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Take Five: Policymakers under pressure

1/TANTRUMS WITHOUT TAPER What happened to keeping borrowing costs in check? All of a sudden, central banks are grappling with rising bond yields that could threaten recovery prospects. February is ending with some of the biggest bond moves in years, even after soothing noises from Federal Reserve Chair Jerome Powell, European Central Bank boss Christine Lagarde and Reserve Bank of New Zealand Governor Adrian Orr. Australian and New Zealand 10-year yields have soared 70 basis points each — Australia’s biggest monthly yield jump since 2009. U.S. 10-year yields are set ...

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The bond market is betting on a red hot economy and stocks don’t like it

Growing inflation concerns, optimism the economy could surge and some technical factors are combining to drive interest rates higher at a rapid clip. But on Thursday, for the first time, the market has begun to question how long the Fed can stay on hold when the economy could come thundering back. Interest rates on the long end, meaning 10-year and 30-year yields, have been rising, but they were joined Thursday by 2-year and 5-year yields, an area impacted more directly by the Fed. Yields rise when prices fall. Bond yields ...

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Column: Tantrum without the taper

If there’s no taper, why the tantrum? A surge in government bond yields this month and related wobble in equities has markets harking back to 2013’s “taper tantrum” — when the prospect of the Federal Reserve winding down its bond-buying nearly doubled 10-year U.S. Treasury yields in four months and briefly knocked world shares by 10%. This year’s moves, so far, are less than half that magnitude, and the tentative comparison runs further aground. Eight years ago, the Fed did indeed signal a tapering of its monthly bond purchases, in ...

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EU to consider lessons from frenzied retail trading on Wall Street

The European Union will consider potential lessons from the recent frenzied trading by retail investors on Wall Street in its broad review of consumer protection in markets, a senior European Commission official said. The rise of retail investors in share trading is a trend that cannot be prevented but it has to be managed, said John Berrigan, head of the EU executive’s financial services unit. “We want to take a European perspective and not assume that what happened in the U.S. can happen here,” Berrigan told an EU online event. ...

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Stock markets hit by bond whiplash

Global stocks fell on Friday, with emerging market and Asia shares hardest hit, as a recent rout in global bond markets spooked investors amid fears the heavy losses suffered could trigger distressed selling in other assets. MSCI’s Emerging Markets equity index suffered its biggest daily drop in nearly 10 months and was 3.1% lower, while European shares were deep in the red, with the STOXX 600 down 1.1%. The MSCI world equity index, which tracks shares in 50 countries, was 1.1% lower and heading for its worst week in a ...

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World stocks’ dance to continue, but inflation could mute the music: Reuters poll

The bull-run in global stocks fuelled by cheap cash and reflation hopes will continue for at least another six months but a rise in bond yields as inflation expectations grow could throw a spanner in the works, Reuters polls found. Despite severe economic damage from the pandemic, MSCI’s global stock index — which tracks shares across 49 countries — notched up all-time highs this month, having risen over 70% since hitting rock-bottom in late March amid ample liquidity from central banks and massive fiscal stimulus. In recent trading sessions, world ...

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European shares drop as bond rout sparks profit taking

European stocks fell on Friday as investors booked profits in high-flying technology shares due to concerns over rising inflation and interest rates on the back of a jump in bond yields. The benchmark European stock index was down 0.6%, paring earlier losses but still on track to record its first weekly fall this month. London’s FTSE 100 slipped 0.2% and Germany’s DAX lost 0.1%, both well off session lows. “Equity markets across the U.S. and Europe are quite expensive now and with bond yields constantly rising, the fixed income market ...

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Stocks rise, bond yields too – despite central banker talk-down efforts

World stocks clawed back towards record highs on their third day of gains on Thursday as the dollar dropped to a three-year low, after top Federal Reserve and European Central Bank officials attempted to talk down rising bond market yields. There was a lot to keep tabs on. A renewed retail frenzy re-ignited the likes of GameStop, bets on $70 a barrel oil and a near decade-high in copper prices rallied commodity currencies [/FRX] – and despite all the central bank talk, bond yields were still rising. [GVD/EUR] MSCI’s world ...

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Bubbles, bubbles bound for trouble?

The $6.2 billion-an-hour rise in the value of world stocks since March was dubbed the “mother of all asset bubbles” by BofA analysts last week – and all of a sudden there is a high-pitched hissing sound. Electric car doyen Tesla, which raced up 750% in last year’s frenzy, skidded into the red for 2021 on Tuesday, hit by a selloff of tech stocks and a plunge in Bitcoin, in which the carmaker recently invested $1.5 billion. Both are technically in bear markets, defined as down 20% from their latest ...

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Banks, miners lead European markets higher as Fed calms inflation woes

European shares rose on Thursday, led by sectors expected to benefit from a broader economic recovery, as the U.S. Federal Reserve signalled it would maintain a loose monetary policy, while Standard Chartered fell as its profit slumped. Shares in the British bank slipped 5% despite it restoring its dividend and reaffirming long-term profit goals in a display of confidence about its ability to recover from the COVID-19 pandemic. The wider European banking index, however, jumped 1.4%, benefiting in part from higher bond yields, which have risen on bets of a ...

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European shares strengthen, but tech stocks under pressure

European shares opened generally higher on Wednesday but world shares remained in the red after a weak Asian session, even after Fed Chair Jerome Powell pushed back against inflation fears. Falling tech stocks pulled Asian markets lower overnight, as recent gains in U.S. Treasury yields put lofty valuations under pressure. In his testimony before the U.S. Senate, Federal Reserve Chair Jerome Powell did not seem too worried about rising yields, telling Congress they were a statement on the market’s confidence in the pandemic recovery. The 10-year U.S. Treasury yield edged ...

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Stocks struggle as tech slide erases commodities surge

World shares struggled on Tuesday as a rally in commodity-related assets gave in to pressure on heavily weighed tech stocks and investors awaited reassurance from U.S. Federal Reserve Chair Jerome Powell on the path for monetary policy in United States. European tech stocks were on set for their worst day in four months, down 2.7%, and futures on the Nasdaq fell 1.5% after losses in stocks like Apple and Tesla dragged the index down 2.5% on Monday. “The prospect of a less dovish tone from central banks, sparked by rising ...

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European shares fall on bleak earnings; HSBC slips

European shares reversed early gains to trade lower on Tuesday as mixed corporate earnings updates overshadowed a boost from strong commodity prices, while British bank HSBC fell after abandoning its long-term profitability targets. HSBC Holdings dropped 1.5% after its annual profits fell sharply due to the COVID-19 pandemic, while it unveiled a revised strategy focused mainly on wealth management in Asia. The benchmark euro zone stock index was down 0.8%. Tech and healthcare stocks fell the most, while oil and gas and travel shares gained nearly 1%. “Investors are cautiously ...

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World shares dip as bond yields, commodities surge

World shares sank on Monday as expectations for faster economic growth and inflation battered bonds and boosted commodities, while rising real yields made equity valuations look more stretched in comparison. MSCI’s All Country World Index, which tracks shares across 49 countries, was down 0.25% by midday in London. The pan-European STOXX 600 index was down 0.6%, hitting its lowest in 10 days. Germany’s DAX and France’s CAC 40, and Britain’s FTSE 100 fell 0.5% each. Spain’s IBEX 35 index and Italy’s FTSE MIB lost 0.6% each. [.EU] S&P 500 futures ...

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Central bank ‘punch bowl’ still brimming for markets

Central bank support for pandemic-hit economies looks to endure well past the recovery in output, leaving investors little option but to keep chasing a parabolic bull market until the fabled “punch bowl” is eventually removed. William McChesney Martin – the longest serving Federal Reserve chief between 1951 and 1970 – is credited with the famous quote about the Fed’s main job being to “take away the punch bowl just as the party gets going” – or tighten credit once the economy recovers from recession. But an assumption his maxim will ...

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