 2021. REUTERS/Kim Kyung-Hoon

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By Herbert Lash and Tommy Wilkes

NEW YORK/LONDON (Reuters) – Risk aversion dominated markets on Friday as stocks tumbled on Wall Street and in Europe oil prices fell from seven-year highs earlier in the week and bond prices surged as traders rushed for the relative safety of government debt.

Weak subscriber growth reported Thursday night at Netflix Inc (NASDAQ:) sent its shares tumbling 21.8% and clouding a market already reeling from concerns that the Federal Reserve is tightening monetary policy too aggressively to combat the ‘inflation.

Investors await details from the Fed’s policy meeting next week on how it will proceed at a time when inflation is such a hot political issue that it could force a more hawkish stance.

The data, however, won’t start showing an expected slowdown in consumer price inflation for at least a few months, making it harder for Fed Chairman Jerome Powell as he tries to calm down. the steps.

“We know the Fed is starting to pivot and the problem is inflation numbers aren’t going to start falling until late spring,” said Andrew Slimmon, chief executive of Morgan Stanley (NYSE:) Investment Management.

Despite Netflix’s negative earnings, it’s too early to tell whether business fundamentals won’t remain strong, he said.

In Europe, the German, French and Italian indices fell nearly 2%, with the broad Euro STOXX index of the top 600 regional companies closing down 1.84%. The MSCI All Country World Index fell 1.74%.

On Wall Street, it slid 1.30%, fell 1.89% and lost 2.72%. The S&P 500 and Nasdaq both posted their biggest weekly declines since the market collapsed in March 2020.

As the Fed prepares to hike interest rates up to four times this year, fear of a hard landing has grown among investors. But a slowing economy in the coming months will likely give the Fed second thoughts, said Steven Ricchiuto, chief U.S. economist at Mizuho Securities USA LLC.

“By the time we get to the second rate hike, everything will be unfolding enough for everyone to back down from these calls,” he said. “Growth numbers will slow much faster than the Fed had anticipated.”

Yields on US Treasuries and Eurozone government bonds fell as concerns over a potential conflict in Ukraine also dampened risk appetite and stock market declines increased demand for the debt.

The yield fell 7.2 basis points to 1.762%, a sharp decline from a two-year high of 1.902% hit on Wednesday.

Overnight markets in Asia were broadly lower, including in China where benchmark mortgage rates were cut on Thursday in the latest move to support an economy embittered by its property sector.

The US dollar edged lower along with US Treasury yields, with investors looking to next week’s Fed meeting for clarity on the outlook for rate hikes and quantitative tightening.

The , which tracks the greenback against a basket of six currencies, fell 0.138% to 95.627. The yen was last down 0.40% at $113.6300. The euro was last up 0.30% at $1.1344,

Oil prices fell for a second day, pressured by an unexpected rise in fuel and fuel inventories, as investors took profits after global oil benchmarks hit seven-year highs.

futures fell 49 cents, or 0.6%, to $87.89 a barrel, while US futures settled 41 cents at $85.14 a barrel.

Gold was expected to gain a second week as inflation and geopolitical risks boosted its safe-haven appeal, but it slid on Friday amid a broader commodity decline.

The US was down 0.6% at $1,831.80 an ounce.

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