Stock and bond markets around the world limped to the end of a bruising week on Friday, reflecting an investor scramble to position for rising interest rates as global economic growth slows under the weight of Iran war-related economic damage.<\/p>\n
U.S. Treasury yields hit their highest in around a year as traders anticipated the Federal Reserve \u2060would be \u200bforced to hike rates to rein in inflationary pressures stemming from energy shocks. <\/p>\n
The global move higher in bond yields extended into Canada, where both the five- and 10-year yields reached two-year highs, and were up more than 10 basis points. The moves suggest there will be more upward pressure on GIC and fixed mortgage rates in Canada in the days ahead.<\/p>\n
U.S. stock indexes opened around 1 per cent lower, extending losses around the world highlighted by declines of 2 per cent in Germany and 1.8 per cent in Britain.<\/p>\n
The S&P\/TSX Composite Index underperformed Wall Street, trading down 1.5 per cent in morning trade. Higher global bond yields was sending investors to the U.S. dollar. A higher greenback makes commodities more expensive to buy globally, and depressed gold prices sent the TSX\u2019s heavily weighted materials sector to a sharp loss. <\/p>\n
Investors said the broad selloff reflected the realization that the war in Iran was likely to continue to weigh on economic output around the world, following a meeting between the U.S. and China that yielded no significant headlines on the Middle East situation.<\/p>\n
\u201cWe expected more out \u200bof the meeting in China with Trump and it didn\u2019t seem like there was much progress made \u200cin terms of the outcome in the Middle East, and so oil\u2019s backing up again,\u201d said Mike Sanders, head of fixed income investments at Madison Investments in Madison, Wisconsin.<\/p>\n
The market was \u201cexpecting maybe a resolution somewhere down the line but now that timeline\u2019s extended a little bit.\u201d<\/p>\n
UK gilt yields surged again, hitting their highest in decades, as pressure mounts on Prime Minister Keir Starmer to resign over his Labour Party\u2019s hefty losses in local elections, and as challengers emerge.<\/p>\n
Yields across the euro zone jumped, while Japanese bond yields hit record highs.<\/p>\n
Italian 10-year bonds were \u200camong the worst performers, with \u200byields up 11 basis points to around \u200c3.89 per cent, bringing the rise for the week to 16 bps, while benchmark German Bund yields rose almost 7 bps to around 3.12 per cent, up 11 bps this week.<\/p>\n
Friday\u2019s market \u200bswings also reflected a sense among many investors that trading in U.S. stocks had grown disconnected from \u2060global economic fundamentals, due to excitement driven by the surging corporate profits tied to artificial intelligence investments.<\/p>\n
U.S. indexes have surged back to record \u2060highs in the month-and-a-half since the markets\u2019 Iran war scare bottomed out at the end of March, a surge that raised eyebrows because it seemed at odds with sharply higher energy prices and related disruptions.<\/p>\n
\u201cThere\u2019s \u200ba realization that the market had gotten way ahead of itself,\u201d said Kenny Polcari, chief market strategist at Slatestone Wealth Management in Jupiter, Florida. \u201cIt wasn\u2019t paying enough attention to what the bond market and economic data is telling it. It was caught up in this momentum AI trade.\u201d<\/p>\n
Inflation data this week has shown consumers and businesses are starting to see big increases in price pressures as a result of the war, which has pushed up the price of crude oil by more than 50 per cent.<\/p>\n
\u201cWe see a reset of this global bond risk \u2060premium because the market is just realising we\u2019re living in a much more volatile inflation climate,\u201d Daniel von Ahlen, senior macro strategist at GlobalData TS Lombard, said.<\/p>\n
Two-year yields, which are the most sensitive to changes in expectations for inflation and interest rates, have risen most sharply this week, but yields on longer-dated bonds have started to increase as well, reflecting investors\u2019 concern about the longer-running impact from a price shock.<\/p>\n
\u201cGlobal yields have probably come to the point where they are high enough to hurt sentiment. Between a resilient global economy powered by AI build-out and elevated energy prices, central banks are probably more worried about inflation,\u201d DBS senior rates strategist Eugene \u2060Leow said.<\/p>\n
Money markets show traders see a 60 per cent chance of the Fed delivering a rate hike this \u200byear. Before the war, at least two cuts had been priced in.<\/p>\n
The rates market also shows that just four out of 24 of the world\u2019s most influential central \u2060banks have any meaningful chance of delivering a rate cut this year, with the vast majority tilted in favour of hikes, according to LSEG data.<\/p>\n
\u201cIt\u2019s not just inflation, but also higher deficits that should be the focus,\u201d \u200cJefferies strategist Mohit Kumar said.<\/p>\n
\u201cWe are likely to see a number of support measures for fuel subsidies announced in the coming months.\u201d<\/p>\n
Kumar said he anticipated a steepening bias \u200bin government bond curves, referring to a market dynamic in which longer-dated bond yields rise more quickly than those of shorter maturities.<\/p>\n
Ten-year yields across the G7 nations have risen by an average of 17 bps this week, compared with an average rise of 12 bps for two-year G7 debt yields. Benchmark 10-year Treasury notes were last yielding 4.58 per cent, up 12 bps on the day and around their highest since last June.<\/p>\n
Benchmark 10-year gilts, which have risen \u200bby over 20 bps this week, were up another 15 bps at 5.14 per cent on Friday, while 10-year Japanese yields closed up 7 bps at 2.7 per cent.<\/p>\n","protected":false},"excerpt":{"rendered":"Stock and bond markets around the world limped to the end of a bruising week on Friday, reflecting…\n","protected":false},"author":2,"featured_media":671594,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[901,888,902,879,877,903,45,49,48,876,895,896,891,878,875,46,549,295,894,887,914,880,881,893,889,890,884,904,885,909,910,912,907,911,905,908,882,898,899,714,897,906,865,61,900,892,886,883,913],"class_list":["post-671593","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business","tag-alberta","tag-arts-news","tag-bc","tag-breaking-news","tag-breaking-news-video","tag-british-columbia","tag-business","tag-ca","tag-canada","tag-canada-news","tag-canada-sports","tag-canada-sports-news","tag-canada-trafficcanada-weather","tag-canadian-breaking-news","tag-canadian-news","tag-economy","tag-education","tag-environment","tag-federal-government","tag-foreign-news","tag-globe-and-mail","tag-globe-and-mail-breaking-news","tag-globe-and-mail-canada-news","tag-government","tag-life-news","tag-lifestyle","tag-local-news","tag-manitoba","tag-national-news","tag-new-brunswick","tag-newfoundland-and-labrador","tag-northwest-territories","tag-nova-scotia","tag-nunavut","tag-ontario","tag-pei","tag-photos","tag-political-news","tag-political-opinion","tag-politics","tag-politics-news","tag-quebec","tag-sports-news","tag-technology","tag-travel","tag-trudeau","tag-us-news","tag-world-news","tag-yukon"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/671593","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=671593"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/671593\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/671594"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=671593"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=671593"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=671593"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}