NEW YORK: Global stock markets tumbled again on Friday and US Treasury yields rose as cautious investors worried about the impact of a hike in US interest rates on the economy.
A warning from the largest US bank JPMorgan Chase & Co that its profitability could fall below its medium-term target dealt another blow to Wall Street.
In the United States, bargain hunting helped stocks narrow losses at the end of the day. The Dow Jones Industrial Average fell 0.56%, the S&P 500 ended flat, and the Nasdaq Composite slid 0.59% in the black. [.N]
Nicolas Kolas, co-founder of Datatrack, said, “We are now entering a phase where the Federal Reserve will engage in a never-before-seen experiment: raising interest rates from zero and increasing the size of its balance sheet in the same year.” Lower.” Research.
“The market is still wondering what the outcome of their decisions will be,” Kolas said.
In line with expectations of rising rates, the benchmark 10-year Treasury yield rose to 1.7859%, having hit a two-year high of 1.8080% earlier this week. The two-year Treasury yield hit a high of 0.9730%, last seen in February 2020. [US/]
European bond yields also rose in tepid trade as investors focused on tightening monetary policy by central banks, although a sharp fall in Germany’s benchmark 10-year yield earlier this week pushed it to its biggest weekly drop in 10 weeks. registered. [GVD/EUR]
Meanwhile, in Asia, the five-year Japanese government bond yield rose to its highest level since January 2016 and the yen rose after a Reuters report that Bank of Japan policymakers were debating whether How soon can they start increasing the interest rate.
Sources said such a move could come even before the bank’s target of inflation is reached at 2%.
The dollar, which has been slowed by a three-day selling spree as investors bet on rate hike hopes already in the currency, finally held steady on Friday.
The dollar index, which measures the greenback against a basket of six currencies, jumped 0.34% to 95.167, further away from a two-month low this week. [USD/]
The dollar’s rally dragged on the euro, which fell 0.34% to 1.14135.
Sterling also slipped 0.22% to 1.36780, a relief after this week’s rally that pushed it to a 2-1/2-month high.
GDP data on Friday showed Britain’s economy grew faster than expected in November and its output eventually surpassed its level before the country went into its first COVID-19 lockdown.
Asian stocks were down overnight on Thursday after Fed Governor Lyle Brainard became the senior-most central banker to signal a rate hike by the Fed in March.
Other Fed officials have shown a willingness to raise rates, after data from this week showed US consumer prices rose 7% year-on-year.
Moving on from weakness in equity markets, oil futures climbed again for a fourth weekly gain on the back of supply constraints. [O/R]
Brent crude futures rose 1.9% to a two-and-a-half-month high at $86.44 a barrel. US West Texas Intermediate crude jumped 2.6% to $84.28. Both Brent and US futures entered overbought territory for the first time since late October.
Bond yields weighed on non-yielding gold, with spot gold falling 0.31% to $1,816.53 an ounce. [GOL/]
Guillaume Pilat, Multi-Asset Portfolio Manager, Aviva Investors, said, “This is clearly the effect of monetary policy tightening that is being felt in the markets here.
Pilot, who is expecting at least four Fed rate hikes this year, said it was “largely a bargain” that the tightening cycle would begin in March.
“What matters in the days to come is going to be more about earnings. There is still a little bit of room for earnings to surprise upwards,” he added.
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