LONDON – World stocks slipped on Thursday as the upbeat mood that carried the Dow Jones and bitcoin to records a day earlier ran out of steam, while a pause in the oil rally stalled rising global bond yields.

Turkey’s lira was backsliding towards record lows with the central bank expected to chop its interest rates again later.

Other risk and commodity sensitive currencies such as the Australian and New Zealand dollars and South African rand also hit a speed bump, giving the safe-haven Japanese yen a rare lift after it had fallen to a four-year low versus the dollar.

“There is little bit of risk aversion,” said Societe Generale’s Kit Juckes, who pointed to the higher yen and the fact that both European stocks and Wall Street S&P 500 futures were both in the red.

“I think most people today are going to be looking at the Turkey central bank meeting to see if sparks are going to fly… other than that the themes (of rising inflation and COVID cases) are pretty much set”.

“The US stock market has gone up for six days in a row, bitcoin’s made a record and the US bond market is calm. On the surface it looks benign,” said Andrew Ticehurst, a rates strategist at Nomura in Sydney.

Financial news provider REDD reported that it had secured an extension on one of its lower-profile bonds.

Talking turkey

Turkey’s lira dropped 0.7 percent against the dollar and was the worst performer in FX markets as bamboozled traders expected the central bank to once again fly in the face of economic orthodoxy and cut its 18 percent interest rates.

It did so last month and the lira has hit a string of record lows in recent sessions after another major ousting of central bank policymakers last week left investors doubting the bank’s independence from the government.

“We have seen strong outflows from debt in the last three weeks, probably due to uncertainty with the currency and increased risk perception,” IIF economist Jonathan Fortun told Reuters.

Wall Street futures were down 0.3 percent after a blizzard of earnings had helped the Dow Jones touch an all-time high on Wednesday, with the S&P 500 within touching distance too.

The VIX volatility index, sometimes referred to as Wall Street’s “fear gauge”, also ticked up having dropped to a two-month low the previous day.

But a soft finish on the Nasdaq flowed through to tech-stock selling in Tokyo and in Hong Kong, where the Hang Seng fell 0.8 percent.

In the government bond markets that drive global borrowing costs, longer-dated US Treasury yields steadied after rising with inflation and growth expectations on Wednesday.

The benchmark 10-year yield hovered at 1.6568 percent, just below the previous day’s five-month high of 1.6730 percent, while Germany’s 10-year yield, the benchmark for Europe, was unmoved at a still negative -0.12 percent.

“The strong focus on the volatile (bond) curve environment in the euro area looks set to stay, at least until next week’s ECB Governing Council meeting,” UniCredit analysts told clients.

Investors have figured that surging energy prices and tightening job markets will pressure top central banks such as the US Fed and ECB to either raise interest rates or at least rein in stimulus.

Fed funds futures have priced a 25 basis point US rate hike in the third quarter of 2022 while eurodollar markets expect higher rates as soon as the second quarter.

“In our view, the dollar and yen face upside risks if inflation concerns spark a sharp tightening in global short-term interest rates and a sharp pullback in equity markets,” said Commonwealth Bank of Australia currency analyst Carol Kong.