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Stocks hit two-year lows, sterling comes under fire

World shares sank to two-year lows on Wednesday, hammered by spiralling borrowing costs that intensified fears of a global recession and sent investors into the arms of the safe-haven dollar. Yields on U.S. 10-year Treasuries topped 4.0% for the first time since 2010 as markets wagered the Federal Reserve might have to take rates past 4.5% in its crusade against inflation. The pound came under fire again on the back of a renewed surge in UK bond yields that have driven the government’s borrowing costs above those with heavier debt ...

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Funds’ pivot hopes get smoked as Fed doubles down

Hedge funds went into the Fed’s Sept. 20-21 policy meeting betting on a sign that a dovish pivot is looming onto the horizon. They got a pivot, but unfortunately for them it was a double-down, hawkish signal that interest rates will continue rising until inflation is firmly heading back towards target, no matter the economic fallout. The latest Commodity Futures Trading Commission’s report shows that speculators cut their short positions in interest rate, S&P 500, and Treasuries futures in the week to Sept. 20, and significantly reduced their net long ...

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World stocks edge above Nov 2020 lows, sterling recovers some ground

World stocks picked up from 21-month lows on Tuesday and sterling rallied after hitting record lows versus the dollar a day earlier on UK plans for tax cuts, as market slides ran out of steam. U.S. S&P futures bounced 0.94% after Wall Street fell deeper into a bear market on Monday, benchmark 10-year Treasury yields dipped from the previous session’s 12-year high and the dollar eased from 20-year highs on a basket of currencies. Markets remain nervous, however, after U.S. Federal Reserve officials on Monday said their priority remained controlling ...

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Credit markets see less risk of recession, earnings may challenge that

U.S. high-yield corporate debt markets may be underpricing for the risk of a recession even as Treasuries and macroeconomic indicators reflect rising growth fears, but that may be tested soon with corporate earnings projected to worsen. Leveraged loans and high-yield corporate bond prices have fallen from record highs reached early this year as rates increase and their spreads over benchmark rates widen, but they still reflect a relatively rosy economic outlook. “Credit spreads are too tight, they are not adequately reflecting the risk of recession. Other models that we use, ...

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Pound plunge the latest ill omen as market stress rises

Sterling slumped to a record low on Monday, and a renewed selloff in British gilts pushed euro zone yields higher as the fall out from last week’s fiscal statement in Britain roiled markets for a second session. Share markets around the world also slid as concerns about high interest rates continued to put pressure on the financial system, though in a rare recent example of a news event having a smaller market impact than feared, reaction to Italy’s election result was muted. The pound plunged nearly 5% at one point ...

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After feverish week, global investors lick wounds and brace for more chaos

Global investors are preparing for more market mayhem after a monumental week that whipsawed asset prices around the world, as central banks and governments ramped up their fight against inflation. Signs of extraordinary times were everywhere. The Federal Reserve delivered its third straight seventy-five basis point rate hike while Japan intervened to shore up the yen for the first time since 1998. The British pound slid to a fresh 37-year trough against the dollar after the country’s new finance minister unleashed historic tax cuts and huge increases in borrowing. “It’s ...

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Key events in EMEA next week

Czech Republic: Rates should remain unchanged again Next Thursday, the second monetary policy meeting will be held under the leadership of the new CNB board. Nothing has changed in our forecast since the last meeting and we expect rates to remain unchanged this time, too. This is indicated by both the statements of the board members and the latest inflation numbers, which were well below the CNB’s forecasts in July and August. The same result can be expected from the September number (our preliminary forecast is for 17.6% year-on-year). On ...

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Funds flock to Southeast Asian startups as China loses sheen

Southeast Asian startups are enjoying a boom in fundraising exercises by venture and buyout funds that are chasing bigger returns and turning away from regulatory turmoil in Chinese markets, even at the risk of slower growth. Firms such as Insignia Ventures Partners and SoftBank-backed East Ventures are among those that have raised a combined total of billions for startups over the past year as the region’s 650 million people take to digital platforms. “Some of the world’s largest institutions are coming up with strategies now to invest and deploy capital ...

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China bond funds restrict inflows as investors pile in to take shelter

A growing number of bond funds in China have suspended taking subscriptions or capped inflows, amid signs money is gushing into fixed income products as stocks wobble and banks cut deposit rates. On Friday (Sep 23) alone, more than a dozen bond funds announced measures to restrict new purchases, according to fund managers’ filings. Around 40 short-term bond funds made similar statements in the past 20 trading days, according to Chinese newspaper China Fund. Xia Haojie, bond analyst at Guosen Futures, said bond funds looked increasingly attractive for investors at ...

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Bond sell-off worst since 1949, investor sentiment plummets – BofA

Global government bond losses are on course for the worst year since 1949 and investor sentiment has plummeted to its lowest since the financial crisis, BofA Global Research said in a note on Friday. This year’s dramatic bond tumble threatens credit events and a potential liquidation of the world’s most crowded trades, including bets on the dollar that have taken the greenback to multi-year highs against other currencies and bets on U.S. technology stocks, the bank said. Bond funds recorded outflows of $6.9 billion during the week to Wednesday, while ...

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Some U.S. firms wait to issue bonds in a bet rates will come down

Some U.S. companies with the best credit ratings are looking at shorter-term debt solutions as a bridge to a better funding environment in a year or two, slowing new bond issuance despite demand from investors. The shorter-term debt solutions include getting bank term loans, drawing down on bridge loans and issuing bonds with maturities of five years or less, debt capital market bankers and credit investors said. While loans can be cheaper than issuing bonds, shorter-term debt is currently more expensive than longer tenors. With the move, these companies are ...

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Hedge funds dashed to exit energy positions last week – data

Hedge funds around the world fled positions in energy stocks, bonds and futures last week just in time to miss this week’s whipsaw moves in oil, according to data from two banks. Funds dropped their long and short positions in energy stocks, bonds and futures in the week ending Sept. 16 “more than any other time in recent months”, and more than any other sector of the economy in the last 20 days, according to notes by Morgan Stanley (NYSE:MS) and JP Morgan respectively. It could be a sign that ...

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UK market meltdown? Nothing to see here, Treasury minister says

Britain’s deputy finance minister on Saturday played down a historic collapse in the pound and government bonds in response to the country’s new economic growth plan, which sent international investors heading for the exit. The pound slumped 3.6% on Friday below $1.09, a new 37-year low against the dollar, while gilts suffered their worst day in decades as the market digested finance minister Kwasi Kwarteng’s announcement of a borrowing-funded drive for growth. “Let’s be clear, the interest rates payable on government gilts is about the same in the United Kingdom ...

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Key events in developed markets next week

US: Housing numbers in focus after Fed’s 75bp hike After the Federal Reserve’s 75bp rate hike this week and Jerome Powell’s commentary that the Fed is prepared to sacrifice growth and jobs to ensure inflation comes back to target, we will be hearing from many more officials over the coming week. Given the strong clustering of near-term forecasts for rates and the economy, the hawkish comments hinting at another 75bp hike in November are likely to come thick and fast. The data calendar is fairly light with housing numbers the ...

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Investors wonder when vicious sell-off in U.S. stocks will end

A week of heavy selling has rocked U.S. stocks and bonds, and many investors are bracing for more pain ahead. Wall Street banks are adjusting their forecasts to account for a Federal Reserve that shows no evidence of letting up, signaling more tightening ahead to fight inflation after another market-bruising rate hike this week. The S&P 500 is down more than 22% this year. On Friday, it briefly dipped below its mid-June closing low of 3,666, erasing a sharp summer rebound in U.S. stocks before paring losses and closing above ...

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