Bond yields jumped and global share prices slipped after posting new highs on Tuesday as the biggest hike in US inflation in 13 years rattled investors who fear rising interest rates could end a stock market rally that has doubled prices from 2020 lows.

The yield on US Treasury debt initially fell on news the US consumer price index in June jumped 5.4 per cent year over year, the largest gain since August 2008, the Labour Department said.

But a weak Treasury auction sparked a 4.7-basis-point jump in the benchmark 10-year note to 1.41 per cent, after initially falling to 1.343 per cent after the CPI data was released.

The inflation spike followed a 5.0 per cent increase in the 12 months through May, while CPI rose 0.9 per cent month over month after advancing 0.6 per cent in May, gains that unnerved investors.

Stocks on Wall Street at first took the CPI data in their stride, bidding up technology stocks that typically thrive with low interest rates.

The $24 billion of 30-year bonds were sold to yield 2.00 per cent, or more than two basis points above where the debt had traded before the auction.

The jump in inflation ultimately is a negative hanging over a market that has enjoyed a remarkable rally since the lows of March 2020, said Rick Meckler, a partner at Cherry Lane Investments in New Vernon, New Jersey.

"Inflation is not the worst news for stocks, but it's very bad news for bonds," Meckler said. "You're starting to see some of the potential negatives that could bring an end to this incredible rally this year."

MSCI's world equity index, which tracks shares in 50 countries, fell 0.14 per cent to close at 726.33, after earlier setting a new high at 728.77. In Europe, the broad FTS Eurofirst 300 index added 0.07 per cent to set a record close of 1,779.34.

On Wall Street, the Dow Jones Industrial Average fell 0.31 per cent to 34,888.79, the S&P 500 lost 0.35 per cent to 4,369.21 and the Nasdaq Composite dropped 0.38 per cent to 14,677.65.

Investors could re-enter market

Stock investors could re-enter the market to buy "on the dip" as investors wait to see if the Federal Reserve takes aggressive steps to halt rising inflation, Meckler said.

Federal Reserve Chair Jerome Powell testifies before Congress on Wednesday and Thursday.

"A lot of this will play into the Fed's transitory story," Gennadiy Goldberg, interest rate strategist at TD Securities in New York, said about the CPI data. "You can argue that a lot of this (inflation spike) is due to the recovery."

The dollar index, which tracks the greenback versus a basket of six currencies, rose 0.56 per cent to 92.778. The euro fell 0.70 per cent to $1.1776, while the Japanese yen was last up 0.24 per cent at $110.6200.

Overnight in Asia, MSCI's broadest index of Asia-Pacific shares outside Japan rose 1 per cent, its best daily gain since late June, led by a 1.6 per cent rise in Hong Kong, where tech stocks rose broadly. Japan's Nikkei was up 0.5 per cent, while Australian shares closed broadly flat.

In Hong Kong, tech behemoth Tencent Holdings Ltd jumped 3.9 per cent after China's antitrust regulator on Tuesday approved its plan to take China's No.3 search engine, Sogou Inc, private in a $3.5-billion deal.

Euro zone government bond yields have fallen in line with US Treasuries in recent weeks, and are running close to their lowest levels since early April.

Germany's 10-year bond yield was unchanged at-0.297 per cent, close to a three-month low of -0.344 per cent hit last week.

South Africa's rand dropped to a three-month low, slipping 1.2 per cent to 14.4000 against the dollar, as violence escalated over the jailing of former President Jacob Zuma.

Brent crude settled up $1.33 at $76.49 a barrel. US crude rose $1.15 to settle at $75.25 a barrel.

Gold was little changed as a firmer dollar offset support from bets that the Fed was unlikely to respond to the jump in US inflation with immediate monetary tightening.

US gold futures settled up 0.2 per cent at $1,809.90 an ounce.

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