Nervy markets await ECB rate hike, US inflation data

Markets worldwide are bracing for the European Central Bank's second rate hike of the year and key US inflation data, following a surge in oil prices due to Middle East attacks. The return of $100-a-barrel oil has added to the anxiety in global bond markets. In Europe, steadier oil and gas prices have helped stabilize bond markets and keep stocks, the euro, and sterling on track.

Investors are awaiting ECB president Christine Lagarde's remarks on potential further rate hikes. Columbia Threadneedle's Global Head of Absolute Return Fixed Income, Keith Patton, expects the key question to be whether the ECB's actions will negatively impact growth. The market anticipates almost two 25-basis-point hikes by December, with additional hikes possible.

Germany's 10-year bond yield reached a record high, while France and the UK also saw their yields near post-2007 and 1998 highs. US Treasury yields increased to 4.85% after Donald Trump proposed a $5,000 dividend for US adults if his party wins congressional elections in November. The Treasury's $6 billion bond buyback has raised concerns about policy coherence.

Oil prices pushed Brent crude futures above the $102 mark, signaling significant inflationary pressure. Asian markets experienced a slight decline overnight, with Japan's Nikkei and South Korea's Kospi ending lower. Wall Street futures rose slightly ahead of US inflation data, which will influence expectations for the Federal Reserve's upcoming meeting.