* U.S. CPI rises at fastest pace since 1990, roiling markets * Dollar hits 16-month high on bets for earlier rate hikes * Treasury yields jump, break-even rate at record high * Euro and sterling take hit in Europe * China property assets rally * Graphic: Global asset performance tmsnrt.rs/2yaDPgn Graphic: World FX rates tmsnrt.rs/2egbfVh The dollar hit a 16-month high on Thursday and bond market borrowing costs were nudging up again, after the strongest U.S. inflation reading in over three decades fuelled expectations of Federal Reserve interest rate hikes next year. The dollar index, which gauges the currency against six peers including the yen and euro, continued to make steady progress in Europe after Wednesday’s consumer price data spurred its biggest jump since March. They had shown the biggest inflation gain in four months, lifting the annual increase to 6.2%, the strongest year-on-year rise since November 1990. The dollar pushed the euro below $1.15, leaving the next major chart support level down at $1.12. European stocks shuffled higher, sensing the potential for a competitiveness boost, but Japan’s yen was falling towards a four-year low at 114.15 per dollar. “There wasn’t a single element of the CPI data that drove the upside surprise yesterday, it was just everywhere,” said Societe Generale FX strategist Kit Juckes. “You can’t ignore something that broad-based and it will reinforce the view that the Fed is going to hike next year.” Wall Street was expected to see a modest rebound later having had its worst day in over a month after Wednesday’s data. U.S. bond markets were closed for a holiday but Europe’s government bonds were also calmer. Benchmark 10-year yields were around two basis points higher across Europe , firmly above lows hit in the past week as central banks including the ECB talked down aggressive market pricing on rates. U.S. Treasury yields had leapt by the most since February on Wednesday to nearly 1.6%. U.S. real yields, which take inflation into account, dipped to record lows and the five-year breakeven rates hit a record 3.113%. “The inflation numbers surprised on the upside, and they may not even be the peak,” said ING economist Rob Carnell. “The market thinks the Fed, and most other central banks, are behind the curve,” meaning a more rapid tightening than policy makers have so far communicated, he said. “Risk assets hate this.” China and Japan’s stock markets also rose overnight. China’s markets were supported by property giant Evergrande avoiding default again and hopes Beijing would give the broader sector support, while the Nikkei was helped by the weaker yen, which aids exporters. Chinese blue chips rallied 1.6%. Evergrande jumped nearly 7%. Japan’s Nikkei ended up 0.6% while the yen weakened as far as 114.15 per dollar from as strong as 112.73 earlier this week. INFLATION U.S. stock futures were up 0.2% ahead of the opening bell after the S&P 500 had dropped 0.8 the previous day. Tesla gained 2.6% in pre-market deals to claw back some of the 12% lost after Elon Musk said he would sell about $5 billion of the stock. Walt Disney fell nearly 5% though to lead declines among Dow components, as it reported the smallest rise in Disney+ subscriptions since the service’s launch and posted downbeat profits at its theme parks. The Fed has said prices will fall once supply bottlenecks start easing and last week urged patience, reiterating that high inflation is “expected to be transitory”. The money market now prices a first Fed interest rate increase by July. Volatility spilled into other markets, with the CBOE Volatility index, Wall Street’s so-called fear gauge, touching its highest level in nearly a month. Investors sought inflation hedges, with gold jumping to a five-month high of $1,868.20 overnight before easing to around $1,850 on Thursday. The main energy commodities have also been driving up inflation. Oil steadied in London after pulling back sharply from near seven-year highs the previous day, when U.S. President Joe Biden said his administration was looking for ways to reduce energy costs. Brent crude see sawed between $82 and $83 a barrel, down from as high as $85.50 on Wednesday and October’s three-year peak of $86.70. U.S. West Texas Intermediate (WTI) crude was last down 60 cents to $80.75 per barrel, off both an overnight high of $84.97 and last month’s seven-year peak. Bitcoin hit a fresh record at $69,000 before dipping back to around $64,900.