ETX Capital Daily Market Bite, 19th August, 2013: Stocks And Bonds Fall On Fed Taper Talk
August 19, 2013 8:23 am
August 19th, 2013, Daily Market Bite from Ishaq Siddiqi Market Strategist
European equities decline [FTSE100 off 24 points/EuroStoxx50 off 18 points] but gold nudges higher by 3 bucks and the US dollar is performing better than most currency rivals. Core government bonds are under pressure, triggering spikes for US, UK and German bond yields. A new week but the same old story — “taper talk” keeps the market feeling pensive, so investors would rather refrain from taking positions than to get involved. The most notable move in financial markets over the last 24-hours is of course, the US 10-year Treasury yield spiking to 2.84%, the highest level since July 2011.
UK and German bond yields respond accordingly to the rise in US T’s, rising to 2.7% and around 1.8% respectively. The growing optimism over the US economy/prospects of September Fed tapering drives the spike in bond yields, which are widely seen as unwelcomed due to the negative impact on growth at a time when economies are just starting to show tangible signs of recovery. This recent spike will not be welcomed by central bankers too — both the BOE’s Carney and the ECB’s Draghi have expressed their views on rising yields being a drag on economic growth.
Asian markets feel the heat off the back on the rise in borrowing costs in developed nations — the improvement in developed economies and prospects of reduced liquidity in the global market sends investors switching out of emerging markets. India’s market receives a major hit on this — the national index drops near 2% for a second consecutive session of losses while the rupee hits another fresh low against the US dollar.
With no major economic releases on the agenda Monday, traders are left adjusting their portfolios in anticipation of Fed tapering next month. Additionally, the Fed’s meeting minutes from the latest policy meeting, due Wednesday will be a major event-risk in the market as a number of Fed members have vocally supported tapering next month. If we see more unity on tapering by the FOMC, the market will view it as a solid signal of tapering in September and will likely continue dumping equities and bonds in response.
August 19th, 2013, Daily Market Bite from Ishaq Siddiqi Market Strategist
European equities decline [FTSE100 off 24 points/EuroStoxx50 off 18 points] but gold nudges higher by 3 bucks and the US dollar is performing better than most currency rivals. Core government bonds are under pressure, triggering spikes for US, UK and German bond yields. A new week but the same old story — “taper talk” keeps the market feeling pensive, so investors would rather refrain from taking positions than to get involved. The most notable move in financial markets over the last 24-hours is of course, the US 10-year Treasury yield spiking to 2.84%, the highest level since July 2011.
UK and German bond yields respond accordingly to the rise in US T’s, rising to 2.7% and around 1.8% respectively. The growing optimism over the US economy/prospects of September Fed tapering drives the spike in bond yields, which are widely seen as unwelcomed due to the negative impact on growth at a time when economies are just starting to show tangible signs of recovery. This recent spike will not be welcomed by central bankers too — both the BOE’s Carney and the ECB’s Draghi have expressed their views on rising yields being a drag on economic growth.
Asian markets feel the heat off the back on the rise in borrowing costs in developed nations — the improvement in developed economies and prospects of reduced liquidity in the global market sends investors switching out of emerging markets. India’s market receives a major hit on this — the national index drops near 2% for a second consecutive session of losses while the rupee hits another fresh low against the US dollar.
With no major economic releases on the agenda Monday, traders are left adjusting their portfolios in anticipation of Fed tapering next month. Additionally, the Fed’s meeting minutes from the latest policy meeting, due Wednesday will be a major event-risk in the market as a number of Fed members have vocally supported tapering next month. If we see more unity on tapering by the FOMC, the market will view it as a solid signal of tapering in September and will likely continue dumping equities and bonds in response.
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