Stock Traders Bet That Rates Market Is Wrong on Inflation Risk

The stock market is looking past the sharp interest rate hikes priced by Europe’s bond market, risking losses for investors backing the wrong outcome.

Swaps imply three European Central Bank rate increases this year, reflecting how the region is particularly exposed to energy shocks triggered by the Iran war. While growth concerns are also starting to emerge, there’s widespread conviction that central banks will be eager to ensure inflation is kept under control.