- Fed minutes reflect growing fears about inflation
- China, Hong Kong stocks slide as Shanghai fights COVID-19
- U.S. yields slip from multi-year highs
- Stocks make tentative gains; Treasury yields slip
LONDON, April 7 (Reuters) - U.S. Treasury bond yields slipped from multi-year highs on Thursday and equities showed signs of steadying after Federal Reserve minutes released the previous day did nothing to add to the rate-hike momentum already priced into markets.
Ten-year Treasury yields, the benchmark for global borrowing costs, have risen around 20 basis points this month, adding to a 50 bps surge in March. Shorter-maturity yields which are more sensitive to interest rate expectations, have jumped even more.
Those moves, driven by expectations of faster policy tightening by the Federal Reserve and other central banks have weighed on stock markets, pushing MSCI's global equity index down 7% this year, while the Nasdaq U.S. tech benchmark has lost more than 11%.
Asian shares earlier on Thursday took their cues from Wall Street's selloff and fell to one-week lows while Japan's Nikkei index dropped 1.7%.
But markets gradually steadied, and a pan-European stock index rose 0.4%, while futures for the Nasdaq, which fell 2.4% on Wednesday, was up 0.3% by 0730 GMT.
Minutes of the Fed's March 15-16 meeting revealed concern that inflation had broadened through the economy and suggested its balance sheet reduction could start next month.
But comments earlier this week by Fed governor Lael Brainard had already cemented expectations of a faster stimulus withdrawal.
"(Fed chairman Jerome) Powell had already put 50 bps on (the) table for the next meeting, then we had Brainard's speech so there were no additional surprises in the minutes," said Thomas Costerg, senior economist at Pictet Wealth Management.
He said, however, markets would remain on tenterhooks and watch out for data such as March inflation figures -- expected next week at 8.3%.
"The question is to what degree the Fed will be willing to kill growth. My fear is (they) may not be as sensitive to weak growth as they were expected to be."
Ten-year Treasury yields slipped 4.5 bps to 2.564%, easing from a three-year peak around 2.66% touched on Wednesday. The 2-year note yield fell over 5 bps to 2.43%
The gap between the two- and 10-year segments was at the widest in a week, reversing the inversion that is seen as a recession signal .
With the Fed leading the policy tightening momentum among major central banks, the dollar stayed near two-year highs against a basket of currencies though it retreated from an overnight peak of 99.778.
The U.S. economic and interest rate picture is somewhat at divergence with some other big economies.
The euro was close to one-month lows, pressured by what ING analysts called a "double threat" from the economic impact of new sanctions on Russia and uncertainty about the outcome of the French election.
France votes on Sunday in the first presidential election round and while incumbent Emmanuel Macron is likely to re-take the presidency, his far-right opponent Marine Le Pen has been closing the gap, recent opinion polls show.
With her policies seen driving up France's fiscal deficit, the premium investors demand to hold French government bonds over German debt has risen to 55.3 bps, the highest since 2020 . French 10-year yields hit their highest levels since 2015 on Wednesday .
French stocks rose 0.4% on Thursday after sharp falls earlier this week.
"If France elects an inexperienced and populist president – who has in the past showed sympathies for Russian president Vladimir Putin – France and the EU would face a major upset almost comparable to the surprise win of Donald Trump in the 2016 U.S. elections," Berenberg analysts wrote.
Le Pen's agenda of protectionism, reform rollbacks, and anti-immigration stance would likely trigger conflict with the European Union, they warned.
Investors also fretted about growing economic strains and new COVID-19 outbreaks in China. Nomura estimated this week 23 Chinese cities accounting for 22% of the country's GDP, have implemented either full or partial lockdowns.
Shanghai, under a city-wide lockdown, reported nearly 20,000 new cases on April 6.
Chinese blue chips shed 0.9%, and Hong Kong stocks lost 1.3%, weighed by declines in large Chinese tech firms.
Reporting by Sujata Rao; editing by