Stocks stumble, yields jump on rates outlook; oil rallies

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Stocks stumble, yields jump on rates outlook; oil rallies


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The DAX chart of the German stock price index is listed on the Frankfurt Stock Exchange, Germany, on September 5, 2018. REUTERS / Staff / File Photo

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  • US, European and Asian stocks down
  • JPMorgan’s profitability warning drops
  • The falls follow the signals of the US Fed’s political leaders
  • Manifestations of oil; The US dollar remains stable after the 3-day fall

NEW YORK, Jan 14 (Reuters) – Global stock markets plummeted again on Friday and U.S. Treasury bond yields rose as cautious investors worried about how imminent interest rate hikes would affect US in the economy.

A warning from the largest US bank, JPMorgan Chase & Co (JPM.N), that its profitability could fall below a medium-term target, led to another draft on Wall Street. Read more

In the early hours of the evening, the MSCI Worldwide Stock Indicator (.MIWD00000PUS) was down 0.36%. The pan-European STOXX 600 index (.STOXX) closed up 1.01% and had its worst week since November 26, partly offset by falls in technology stocks.

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In the United States, a wave of hook-hunting toward the end of the day helped the stock reduce losses. The Dow Jones Industrial Average (.DJI) fell 0.56%, the S&P 500 (.SPX) fell flat and the Nasdaq Composite (.IXIC) fell black, up 0.59%.

“We are now entering a period in which the Federal Reserve will participate 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. Research.

“The market is still wondering what results will come out of its decisions,” Colas said.

In line with expectations of rising interest rates, 10-year Treasury benchmark yields jumped to 1.7859%, recovering to a two-year high of 1.8080% earlier this week. Two-year Treasury yields reached a high of 0.9730%, a level that was last seen in February 2020.

European bond yields also rose in turbulent trading as investors focused on tightening central bank monetary policy, despite sharp falls in Germany’s 10-year benchmark yield in earlier this week led to its biggest weekly drop in 10 weeks.

Meanwhile, in Asia, the yield on five-year Japanese government bonds has peaked since January 2016 and the yen has risen following a Reuters report that Bank of Japan policymakers are debating how far point can start a possible rise in interest rates.

This move could reach even before inflation reaches the bank’s 2% target, sources said. Read more

The dollar, which has been held back by a three-day sell-off as investors bet that expectations of a rate hike are already priced in the currency, finally stabilized on Friday.

The dollar index, which measures the dollar against a six-currency basket, rose 0.34% to 95,167, further down the two-month low this week.

A rebound in the dollar dragged the euro, which lost 0.34% to 1.14135.

The pound also fell 0.22% to 1.36780, taking a breather after this week’s rebound that pushed it to a 2-and-a-half-month high.

Friday’s GDP data showed that the British economy grew faster than expected in November and its output finally surpassed its level before the country entered its first blockade by COVID-19. Read more

Asian stocks had fallen overnight after Fed Governor Lael Brainard became the highest central banker on Thursday, indicating that the Fed will raise rates in March. Read more

Other Fed officials have shown a willingness to raise rates after this week’s data showed that US consumer prices rose 7% year-on-year. Read more

Against the weakness of equity markets, oil futures rose again, in the process of making a fourth weekly gain, driven by supply constraints.

Brent crude oil futures rose 1.9% to a two-and-a-half-month high of $ 86.44 a barrel. US crude West Texas Intermediate rose 2.6% to $ 84.28. Both Brent and U.S. futures entered overbought territory for the first time since late October.

The rise in bond yields weighed on unprofitable gold, with a 0.31% drop in spot gold to $ 1,816.53 an ounce.

“It’s clearly the impact of the tightening of monetary policy that is being felt in the markets here,” said Guillaume Paillat, Aviva Investors’ multi-asset portfolio manager.

Paillat, who expects at least four Fed rate hikes this year, said it was “practically a deal” for the tightening cycle to begin in March.

“What matters in the next few days will be more about the gains,” he added. “There’s still a bit of room for gains to surprise on the upside.”

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Report by Koh Gui Qing and Elizabeth Howcroft; edited by Jonathan Oatis and David Gregorio

Our standards: Thomson Reuters’ principles of trust.

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