US and European stocks fell sharply as interest rate expectations rose. Higher inflation The slowdown in economic growth has overturned the simple monetary policy and recovery story that has supported asset prices for months.
Wall Street’s premier S & P 500 Index fell 1.8%, while the technology-intensive Nasdaq Composite fell 2.4%. Both index declines were the worst daily losses since May, with more than 85% of S & P 500 shares falling that day. The STOXX 600 index in Europe closed at 2.2% lower.
Yields on 10-year Treasuries, which serve as a benchmark for corporate and household borrowing costs around the world, rose 0.04 points to 1.53 percent. This is a level not seen since June.
Short-term government bond yields, which are inversely proportional to price, have risen over the past week to track expected rate hikes by central banks in the United States and the United Kingdom. Policy makers are increasingly eager to start withdrawing financial stimulus in the pandemic era. Sustainedly high inflation.. Long-term bonds that move in line with inflation and growth expectations have also sold out dramatically.
Priya Misra, Global Head of Interest Rate Strategy at TD Securities, said: “This is a more hawkish message that is pervading the toll market. That’s why the long end has taken the lead.”
Last week, the Federal Reserve Board said it could. Easy to move on Reduced $ 120 billion in monthly bond purchases. The world’s most influential central bank also revealed that half of its monetary policy makers expect interest rates to rise after the first pandemic in 2022.
The next day, Bank of England Warning of UK inflation It could exceed 4% next year, raising expectations that interest rates are approaching a record low.
The yield on 10-year Treasury bonds, which traded approximately 1.3% a week ago, is also used by investors to assess the value of public companies’ future returns, cash flows and dividends.
UK 10-year bond yields temporarily topped 1% on Tuesday for the first time since March last year, rising 0.04pp to 0.99%. The pound sterling fell almost 1.3 percent against the dollar to buy $ 1.352.
Among the sectors hit hardest on Tuesday were companies in the tech industry, with Goldman Sachs’ unprofitable listed tech group index declining almost 5% that day.
Rebecca Chesworth, Senior Equity Strategist at State Street Global Advisors’ SPDRETF business, said:
Tech stocks are especially sensitive to movement Interest level And given that monetary policy expectations are often closely tied to future growth years in the future. If both interest rates and inflation are rising, investors may appreciate their views on how valuable their future growth is.
testimony In Congress on Tuesday, Federal Reserve Board Chair Jay Powell said supply-side constraints, which have kept US headline inflation above 5% for the third straight month, are “greater than expected and last longer.” Stated.
Powell made these comments hours after the international oil benchmark Brent Crude was first temporarily traded above $ 80 a barrel. After October 2018, Hurricanes boosted US production and soared natural gas prices.
The Conference Board’s Consumer Confidence Index, released Tuesday, also hit a seven-month low in September.Study author Cited concerns For the highly infectious delta variant of coronavirus for drops.
“The main market story is one of stagflation,” said Sammy Charles, chief economist at Lombard Odie Bank in Switzerland, citing concerns about high inflation and slowing economic expansion.
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Global equities and bonds fall as investors fear “stagflation” concerns
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