NEW YORK, Jan. 15 – Global equity markets stumbled again yesterday and US Treasury yields climbed as cautious investors worried about the impending impact of US interest rate hikes on the economy.
A warning from America’s biggest bank JPMorgan Chase & Co that its profitability could fall below a medium-term target has cast a new pall over Wall Street.
By early evening, the MSCI gauge of equities around the world had lost 0.36%. The pan-European STOXX 600 index closed down 1.01% and had its worst week since Nov. 26, weighed in part by falling tech stocks.
In the US, a flurry of bargain hunting towards the end of the day helped stocks pare their losses. The Dow Jones Industrial Average fell 0.56%, the S&P 500 ended flat and the Nasdaq Composite tipped into the black, rising 0.59%.
“We are now entering a period where the Federal Reserve will engage in an unprecedented experiment: raising interest rates to zero and reducing the size of its balance sheet in the same year,” said Nicholas Colas, co-founder of DataTrek. . To research.
“The market is always wondering what results will come from their decisions,” Colas said.
In line with rate hike expectations, benchmark 10-year Treasury yields jumped to 1.7859%, rebounding to a two-year high of 1.8080% hit earlier this week. Two-year Treasury yields hit a high of 0.9730%, a level last seen in February 2020.
European bond yields also rose in choppy trading as investors focused on central bank monetary policy tightening, although sharp declines in Germany’s benchmark 10-year yield earlier this week led it to fall. record its biggest weekly decline in 10 weeks.
Meanwhile, in Asia, the yield on five-year Japanese government bonds hit its highest since January 2016 and the yen rose after a Reuters report that Bank of Japan policymakers would debate when to go. which they could initiate a possible rise in interest rates.
Such a move could come before inflation even hits the bank’s 2% target, sources said.
The dollar, which was hit by a three-day selling spree as investors bet expectations of rate hikes are already priced into the currency, finally stabilized yesterday.
The dollar index, which measures the greenback against a basket of six currencies, rebounded 0.34% to 95.167, moving further away from a two-month low hit this week.
A rebound in the dollar weighed on the euro, which lost 0.34% to 1.14135.
The pound also slipped 0.22% to 1.36780, taking a breather after this week’s rally that pushed it to a 2.5-month high.
GDP data yesterday showed Britain’s economy grew faster than expected in November and its output finally rose above its level before the country entered its first Covid-19 lockdown.
Asian stocks fell overnight after Fed Governor Lael Brainard on Thursday became the most senior central banker to signal that the Fed will raise rates in March.
Other Fed officials showed willingness to raise rates, after data this week showed US consumer prices jumped 7% year-on-year.
Countering the weakness in equity markets, oil futures rose again, en route to a fourth weekly gain, boosted by supply constraints.
Brent crude oil futures rose 1.9% to hit a two-and-a-half-month high at US$86.44 (RM361.19) a barrel. U.S. West Texas Intermediate crude jumped 2.6% to US$84.28. Brent and US futures entered overbought territory for the first time since late October.
Rising bond yields weighed on non-performing gold, with spot gold falling 0.31% to US$1,816.53 an ounce.
“It is clearly the impact of tighter monetary policy that is being felt in the markets here,” said Guillaume Paillat, multi-asset portfolio manager at Aviva Investors.
Paillat, who expects at least four rate hikes from the Fed this year, said it was “pretty much done” for the tightening cycle to begin in March.
“What matters in the next few days will be more revenue,” he added. “There is still some room for earnings to surprise on the upside.” —Reuters