European Shares May See Gap-down Opening On BoJ Surprise Yield Shift

European stocks look set to open sharply lower on Tuesday amid signs that central bankers around the world might be willing to risk causing a recession in order to control inflation.

Former Federal Reserve official William Dudley said on Monday it was likely interest rates could go higher even as U.S. unemployment started to creep higher.

Asian markets fell across the board, with Japan’s Nikkei index falling nearly 3 percent after the Bank of Japan allowed yields rise to more in a surprise tweak to its monetary policy.

The central bank expanded its target band for 10-year yields to 50 basis points from 25, helping lift the Japanese yen to a four-month high.

Bond yields jumped globally, with the 10-year U.S. Treasury yield soaring to the highest this month at 3.711 percent. Gold and oil prices were little changed in Asian trade.

Elsewhere, China’s central bank kept its benchmark lending rates unchanged for the fourth consecutive month.

Current account and consumer confidence data from the euro area are due later in the session, headlining a busy day for the European economic news.

Destatis is slated to publish Germany’s producer prices for November. Economists expect producer price inflation to ease to 30.6 percent from 34.5 percent in October.

U.S. stocks fell for a fourth straight session on Monday as bond yields climbed amid bets the Federal Reserve will continue with its rate hikes.

In economic news, a measure of homebuilder confidence declined for the twelfth straight month, falling to its lowest reading since mid-2012.

The Dow dropped half a percent, the S&P 500 shed 0.9 percent to close at its lowest level in more than a month and the tech-heavy Nasdaq Composite fell 1.5 percent.

European stocks closed a tad higher on Monday after last week’s selloff. The pan European STOXX 600 edged up 0.3 percent.

The German DAX and the U.K.’s FTSE 100 both rose around 0.4 percent, while France’s CAC 40 index added 0.3 percent.

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