GLOBAL MARKETS – Stocks fall for third day, yields surge as markets brace for rate hikes
Global stocks fell for a third day in a row on Wednesday, as bond yields and measures of inflation expectations on both sides of the Atlantic soared amid concern over when central banks might raise interest rates. The MSCI All Country World Index, which tracks stocks from 49 countries, was down 0.36% the day after trading in Europe began.
The 10-year US Treasury yield hit 1.5444%, its highest level since June 17, dragging Eurozone bond yields in its wake. Two-year Treasury yields hit 18-month highs. A market measure of eurozone inflation expectations jumped to 1.8308%, its highest level since 2015. The yield on 10-year inflation-protected US Treasuries (TIPS) reached -0 , 82%, its highest since the end of June. “The massive sell-off in bond markets is linked to markets interpreting recent Fed and Bank of England statements as being more hawkish about the timing of rate hikes,” said Sarah Hewin, Senior Economist at Standard Chartered Bank.
“Powell’s comments yesterday seem to indicate greater nervousness about inflation and these have had an impact on Treasury yields. This uncertainty over the transient nature of the so-called transient factors in addition to the rising energy prices appear to be accentuating the integration of inflation. “Last week, policymakers at the US Federal Reserve forecast that policymakers are ready to hike rates in 2022 and that the bank should start cutting its monthly bond purchases starting in November.
US Fed Chairman Jerome Powell and Treasury Secretary Janet Yellen will testify at a congressional hearing in the United States at 2:00 p.m. GMT. Special attention will also be paid to European Central Bank decision-makers speaking at the ECB Central Bank Forum, starting with ECB President Christine Lagarde at 12:00 GMT. Soaring yields put pressure on high-growth tech stocks at the start of trading in Europe, while further signs of a slowing Chinese economy also weighed on investor morale, pushing the pan-European STOXX 600 index down more than 1%.
The UK FTSE 100 index fell 0.6%, while the German DAX fell more than 1%. The French CAC 40 fell 1.6% and the Italian FTSE MIB index slipped 1.2%. E-mini futures for the S&P 500 fell 0.9%, indicating a lower open on Wall Street later.
“The global stock market struggles to climb into a wall of worry as the energy crisis and price revisions in the US (and the EU over the month) potentially alter the timing and speed of futures. rate increases or at least a decrease, “said Sébastien Galy, senior macro strategist at Nordea Asset Management. Rising yields also boosted the dollar, with the index which measures its strength hitting a five-week high. The Japanese yen fell against the dollar and the euro as higher yields made the currencies more attractive to Japanese buyers.
Earlier in Asia, stocks were mixed, as the fallout from Chinese property developer Evergrande’s debt crisis and the worsening power shortage in China weighed on sentiment. Australia’s benchmark S & P / ASX200 closed down 1.47%, led by a massive sell-off in health and tech stocks, while Japan’s Nikkei was down 0.2% after trading. halved his initial losses.
China’s blue-chip CSI300 index rose 0.1%, while Hong Kong’s Hang Seng index gained 1.34%, ending a recent string of negative sessions. During Asian trade, Brent crude oil hit $ 80 a barrel for the first time in three years, driven by regional economies starting to reopen due to the COVID-19 pandemic and supply issues.
SOME “POSITIVE NEWS” IN THE REAL ESTATE SECTOR The main real estate indices in Hong Kong and mainland China rose 3% to 8% after the People’s Bank of China (OBOC) pledged to support homeowners.
“There has been some positive news for the real estate industry, and the markets are digesting it after all of the negative news flow of the past few days,” said Tammy Leung, Everbright Sun Hung Kai strategist. Investors remain nervous about the future of Evergrande, which missed a deadline to pay interest to offshore bondholders.
Evergrande has 30 days to make payment before it goes into default and authorities in Shenzhen are investigating the company’s wealth management unit. Gold prices fell to a 1.5-month low on Tuesday, with spot gold hitting its lowest level since Aug. 11 at $ 1,735.40 an ounce.
London nickel and tin prices extended losses in a second session on Tuesday, as growing blackouts in major metal consumers, China, raise concerns about downstream demand. Analysts said the outages could affect industrial stocks listed in China.
“What we’re seeing in China with developers and blackouts is going to be a negative burden on Asian markets,” Tai Hui, chief Asian markets strategist at JPMorgan Asset Management, told Reuters. “Most people are trying to determine the potential contagion effect with Evergrande and how far it could go. We continue to monitor the policy response and we have started to see some shift towards supporting homebuyers at this point. what we expected. “
Commonwealth Bank economists estimate that two months of power rationing in major Chinese provinces could reduce economic growth by 0.1 percentage point this year and by 0.3 percentage point next year . “Markets have been choppy amid the focus on China’s regulatory crackdown and the prospect of the Federal Reserve cutting back on asset purchases,” the BlackRock Investment Institute said in its weekly global commentary.
“We believe the path to further gains in risk assets has narrowed after a prolonged rise, warranting a selective approach, but we reaffirm our tactical pro-risk stance.” He said he was changing his mind towards a “moderate” overweighting of Chinese assets, in the context of very small client allocations to this asset class.
(This story was not edited by Devdiscourse staff and is auto-generated from a syndicated feed.)