Stock markets were routed around the globe yesterday, with European indexes opening lower and bond yields rising as resurgent US inflation raised the possibility central banks would tighten policy more aggressively than had been expected.

Europe’s benchmark Stoxx 600 fell 1.5 per cent, its sixth consecutive day of losses totalling 4.6 per cent – the biggest decline since the United Kingdom voted in June 2016 to leave the European Union.

All major indexes in Europe fell: the UK’s FTSE 100 dropped 1.4 per cent, France’s CAC 40 1.4 per cent and Germany’s DAX 1 per cent.

Friday’s United States payrolls report showed wages growing at their fastest pace in more than eight years, fuelling expectations that both inflation and interest rates would rise more than previously forecast.

That sparked a sell-off in US equities that was set to continue yesterday. Dow Jones futures pointed to the market opening 1.1 per cent lower, with the S&P 500 down 0.6 per cent and the NASDAQ down 0.9 per cent.

Futures markets priced in the risk of three, or even more, rate rises by the Federal Reserve this year after Friday’s data release.

“This added fuel to a bond market sell-off, pushing US 10 year Treasury bond yields closer to the magic 3 per cent level, which will only increase borrowing costs for corporates following years of cheap financing, thus ushering equities further from recent highs,” said Mike van Dulken, head of research at Accendo Markets. Bond yields, which move inversely to bond prices, initially rose to multi-year highs across the globe before pulling back in later trades.

Yields on 10-year US Treasury debt hit a four-year high of 2.885 per cent, having jumped almost seven basis points on Friday.

They were last trading at 2.833 per cent.

German 10-year yields, the benchmark in Europe, rose to 0.774 per cent, their highest since September 2015, before falling to last trade at 0.671 per cent.

Faster rate rises by the Fed would hurt emerging markets and commodity currencies, said Deutsche Bank macro strategist Alan Ruskin.

Emerging-market currency the South African rand fell 0.4 per cent, with the Chinese yuan and Polish zloty down around 0.2 per cent.

Rising US yields gave the dollar some support.

Against a basket of currencies, the dollar was up fractionally at 89.267, after climbing 0.6 per cent on Friday for its biggest single-day gain in three months.

Any rally by the dollar weakens commodities priced in the currency, with the Thomson Reuters CRB index down 0.5 per cent.

Yesterday, gold was off at $1,335.78 an ounce after losing one per cent on Friday.

In oil markets, Brent fell 1.36 per cent to $67.66 a barrel and US crude dropped 1.06 per cent to $64.76.

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