U.S. Treasuries rose and European stock markets fell due to growing economic concerns
As concerns about inflation and rising interest rates were replaced by concerns about the recovery of the global economy from the coronavirus crisis, US government bonds built on this week’s sharp rise and European stock markets fell.
The yield on the 10-year U.S. Treasury bond is inversely proportional to the price. It was close to 1.8% in March as traders bet that the U.S. Central Bank would slow down its pandemic emergency debt purchases in response to a strong rebound in economic growth, down 0.05 percentage points to 1.26%.
This has caused the global benchmark bond yield, which affects the borrowing costs of companies and households around the world, to fall to its lowest level since early February, and is expected to hit its biggest weekly decline since June 2020.
At the same time, European stock markets also experienced a broad correction on Thursday, and these companies were flooded with cyclical industry companies benefiting from economic growth. The regional Stoxx Europe 600 index fell 1.1% in early trading, while the UK FTSE 100 index fell 1.4% and the German Dax index fell 1.2%.
The sell-off in Spain and Italy was even worse, with the benchmark stock indexes Ibex 35 and FTSE MIB of these two countries falling by more than 2% each. Futures tracking the Wall Street S&P 500 index fell 1%.
Analysts pointed out that spread The Delta variant of the coronavirus, weaker-than-expected US service industry data, and China’s potential economic slowdown are catalysts for the recent shift in market sentiment.
in minute At the latest meeting released on Wednesday, the Federal Reserve stated that its officials believe that “the uncertainty surrounding the economic outlook has increased,” indicating that it will not rush to reduce the $120 billion in monthly debt purchases that have boosted financial markets since last year. plan. March.
The U.S. dollar index, which measures the U.S. dollar against major currencies, has stabilized near its highest point since early April. The oil benchmark Brent crude fell 1.4% to US$72.40 per barrel.
Maarten Geerdink, head of European equity at NN Investment Partners, said: “You can see that the market has some volatility regarding the future of economic recovery, so it makes sense to buy safe-haven assets such as government bonds in the short term.”
“But this may be a knee-jerk reaction to a soft data,” he added, citing data from the Institute of Supply Management on Tuesday, which showed growth in activity in the U.S. service industry Much slower Compared with the previous month in June, “price movements are now self-sufficient”.
As investors turned to safe-haven assets in the region, the German 10-year bond yield fell 0.04 percentage points to minus 0.34%, the lowest level since March.
China’s 10-year treasury bond yield fell by 0.06 percentage points to a little over 3% Say It will “timely” lower bank deposit reserve requirements to keep funds flowing in the economy.
Daiwa economist Chris Scicluna said that China’s cut in the reserve requirement ratio also raised concerns that China’s second-quarter GDP report to be released next week “may not meet market expectations.” . In other parts of Asia, due to the rapid spread of Delta mutation infection, Japan will declare a state of emergency in Tokyo.
Maria Municchi, M&G’s multi-asset portfolio manager, said investors in Europe and the United States should remind themselves that there is “nothing unhealthy” in these two economies. The Federal Reserve predicts that the US GDP will grow by 7% this year and will slow to 3.3% by 2022. The European Central Bank predicts that the Eurozone economy will grow by 4.6% this year, and the rate of expansion in the second year will be similar.
“We come from a complete [economic] The closure and reopening will now be normalized,” Munic said. “This does not mean that the underlying economy is unhealthy. “