Global stocks fall, US yields rise as oil prices hit new highs

NEW YORK, May 31 (Reuters) – Global stock markets plunged as U.S. Treasury yields rose sharply on Tuesday as investors weighed the outlook for higher inflation following a phased import ban of Russian oil by the European Union, which took crude prices to new heights.

EU leaders have agreed in principle to cut oil imports from Russia by 90%, the bloc’s toughest sanction to date against Moscow since the invasion of Ukraine in February. Read more

The new sanctions will apply to Russian crude which is delivered by shipments and will be phased in over six months, with refined products being implemented over eight months. The embargo exempts pipeline oil from Russia as a concession to Hungary.

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Oil prices hit new highs on Tuesday after the EU announcement, with benchmark Brent crude rising 0.96% to $122.84 a barrel after hitting $124.64, its highest level since March 9.

Brent crude contracts for August, however, stabilized 1.7% at $115.60 a barrel after members of the Organization of the Petroleum Exporting Countries (OPEC) reportedly considered suspending a production with Russia.

U.S. West Texas Intermediate (WTI) crude also fell 0.06% to $115.02 a barrel, reversing earlier trading gains.

“Energy is the input cost of virtually everything and high oil prices are bad for inflation,” said Thomas Hayes, managing member of Great Hill Capital.

The MSCI Global Equity Index (.MIWD00000PUS), which tracks stocks from 50 countries, fell 0.61%. The pan-European STOXX 600 index fell 0.72%.

Yields on US Treasuries rose with most maturities hitting one-week highs as inflation concerns dominated trading after euro zone inflation hit a record high this month .

Treasury yields also rose, thanks in part to hawkish comments from Federal Reserve Governor Christopher Waller on Monday. Waller said he advocated keeping 50 basis point rate hikes on the table until substantial inflation cuts are seen, pushing back on expectations that the Fed could pause after the hikes of June and July. Read more

Benchmark 10-year yields reached 2.8622%.

On Wall Street, all three major indexes closed lower, led by the healthcare, technology, energy and industrials sectors. The Dow Jones Industrial Average (.DJI) fell 0.67% to 32,990.12, the S&P 500 (.SPX) lost 0.63% to 4,132.15 and the Nasdaq Composite (.IXIC) fell by 0.41% to 12,081.39.

The U.S. dollar strengthened across the board on Tuesday as Treasury yields climbed and concerns over a further acceleration in global inflation weighed on investors’ risk appetite.

The dollar index, which tracks the greenback against the six major currencies, rose 0.345% to 101.770. The euro fell 0.41% to $1.0733.

Safe-haven gold fell 1%, making it the second straight month of declines, under pressure from a rising dollar and US Treasury yields that hurt the metal’s appeal despite concerns over the surge in inflation.

Spot gold fell 1.0% to $1,837.30 an ounce. US gold futures fell 0.99% to $1,833.00 an ounce.

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Reporting by Chibuike Oguh in New York Editing by Nick Zieminski and Will Dunham

Our standards: The Thomson Reuters Trust Principles.

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