Bonds fell around the world as investors braced for the biggest U.S. rate hike since 2000 and a wave of policy tightening by other central banks. Dip-buying sent stocks in Europe higher.
The U.S. 10-year yield traded around 3% after hitting the milestone on Monday. Germany’s benchmark rate rose above 1% for the first time since 2015, while the corresponding yield on U.K. bonds climbed above 2%. Australian bonds slid, and the currency jumped, after the nation’s central bank increased borrowing costs by more than many had expected.
Meanwhile, investors betting that global bonds are still expensive took shelter in equities. Europe’s Stoxx 600 benchmark added 0.6%, led by energy and travel. U.S. index futures pared gains to trade little changed amid volatile trading.
Markets are getting whipsawed between concerns around persistent inflationary spirals and risks to global growth from rising yields, China’s Covid lockdowns and Russia’s war in Ukraine. The Federal Reserve’s plans to raise rates and reduce its balance sheet have ended an era of cheap money and forced money managers to reassess valuations.
“The right strategy right now is to position for inflation — a clear and present fact — rather than recession, which is still only a possibility,” Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management, wrote in a note.
Key events this week:
- U.S. factory orders, durable goods, Tuesday
- Fed rate decision, briefing with Chair Jerome Powell, Wednesday
- EIA crude oil inventory report, Wednesday
- Bank of England rate decision and briefing, Thursday
- OPEC+ convenes virtually for a regular meeting, Thursday
- U.S. April jobs report, Friday
Some of the main moves in markets:
- The Stoxx Europe 600 rose 0.6% as of 10 a.m. London time
- Futures on the S&P 500 were little changed
- Futures on the Nasdaq 100 were little changed
- Futures on the Dow Jones Industrial Average were little changed
- The MSCI Asia Pacific Index fell 0.5%
- The MSCI Emerging Markets Index fell 0.3%
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0500
- The Japanese yen was little changed at 130.13 per dollar
- The offshore yuan fell 0.1% to 6.6810 per dollar
- The British pound rose 0.4% to $1.2538
- The yield on 10-year Treasuries was little changed at 2.98%
- Germany’s 10-year yield advanced one basis point to 0.98%
- Britain’s 10-year yield advanced nine basis points to 2.00%
- Brent crude fell 1.1% to $106.42 a barrel
- Spot gold fell 0.5% to $1,854.21 an ounce.
Source By: bloomberg