- US stock futures slipped and the dollar rallied 0.12% with investors waiting for Friday's inflation numbers.
- Rate rises are back on investors' minds after Australia's central bank hiked more than expected.
- European stocks led a global sell-off, although the UK's FTSE 100 barely reacted to Boris Johnson surviving a confidence vote.
Stock markets slid around the world Tuesday as investors once again found themselves grappling with the potential impact of aggressive rate-hiking cycles.
The Reserve Bank of Australia proved surprisingly hawkish, raising rates by 50 basis points to 0.85%. Several analysts are also forecasting a similar-sized hike from the European Central Bank later this week, while Friday's US inflation data will likely influence Federal Reserve policy over the coming months.
US equities look set to trade lower, with tech stocks leading the sell-off. Nasdaq 100 futures fell 0.64%, while the S&P 500 and Dow Jones Industrial Average were both down 0.49% in European trading.
10-year US Treasury yields held above 3% on Tuesday, having broken above this level for the first time in a month the previous day. The 10-year note was last at 3.02%, down 1 basis point on the day. The dollar was the main beneficiary of stocks selling off and yields holding firm, rallying by 0.12%.
"There've been a couple of catalysts behind those moves higher, but a key one over the last week and a half has been the perception that near-term recession risks are fading back again, which in turn is set to give central banks the space to continue hiking rates and thus take bond yields higher," Deutsche Bank managing director Jim Reid said.
Global stocks also struggled, with the MSCI World Index down around 0.32%. Europe drove the downturn, with the STOXX 600 falling 0.41% and Frankfurt's DAX 40 down 0.69%.
In the UK, Boris Johnson narrowly survived a leadership vote and will continue as prime minister for now. Markets shrugged off the political news, with the FTSE 100 slipping just 0.15% and the pound only down 0.2% against the dollar and the euro.
"Political turmoil is always bound to leave a mark on UK investor confidence, but the full extent of any market moves will depend on how quickly the saga is truly put to bed," Sophie Lund-Jones, lead equity analyst at the UK broker Hargreaves-Lansdown, said. "There's still plenty of uncertainty looming about the stability of the current government, and until those jitters have gone, the market will struggle to find its place."
Australian stocks were the most obvious losers from the RBA's 50-point hike, with the All-Australian 50 falling 1.56%. Other Asian equities weathered the storm, with Japan's Nikkei 225 and China's Shanghai Composite posting gains of 0.10% and 0.17% respectively, although Hong Kong's Hang Seng was down 0.58%.
The move away from riskier assets favored gold, which was up 0.16% to $1,846.60 an ounce. Bitcoin fell 5.91% to $29,597, having broken above $30,o00 for the first time in nearly a week on Monday.