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US government debt sold off on Thursday as investors priced in more aggressive policy tightening by the Federal Reserve this year after chair
Jay Powell said that a jumbo interest rate increase would be considered at the central bank’s May meeting.
"Powell, in a panel discussion at the IMF on Thursday said that it was appropriate to move “a little more quickly” in the central bank’s fight against inflation, and explicitly said that a 0.5 percentage point interest rate increase was on the table in May."
"The futures market has priced in a 0.5 percentage point increase at each of the next three meetings in May, June and July."
"The market is betting that the Fed’s policy rate will be 2.7 per cent by the end of this year, from a little over 0.25 per cent today."
"The two-year Treasury yield, which moves with interest rate expectations, blew past the three-year high it hit on Wednesday to reach 2.73 per cent, its highest level since December 2018."
"The 10-year Treasury yield, a benchmark for borrowing costs worldwide, rose to a high of 2.95 per cent, before retracing some of that move."
“The Fed really and truly is committed to combating inflation.
"And that is their singular focus right now,” said Gregory Whiteley, a portfolio manager at DoubleLine Capital."
“The whole board has moved hawkish.”
The sell-off in rates pulled stocks lower as bets on higher borrowing costs tempered upbeat earnings reports from Tesla and American Airlines.
"The S&P 500 trimmed gains earlier in the session to close 1.4 per cent lower on the day, while the technology-heavy Nasdaq Composite dropped 2.1 per cent."
The latter gauge had closed 1.2 per cent lower on Wednesday after a drop of more than one-third for Netflix hit other streaming companies.
"Tesla’s shares closed up 3.3 per cent after the group topped analysts’ expectations, with revenue more than doubling year on year for the latest quarter at $18.7bn."
"Shares in American Airlines rose 3.8 per cent after Robert Isom, chief executive, wrote in a letter to employees that demand was “as strong as we’ve ever seen”, noting that the company expected to be profitable in the second quarter."
"Hedge funds helped push equities higher earlier this week, as they sought to unwind negative bets."
"They were net buyers of North American equities on Tuesday, according to a note sent to clients by Morgan Stanley’s prime brokerage unit."
"Elsewhere, short-term government borrowing costs in the eurozone shot to an eight-year high after central bank officials said they could raise interest rates as soon as July."
"The yield on Germany’s two-year bond — a benchmark for the entire euro area that closely tracks expectations of the European Central Bank’s interest rates — climbed as much as 0.15 percentage points to 0.19 per cent, its highest level since 2014."
"Longer-dated bonds were also hit, with Germany’s 10-year yield adding 0.09 percentage points to reach 0.94 per cent."
"Luis de Guindos, ECB vice-president, said in an interview with Bloomberg that the central bank’s first interest rate rise since 2011 could come as soon as July."
"His colleague Pierre Wunsch said in a separate Bloomberg interview that the ECB could lift policy rates above zero before the end of 2022, bringing eight years of sub-zero rates in the eurozone to an end."
"The shift in communication has shaken markets that, as recently as the start of the year, were expecting the ECB to move more slowly in tightening monetary policy than its counterparts in the UK and US."
"“Four months ago, [ECB president Christine] Lagarde said it was very unlikely that they’d raise rates in 2022 and now we have . "
"governors speaking about a rate hike in July,” said Bastien Drut, chief thematic macro strategist at CPR Asset Management."
“Everything has changed.”
"In the UK, short-term government bonds were also under pressure, with the two-year gilt yield rising to 1.74 per cent, its highest level since 2008."
"In European equities, the regional Stoxx 600 gauge closed 0.3 per cent higher."
Additional reporting by Laurence Fletcher
"US stocks dipped on Wednesday, pulled lower by a dramatic drop in streaming service Netflix, despite encouraging earnings reports elsewhere, which suggested companies could resist the effect of rising inflation and slowing economic growth."
"Netflix fell 35 per cent on Wednesday after delivering a gloomy update the evening prior, the biggest loser in both the tech-heavy Nasdaq index and the blue-chip S&P 500."
"The Nasdaq closed the day down 1.2 per cent, while the S&P ended the day down 0.1 per cent."
"The Netflix results soured investors on the sector more broadly, with Walt Disney — the owner of Disney Plus — down 5.6 per cent, Roku down 6.2 per cent and music streamer Spotify down 10.9 per cent."
"Still, companies including Procter & Gamble, Danone and Heineken provided reassurance about the health of consumers on both sides of the Atlantic."
The rally in US stocks over the past two days was helped by so-called short covering — when traders who had bet on declines need to purchase stock to close their positions — according to a note sent to clients of Morgan Stanley’s prime brokerage.
"A recent sell-off in government bonds also paused, further easing the pressure on stock markets."
The yield on the benchmark 10-year US Treasury fell 0.1 percentage points to 2.8 per cent.
"Higher yields reflect lower prices, and rising yields on low-risk government bonds reduce the appeal of riskier assets such as stocks."
"The Federal Reserve on Wednesday released its latest beige book report, an anecdotal review of economic conditions."
"The report highlighted continued inflationary pressures, as well as the potential for higher prices and geopolitics to slow growth."
"The report offered “further confirmation of the realities of the current environment for the Fed”, said Ian Lyngen, head of US rates strategy at BMO Capital Markets."
"The Fed has already signalled its willingness to increase interest rates by 0.50 percentage points — bigger than the typical quarter-point rise — at its May meeting, the possibility of which has been fully priced in by futures markets."
"The yield on Germany’s 10-year Bund fell 0.06 percentage points to 0.85 per cent, and the 10-year UK gilt yield fell 0.05 percentage points to 1.91 per cent."
The euro struck a nearly two-year low this week as the European Central Bank stuck with its plans to gradually reduce economic stimulus measures as it balances record inflation with the economic impact of the war in Ukraine.
"The common currency fell below $1.08 for the first time since May 2020 following the central bank’s monetary policy meeting on Thursday, and remained lodged near that level on Friday."
"The euro has shed almost 5 per cent against the dollar so far this year, adding to a 6.9 per cent fall in 2021."
The ECB opted to leave interest rates unchanged as expected after its latest policy meeting but president Christine Lagarde noted that “downside risks to the growth outlook have increased substantially as a result of the war in Ukraine”.
"Inflation will remain high over the coming months, mainly because of rising energy costs, she added."
"Carsten Brzeski, head of macro for ING Research, attributed the drop in the currency to investors getting “ahead of themselves” in recent weeks, expecting eight interest rate rises by the end of 2023."
“Lagarde’s comments . . .
"confirmed the rather gradual process of normalisation,” he said."
The central bank said economic data released since its last meeting “reinforce its expectation” that its asset purchase programme (APP) should end in the third quarter of the year.
"Despite that, Frederik Ducrozet, strategist at Pictet Wealth Management, said the currency’s decline was down to the lack of a “strong hint or firm commitment” from Lagarde that the APP would end in June."
"“It’s a reaction to the positioning of markets ahead of the conference,” he said."
"Inflation in the euro area has sailed higher over the past year, with price growth hitting 7.5 per cent last month."
"Both the US Federal Reserve and the Bank of England have already begun raising interest rates in an attempt to damp intense price rises, but the ECB has indicated that it must first cease its bond-buying before increasing borrowing costs."
"ECB policymakers also need to contend with the impact of the war in Ukraine, which is expected to take an outsized toll on Europe’s economy."
"“The supply shock implied by the war implies a difficult trade-off for the governing council, given weaker growth and higher inflation,” Goldman Sachs analysts noted."
The investment bank expects the ECB to raise rates in September but said a July increase would not be out of the question if inflation pressures picked up.
The ECB’s relatively dovish tilt failed to stem selling in the bloc’s bond markets.
"The German 10-year Bund yield increased 0.13 percentage points this week to 0.84 per cent, having started the year at minus 0.18 per cent."
"US government bonds also took a hit this week, with the 10-year yield rising 0.12 percentage points to 2.83 per cent."
"Unexpectedly weak core US inflation figures released earlier this week had led investors to temper their expectations about how aggressively the Federal Reserve would raise interest rates, prompting a rally in bond prices."
"However, in an interview on Thursday John Williams, president of the New York branch of the Federal Reserve, stressed the need to move interest rates “back to more neutral levels”."
Most European debt and equity markets were closed on Friday for a public holiday.
Wall Street markets were also closed.
"America’s benchmark S&P 500 stock index fell 2.1 per cent for the week, with the Nasdaq Composite off 2.6 per cent."
Europe’s Stoxx 600 was little changed while MSCI’s broad measure of stocks in the Asia-Pacific region fell 1.4 per cent.
US government debt extended a rally on Wednesday as traders pared back their bets on an aggressive series of interest rate rises from the Federal Reserve this year.
"The two-year Treasury yield, which is highly sensitive to monetary policy expectations, sank as much as 0.14 percentage points to 2.27 per cent, its lowest level this month."
Yields fall when prices rise.
"It later reversed some of the move to trade at 2.35 per cent, down 0.06 percentage points for the day."
"Futures markets show investors now expect the Fed to raise rates by a further 2 percentage points by the end of the year, down a quarter of a percentage point from earlier in the week."
"The moves came after Tuesday’s US consumer price data showed closely watched “core” inflation, which strips out volatile energy and food prices, slowed unexpectedly in March."
"The annual headline figure increased 8.5 per cent, slightly above analysts’ expectations."
“Everyone seems to think inflation’s peaking.
"So people are basically shorting rates,” said Eric Fine, a portfolio manager at VanEck."
The yield on the benchmark 10-year Treasury note fell 0.03 percentage points to 2.69 per cent.
"“The big news in the March [inflation] report was that core price pressures finally appear to be moderating,” said Andrew Hunter, senior US economist at Capital Economics, adding that supply shortages of goods and congestion at ports were showing signs of easing."
"Energy prices, a crucial driver of inflation, were expected to ease over the rest of the year, he added."
But he said the Fed was unlikely to stray from its widely trailed plan to raise rates by 0.5 percentage points at its May meeting.
"“Having been slow to realise that the initial surge wasn’t transitory, Fed officials are now being a bit too pessimistic about how quickly inflation will drop back,” Hunter said."
"Data on Wednesday showed US producer prices last month rose at an annual rate of 11.2 per cent, well above economists’ expectations."
"The shift in interest rate expectations also lifted stock markets, particularly high-growth technology stocks that are considered to be particularly vulnerable to higher rates."
"The US benchmark S&P 500 index added 1.1 per cent, while the tech-heavy Nasdaq Composite rose 2 per cent."
"Kicking off bank earnings season, JPMorgan Chase on Wednesday reported a 42 per cent year-on-year drop in net income for the first quarter, after a slowdown in dealmaking, a rise in reserves to protect against a US recession, and a $524mn loss suffered amid market turbulence following Russia’s invasion of Ukraine."
The bank’s shares fell 3.2 per cent.
"BlackRock fared better, posting $1.46bn in adjusted net income for the first quarter, up close to a fifth compared with the same period a year ago."
"In Europe, the regional Stoxx 600 share index closed the session flat."
Germany’s Dax fell 0.3 per cent and France’s
Cac 40 added 0.1 per cent.
London’s FTSE 100 added 0.1 per cent.
"Data on Wednesday showed UK inflation rose to a new 30-year high last month, led by the rising cost of fuel."
"Consumer prices increased 7 per cent year on year in March, up from 6.2 per cent the month before."
Economists polled by Reuters had expected prices to rise 6.7 per cent.
"Martin Beck, chief economic adviser to the EY Item Club, predicted prices would peak at 8.5 per cent in April before cooling later in the year as energy prices and supply chain bottlenecks eased."
"Oil prices rose on Wednesday, with international benchmark Brent crude up 4 per cent to $108.78 a barrel."
"In Asia, Hong Kong’s Hang Seng index added 0.3 per cent and China’s CSI 300 fell 1 per cent."
Topix rose 1.4 per cent and South Korea’s
Kospi gained 1.9 per cent.
"Wall Street stocks gave up earlier gains after a sharp rise in oil prices helped reignite inflation concerns, even after a crucial element of US inflation data came out lower than expected."
"The S&P 500 ended the day 0.3 per cent lower, having moved as much as 1.3 per cent higher earlier on Tuesday."
The tech-heavy Nasdaq Composite also dipped 0.3 per cent.
"Oil prices surged by more than 6 per cent, undermining an initially positive reaction to fresh US inflation data released Tuesday morning."
"Stripping out price gains for volatile items such as food and energy left the “core” US consumer price index up 0.3 per cent month on month, lower than the 0.5 per cent forecast from economists polled by Reuters."
"However, headline consumer prices rose 8.5 per cent year on year in March, up from 7.9 per cent in February, said the Bureau of Labor Statistics, marking the quickest annual rise since 1981."
"The lower core inflation reading initially brought a measure of relief for investors, who feared an inflation overshoot would heap pressure on the US Federal Reserve to tame price growth by swiftly raising interest rates — the prospect of which has unsettled global markets in recent months."
"Jim Paulsen, chief investment strategist at The Leuthold Group, said the “much weaker” than expected core inflation print was unlikely to derail the Fed’s plans to raise interest rates aggressively at its next meeting in May, however."
"The Fed last month lifted its benchmark interest rate a quarter of a percentage point, bringing the target range to 0.25 per cent to 0.50 per cent, in its first increase since 2018."
"In government debt markets, the yield on the 10-year US Treasury note, which underpins global borrowing costs, dropped 0.06 percentage points to 2.72 per cent."
"The yield on the two-year note, which closely tracks interest rate expectations, fell further, indicating investors recalibrated their expectations for interest rate rises following the data release."
"The yield on the 10-year German Bund, a proxy for European borrowing costs, dipped 0.03 percentage points to 0.79 per cent."
The yield on the government note stood at about minus 0.12 per cent at the beginning of the year.
"German investor confidence, as measured by the Zew research institute’s economic sentiment index, fell to its lowest point since the first month of the coronavirus pandemic."
"Elsewhere in equity markets, the European Stoxx 600 index declined 0.4 per cent, Germany’s Dax fell 0.5 per cent and France’s"
Cac 40 slipped 0.3 per cent.
FTSE 100 fell 0.5 per cent.
"European bank stocks were among the worst performers, with shares in German lenders Deutsche Bank and Commerzbank down more than 9 per cent and 8 per cent respectively."
"Andrew McCaffery, global chief investment officer at Fidelity International, said he was “particularly cautious” about European equities and the euro given the “likelihood” of recession."
"In Asia, Hong Kong’s Hang Seng index closed up 0.5 per cent and China"
CSI 300 added 1.9 per cent.
Topix shed 1.4 per cent and South Korea’s
Kospi fell 1 per cent.
"US stocks fell to a weekly decline for the first time in a month on Friday, as hawkish comments from Federal Reserve officials paved the way for a rapid decline in the central bank’s balance sheet and weighed on company valuations."
"The benchmark S&P 500 fell 0.3 per cent in New York, a weekly decline of 1.3 per cent."
It ended three weeks of a recovery after the initial fallout from Russia’s invasion of Ukraine.
"The technology-heavy Nasdaq Composite also declined, falling 1.3 per cent for the day and 3.9 per cent for the week."
The Fed revealed plans earlier this week to shrink its $9tn balance sheet by more than $1tn a year at the same time as it raises interest rates in an effort to combat soaring inflation.
"“While the Fed is saying that balance sheet reduction will occur ‘in the background’, that may not be the case . . . "
"The silver lining is that the Fed may not need to hike rates as much since quantitative tightening should help to slow down the economy,” said Kristina Hooper, chief global market strategist for Invesco."
"The pace of the Fed’s proposed balance sheet reduction weighed on longer-dated Treasury prices, which move inversely to yields, while the prospect of rising interest rates tends to impact shorter-dated yields more."
As attention shifted this week from rate increases to the balance sheet it helped to push yields on longer-dated Treasuries up by more than shorter-dated yields.
"In turn, this has led to a widely watched recession indicator called the yield curve — which compares short- and long-dated yields — moving back into positive territory."
"The yield on the 10-year Treasury note, which influences borrowing costs worldwide, rose to 2.7 per cent on Friday, up 0.04 percentage points on the day and taking its weekly rise to more than 0.3 percentage points."
The 2-year Treasury yield rose by a more meagre 0.06 percentage points for the week to 2.5 per cent.
"The moves follow the worst quarter of returns for the Treasury market since at least 1973, as Russia’s invasion of Ukraine exacerbated coronavirus pandemic-induced inflationary pressures, clouding the economic outlook."
"“The themes that dominated markets in the first quarter are still in play unfortunately,” said Paul O’Connor, head of Janus Henderson’s multi-asset team in the UK."
"“Every now and then, you may see a small burst of enthusiasm, but this will meet strong headwinds from central bank [monetary] tightening and the war in Ukraine — and there’s been no relief from either.”"
"Elsewhere, Europe’s benchmark Stoxx 600 share index added 1.3 per cent, boosted by bank stocks viewed as beneficiaries of rate rises."
"France’s CAC 40 share index gained 1.3 per cent, with some analysts cautioning that traders had not fully quantified the risks of Emmanuel Macron losing this month’s presidential election to far-right candidate Marine Le Pen."
Exit polls suggest Macron’s lead over his rival is much narrower than it was five years ago.
"“This could be a cause for concern and it’s not really priced in at the moment,” said Antoine Lesne, head of research and strategy at State Street’s SPDR ETF business."
"In Asia, the Hang Seng Tech index, which tracks Hong Kong-listed technology companies, dropped sharply before closing 1.1 per cent lower."
"The dollar index, which charts the US currency against six others including the euro and sterling, rose nearly 0.1 per cent to its highest level since May 2020."
"Brent crude, the oil benchmark, rose 2.2 per cent to $102.78 a barrel."
"US stocks steadied on Thursday, stanching the large losses incurred the previous day after the release of minutes from the Federal Reserve"
’s March meeting that detailed officials’ willingness to tighten policy aggressively to combat inflation.
"Wall Street’s benchmark S&P 500 stock index ended Thursday up 0.4 per cent, having closed the previous session 1 per cent lower."
"The tech-heavy Nasdaq Composite, which fell 2.2 per cent on Wednesday, rose 0.1 per cent."
"Europe’s regional Stoxx 600 share index fell 0.2 per cent after ending Wednesday 1.5 per cent lower, on concerns that the European Central Bank would follow the Fed’s rapid monetary policy tightening."
Also rattling markets were fears that sanctions against Russia could stoke higher consumer prices.
Germany’s Dax slipped 0.5 per cent while London’s FTSE 100 lost 0.5 per cent.
"The Fed minutes detailed plans to shrink its $9tn balance sheet, part of an effort to fight inflation."
"The minutes also showed that “many” policymakers viewed one or more half-point increases as appropriate if inflation remained elevated, after the Fed had raised its benchmark interest rate by 0.25 percentage points last month."
The annual pace of consumer price increases in the US soared to a 40-year high of 7.9 per cent in February.
“The Fed believes it is behind the curve.
"I think they have admitted now that they are behind the curve, and now they’re coming out swinging,” said Jack Ablin, chief investment officer at Cresset Wealth Advisors."
"In spite of that, Ablin said: “The market is taking the news relatively well."
"Given where rates are currently, the stock market should be down more than it is year-to-date."
There is a gradual acceptance in the equity world of what the rates market already believes.”
"The yield on the 10-year Treasury note continued its rise, up 0.04 percentage points to 2.64 per cent, having earlier reached a three-year high."
"A fierce sell-off in US government debt, in anticipation of the Fed’s balance sheet reduction, has lifted yields across maturities this week."
The 30-year yield also reached a three-year high.
Bond yields move inversely to their prices.
"The yield on the policy-sensitive two-year Treasury note declined 0.02 percentage points to 2.44 per cent, but remained close to its highest point in more than three years."
"Germany’s 10-year Bund yield edged 0.03 percentage points higher to 0.68 per cent as minutes of the ECB’s latest meeting showed policymakers expected eurozone inflation to “remain above target in 2023, with significant upside risks”."
"Equity markets have found support so far, however, from investors switching out of bonds, where inflation erodes the instruments’ fixed-income payments."
"The Stoxx has fallen about 7 per cent this year but is trading above its closing price on February 23, the eve of Russia’s invasion of Ukraine."
Wall Street’s benchmark S&P 500 share index is about 6 per cent higher than its February 23 level.
"“There is a rotation towards high-quality dividend paying stocks,” said Mobeen Tahir, director of macroeconomic research at ETF provider WisdomTree, adding that companies can potentially safeguard earnings by passing on price increases to customers."
"Brent crude, the international oil benchmark, settled 0.48 per cent higher at $100.58 a barrel, after falling below $100 a barrel intraday for the first time since mid-March."
Oil prices had fallen on Wednesday after the International Energy Agency said its members would tap emergency stockpiles to counter price increases from potential further bans on Russian crude imports.
"In Asia, Hong Kong’s Hang Seng share index fell 1.2 per cent and Japan’s"
"Nikkei lost 1.6 per cent, mirroring declines on Wall Street in the previous session."
"US government debt came under fresh selling pressure on Friday after data showed booming jobs growth in March, inverting the Treasury yield curve for the second time this week."
"The yield on the two-year Treasury note rose above that on the benchmark 10-year note, a so-called inversion of a segment of the Treasury curve that is closely watched by investors and policymakers."
"A yield curve inversion, which happened on Tuesday for the first time since 2019, is typically a sign of a coming recession, signalling that monetary policy is too tight."
"The two-year yield, which moves with interest rate expectations, rose as investors priced in an even more aggressive pace of interest rate rises from the Federal Reserve after the Bureau of Labor Statistics reported strong jobs growth in March."
The yield on the two-year note added 0.12 percentage points to 2.45 per cent.
"In futures markets, investors are now pricing in between eight and nine further quarter-point interest rate increases this year."
"Friday’s data showed that the US had recorded another month of strong jobs growth in March, adding 431,000 positions."
"That figure compared with a Reuters forecast of 490,000 and marked a decline from February’s revised figure of 750,000."
"The yield on the 10-year US Treasury note, which moves with expectations of economic growth and inflation, rose 0.04 percentage points to 2.37 per cent."
"“Typically this is a sign that policy has become too tight,” said Tom Simons, money market economist at Jefferies."
"But he noted, his view is that while the yield curve inversion is a fairly reliable indicator of recession, it is not imminent."
“We still think we’re 10-24 months away from a recession . . . 
"The labour market is doing quite well, and there is nothing in the data we got today that suggest that we’re headed towards a recession,” said Simons."
"The inversion comes after the worst quarter for Treasuries on record, as investors looked ahead to central banks tightening monetary policy to curb surging inflation."
A Bloomberg index of total returns from Treasuries fell by a record 5.6 per cent in the first three months of the year.
"Ewout van Schaick, head of multi-asset at NN Investment Partners, said Friday’s sell-off was the “continuation of last quarter’s trend”, when investors pulled out of US government bonds over concerns that the Federal Reserve may damp economic growth by raising interest rates to combat inflation."
"In equity markets, the benchmark S&P 500 and the technology-heavy Nasdaq Composite inched into positive territory after closing out their worst quarter in two years."
The S&P dropped almost 5 per cent in the first three months of 2022 and the Nasdaq fell 9.1 per cent.
"In Europe, the regional Stoxx 600 index, which shed almost 7 per cent in the first quarter, closed the day 0.5 per cent higher."
Dax added 0.2 per cent and London’s
FTSE 100 rose 0.3 per cent.
Oil prices edged lower after dropping on Thursday as the White House announced a “historic release” from its emergency reserves — pledging to boost supply by about 1mn barrels a day for the next six months in an effort to cool prices that have soared since Russian president Vladimir Putin ordered the invasion of Ukraine.
"Brent crude, the international benchmark, settled lower for the day at $104.39 a barrel."
"Equities rallied and oil prices fell on Tuesday after Russia said it would reduce its military operations near Ukraine’s capital, Kyiv."
"On Wall Street, the benchmark S&P 500 and the technology-heavy Nasdaq Composite rose to more than two-month highs, with the indices closing up 1.2 per cent and 1.8 per cent, respectively."
Both are still down this year.
The rally in US stocks came as Russia said it had decided to “dramatically” scale back military activities in the Kyiv and Chernihiv areas after envoys from Moscow and Ukraine met in Istanbul on Tuesday to discuss a possible peace deal.
"Brent crude, the international oil benchmark, settled 2 per cent lower to $110.23 a barrel, having risen close to $140 in early March."
"As Wall Street rallied, the US Treasury market signalled that investors were worried that the Federal Reserve’s tighter monetary policy could dramatically slow economic growth."
"The yield on two-year Treasury notes briefly rose above the yield on 10-year note for the first time since August 2019, a move that is closely watched by policymakers and investors as a potential indicator of recession."
"At the end of Tuesday’s session in New York, the yield on the 10-year Treasury had fallen 0.07 percentage points to 2.39 per cent, while the two-year yield was roughly flat at 2.36 per cent."
"Analysts at Bank of America wrote on Monday that the recent stock market rally “defies fundamentals” and was unlikely to last, with the rates market more accurately “reflecting [the] gloomier picture”."
"Guilhem Savry, cross-asset manager at Unigestion, said equity markets had been boosted by short-term, trend-following hedge fund strategies, but said “this could reverse quickly”."
"“We are in a short-term positive cycle that will change once there is a negative geopolitical event or negative economic growth data,” he added."
"In Europe, the Stoxx 600 share index added 1.7 per cent, taking it to its highest closing level since February 17, before Russia launched its full-scale invasion of Ukraine."
"Carmakers were a particular bright spot, with shares in the Stoxx 600 auto sub-index rising by almost 6 per cent as investors banked on a moderation of hostilities easing supply chain disruptions."
The Stoxx sub-index of European bank shares also rose 3.8 per cent to turn positive for the month on hopes that an end to the conflict would boost the eurozone’s economic outlook.
"“Investors can’t know much about wars other than they end at some point and headlines that seem to bring that day forward are obviously very good for market psychology,” said Chris Jeffery, head of rates and inflation strategy at Legal & General Investment Management."
The euro climbed 0.9 per cent against the dollar to $1.11.
"Germany’s two-year bond yield briefly rose above zero for the first time since 2014 as the price of the debt security fell, reflecting bets of a peace deal boosting the European Central Bank’s resolve to tighten monetary policy."
Oil prices dropped on Monday as optimism about peace talks between Ukraine and Russia eased concerns about supply levels while new coronavirus lockdowns in China raised the prospect of falling energy demand.
"Brent crude, the global benchmark, settled 6.8 per cent lower at $112.48 a barrel, while US marker West Texas Intermediate dropped 7 per cent to $105.96."
"Oil markets have swung violently over the past week, with intraday moves of at least 5 per cent each day as traders grappled with the latest developments from Russia and China, as well as Saudi Arabia where an oil storage facility was bombed on Friday."
"On Monday authorities announced extreme lockdown measures in Shanghai, China’s leading financial centre."
"China is the world’s largest oil importer, and Warren Patterson, analyst at ING, said “this action yet again highlights that China is not willing to drop its zero-Covid policy and so continues to be a downside risk for the market.”"
"Volodymyr Zelensky, Ukrainian president, also said Kyiv was ready to discuss Russian demands such as pledging to remain neutral and abandon its drive to join Nato if Russia withdrew its troops, raising hopes of an end to the conflict which has driven up energy and commodity prices."
"The fall in oil prices helped ease ructions in US Treasuries, which had sold off earlier in the session as traders placed bets on the Federal Reserve raising interest rates aggressively to tackle high inflation."
"High energy costs have been a key component of elevated global inflation, which saps demand for fixed-income securities such as Treasuries by lowering the value of their interest."
"Brent remains about 15 per cent above its closing level on February 23, the eve of Russia’s invasion of Ukraine."
"The yield on the two-year Treasury note, which moves inversely to its price, rose as much as 0.11 percentage points early in the day, before giving up most of the gains to trade 0.04 percentage points higher, at 2.34 per cent."
"The 10-year Treasury yield fell 0.04 percentage points to 2.45 per cent, having exceeded 2.5 per cent in earlier trading."
"Despite the choppy trading in Treasuries, the US dollar stood firm against other major currencies on Monday, reflecting continued bets of tighter monetary policy."
"“The market is pricing a significant overshoot in inflation and central banks being forced to react strongly, triggering an economic slowdown,” said Luca Paolini, chief strategist at Pictet Asset Management."
"The five-year Treasury yield on Monday rose above the 30-year yield for the first time since 2006, before falling back to a fraction below the longer-dated security."
A so-called yield-curve inversion of this nature reflects concerns that the Fed’s attempt to battle inflation
could over time depress growth or even cause a recession.
"The dollar rose 1.5 per cent against the Japanese yen to purchase ¥123.88, the most since 2015 as the Bank of Japan took steps to maintain loose monetary policy while the Fed raises interest rates."
Sterling dropped 0.8 per cent against the dollar to $1.31.
"In equities, Wall Street’s S&P 500 share index climbed for a third consecutive session, rising 0.7 per cent while the tech-dominated Nasdaq Composite climbed 1.3 per cent."
"Electric carmaker Tesla was the biggest driver of the gains, jumping more than 7 per cent after it said it was considering a stock split."
Europe’s Stoxx 600 share index added 0.3 per cent.
"Asian bourses were mixed, with Japan’s Topix closing 0.4 per cent lower and Hong Kong’s"
Hang Seng adding 1.3 per cent.
US government debt sold off on Friday as hawkish comments from Federal Reserve officials this week prompted big Wall Street banks to forecast a faster pace of interest rate increases.
"The yield on the 10-year US Treasury note rose on Friday as much as 0.14 percentage points to 2.5 per cent, the highest level since May 2019, as the benchmark debt security fell in price."
"The Treasury market, which underpins the costs of corporate debt and consumer borrowing worldwide, is enduring its worst month since the election of Donald Trump in 2016."
"John Williams, New York Fed boss, on Friday said that if a supersized 0.5 percentage point rate increase was warranted to combat intense inflation, the central bank should take that step."
"His remarks echoed recent comments made by Jay Powell, Fed chair, and added to the sense that the central bank will need to step up its tightening of monetary policy."
Goldman Sachs analysts said on Friday that they now expected the 10-year yield to hit 2.7 per cent by the end of 2022.
Citi analysts said they expected the US central bank to raise borrowing costs by half a percentage point at every one of its monetary policy meetings from May to September.
"“There is a narrative around the Fed becoming more hawkish, even punitive,” said Tancredi Cordero, chief executive of Kuros Associates."
“It’s making sentiment erratic and volatile.”
The number of quarter-point rate increases by December that are now priced in to futures markets in which investors bet on or hedge against moves in borrowing costs rose to 8.2 on Friday from 7.7 the day prior.
“Futures volumes are increasing significantly . . . 
"after several Federal Open Market Committee members came out and increased the chances of a 50 basis points rate hike,” said Chuck Tomes, a portfolio manager at Manulife Investment Management."
"Tomes also said part of the move could be attributable to investors rebalancing portfolios ahead of quarter-end next week as well as heading into the weekend, on the chance that a dramatic shift in the conflict in Ukraine over the weekend could catch them offsides."
Some investors also pointed to a lack of liquidity — or the ability to make trades in large size without moving the market — exacerbating the sharp change in yields.
"“Liquidity is extremely tenuous in the market and volatility is extreme,” said Gennadiy Goldberg, a rates strategist at TD Securities."
Equity markets were calmer.
The S&P 500 index picked up 0.5 per cent and Europe
"’s Stoxx 600 added 0.1 per cent, though the tech-dominated Nasdaq Composite slipped 0.2 per cent as growth-focused stocks came under pressure."
Such companies are considered particularly vulnerable to rising interest rates because higher rates reduce the value investors place on future earnings.
"Despite the Nasdaq’s dip on Friday, both it and the S&P recorded their second consecutive week of gains, up 2 per cent and 1.8 per cent respectively."
Additional reporting by Nicholas Megaw in New York
Wall Street stocks rose and government bonds remained under pressure on Thursday as US president Joe Biden met Nato and G7 leaders to discuss their collective response to Russia’s invasion of Ukraine.
"The parties forged an agreement to step up preparations for potential chemical and nuclear weapon threats, while investors were awaiting a response from EU leaders on possible blocks to Russian fossil fuel imports."
"Investors also remain focused on the path of monetary policy and persistent inflation, after retracing earlier losses stemming from the onset of Russia’s war with Ukraine."
"Wall Street’s S&P 500 share index closed 1.4 per cent higher, as traders switched money out of a global bond market that is undergoing its deepest downturn since at least 1990 — knocked by concerns over global inflation and expectations of tighter monetary policy."
The Nasdaq Composite added 1.9 per cent.
"The broad-based S&P has now climbed almost 7 per cent above its closing level on February 23, the day before President Vladimir Putin launched Russia’s invasion of Ukraine."
"In Europe, the regional Stoxx 600 index lost 0.2 per cent on Thursday and is 7 per cent lower for the year, but the gauge has also retraced losses since the beginning of Moscow’s incursion."
“In an inflationary environment . 
"certain parts of the equity market can perform,” said Tim Graf, managing director at State Street."
"Big tech companies, he added “have near-oligopolistic market positions and a good degree of pricing power”."
"Still, equity markets were showing “a remarkable level of complacency”, said Olivier Marciot, investment manager at Unigestion, arguing that “it is hard to see how corporate earnings can be maintained alongside higher inflation and lower economic growth”."
"“There’s a clear divergence between the bond guys and the equity guys,” he said."
“I think the bond guys have it right.”
"The yield on the 10-year US Treasury note, which underpins global financing costs and moves inversely to its price, rose 0.06 percentage points to 2.36 per cent, close to its highest level since May 2019."
"The yield on Germany’s 10-year Bund rose 0.06 percentage points to 0.53 per cent, close to its highest level since October 2018."
"Olaf Scholz, German chancellor, has warned that banning Russian energy “would mean plunging our country and the whole of Europe into a recession”."
Germany imports a third of its oil from Russia and more than half of its gas and coal.
"However, the US is finalising a plan to supply the EU with up to 15bn cubic metres of liquefied natural gas by the end of 2022 to help reduce the bloc’s dependence on Moscow, the Financial Times reported."
"Brent crude oil faded in afternoon trading, settling 2.1 per cent lower at $119.03, but remains up about a fifth since February 23."
"The benchmark could exceed $200 this year, traders warned at an FT event in Switzerland."
"Futures tied to Europe’s wholesale gas price traded at about €114 per megawatt hour, up 1 per cent."
"The contracts had topped €130 on Wednesday after Putin said “unfriendly” nations should pay for Russian gas in roubles, injecting doubt into existing supply deals."
Prices remain about six times higher than a year ago.
"The price of gold rose 0.9 per cent to $1,962 per troy ounce as it emerged that G7 leaders had agreed to crack down on Russia’s"
ability to sell its reserves.
"In Asia, Hong Kong’s Hang Seng share index fell 0.9 per cent."
"The Japanese yen, which is trading at about a six-year low against the US currency, weakened a further 1 per cent to ¥122.33 per dollar."
US and European stocks reversed some of their recent gains on Wednesday as investors refocused on the effect of rising interest rates and oil prices rose in response to supply concerns and the threat of further sanctions on Russia.
"The benchmark S&P 500, which had climbed almost 6 per cent over the previous five sessions, dropped 1.2 per cent."
"The declines were broad-based, with energy and utilities"
the only subsectors in positive territory.
"The tech-dominated Nasdaq Composite index slipped 1.3 per cent, while Europe’s Stoxx 600 index gave up 1 per cent."
"Stocks have rallied since the Federal Reserve announced its first rate rise in more than three years last week, despite the ongoing war in Ukraine and the fact the prospect of higher rates had spooked investors earlier in the year."
"However, Neil Birrell, chief investment officer at Premier Miton Investors, said investor confidence remained fragile and many were choosing to cash in on their recent gains."
"“At the moment everyone is taking profits where they can,” he said."
"“We’re cautious, for lots of reasons.”"
"Roger Lee, head of equity strategy at Investec, said the recent rally “was really caused by short-term asset allocation out of fixed income into equities, [and]"
stock markets are now refocusing on just how high interest rates might go”.
"On Monday, Jay Powell, Federal Reserve chair, said the central bank needed to move “expeditiously” towards tighter monetary policy after the annual pace of US inflation hit a 40-year high of 7.9 per cent in February."
"Brent crude, the international oil benchmark, rose 5.3 per cent to $121.60 per barrel, taking it about a quarter higher since February 23, the day before Vladimir Putin launched Russia’s invasion of Ukraine."
"Oil exports from a crucial Russian pipeline were frozen on Wednesday, with the operator blaming storm damage."
"It came ahead of a visit to Europe by US president Joe Biden, who will argue for new, co-ordinated punitive measures against Moscow."
"The yield on the 10-year US Treasury note, which falls when prices rise, moved 0.08 percentage points lower on Wednesday to 2.30 per cent but remained close to its highest level since May 2019."
US Treasury bonds are experiencing their worst month of losses since Donald Trump became president in 2016.
"In the UK, sterling dropped 0.4 per cent against the dollar to $1.32, holding a move from earlier in the session as chancellor Rishi Sunak revealed in his Spring Statement that official forecasters had lowered their economic growth predictions for this year."
UK government bonds rallied after the government announced plans to issue fewer bonds over the next year than markets had expected.
"The UK Debt Management Office said it planned to sell £124.7bn of gilts this year, substantially lower than the £152bn expected by banks polled by Bloomberg."
The 10-year gilt yield fell 0.06 percentage points to 1.63 per cent.
"In Asia, Hong Kong’s Hang Seng index added 1.2 per cent as investors took advantage of lower valuations."
"Chinese equities staged their worst weekly drop since 2008 earlier this month, before top economic official Liu He pledged state support for the economy and financial markets."
The Hang Seng remains more than 5 per cent lower for the year.
"The Japanese yen hit 121.4 against the US dollar, its latest six-year low, reflecting the Bank of Japan"
"caution towards raising interest rates to battle a rare bout of inflation in the Asian nation, in contrast to the Fed’s hawkish policies."
Additional reporting by Tommy Stubbington in London
"Wall Street stocks rose on Tuesday and US government bond prices fell, as investors looked ahead to tighter monetary policy from the Federal Reserve."
The S&P 500 index rose 1.1 per cent as investors balanced remarks from Fed chair Jay Powell about the need for rapid interest rate rises with his reassurance that tightening would not spark a recession.
The tech-heavy Nasdaq Composite added 2 per cent.
"Meanwhile, the yield on the benchmark 10-year US Treasury note rose 0.09 percentage points to 2.38 per cent — the highest level since May 2019 — as its price fell."
Powell said on Monday that the Fed should move “expeditiously” towards tighter monetary policy.
"He also pushed back on concerns that this would cause a recession, citing episodes in 1965, 1984 and 1994 when the central bank slowed an overheated economy without prompting a sharp contraction."
"“The bond market is responding to expectations of tighter monetary policy, but equity markets are saying if Powell is confident about the growth outlook"
"then risk assets will do well,” said Seema Shah, global investment strategist at Principal Global Investors."
"“Equity markets responding in this way is a bit surprising,” she added."
“One of these views is going to give at some point.”
"Not all investors were persuaded that the Fed’s tough talk would translate into policy decisions, which potentially could explain the continued support for equities."
"“This is a Fed that is talking very hawkish and getting the market to do their dirty work for them,” said Andy Brenner, head of international fixed income at NatAlliance Securities."
“I do not think that this is an aggressive Fed.”
"Tesla rose 7.9 per cent on Tuesday after the electric carmaker opened a plant in Germany, pushing its market capitalisation back above $1tn for the first time since January."
"Europe’s regional Stoxx 600 share index, which remains about 6 per cent lower for the year, ended the day 0.8 per cent higher, with strong gains for financial stocks."
Bundesbank president Joachim Nagel said on Monday that the European Central Bank should raise interest rates this year if the inflation outlook warranted it.
Germany’s Xetra Dax closed up 1 per cent and London’s
FTSE 100 gained 0.5 per cent.
The US Treasury market is experiencing its worst month since 2016 after the Fed raised interest rates last week for the first time since 2018.
US consumer price inflation soared to a 40-year high of 7.9 per cent last month.
"Russia’s invasion of Ukraine has prompted sharp jumps in the prices of commodities from oil to wheat, exacerbating inflationary pressures caused by resurgent demand following coronavirus shutdowns and prompting markets to predict the Fed will raise its key interest rate to more than 2 per cent by December."
"“Inflation expectations for the next one to two years are now extremely high,” said Brian Nick, chief investment strategist at Nuveen."
"“But the scenario where the Fed goes ahead and does what it is signalling it will do is probably the best-case scenario,” he added."
“Do too little and inflation becomes further entrenched.”
"The 10-year German Bund yield, a barometer for eurozone borrowing costs, rose 0.04 percentage points to 0.5 per cent, its highest level since October 2018."
"Brent crude settled 0.1 per cent lower on Tuesday at $115.48 a barrel, with the international oil benchmark still nearly 20 per cent higher since February 23, the day before Russia invaded Ukraine."
Hang Seng index gained 3 per cent.
It began to rally last week when Chinese vice-premier Liu He made a rare intervention to pledge state support for the economy and capital markets.
The US stock market rallied strongly on Wednesday afternoon after the Federal Reserve raised interest rates for the first time since 2018 and signalled a string of additional increases to come.
The Fed lifted its main interest rate by a quarter of a percentage point to a target range of 0.25 per cent to 0.5 per cent.
"The move by the US central bank was widely expected, though one member of the bank’s committee argued for a larger half-point increase."
"Shares initially wavered on the announcement before rebounding sharply after Fed chair Jay Powell discussed the central bank’s actions in a press conference, saying he saw the US economy as being in strong shape and that the probability of a recession was “not particularly elevated”."
"The S&P 500 stock index closed 2.2 per cent higher,"
building on Tuesday’s gains to record its biggest two-day increase since April 2020.
"The tech-heavy Nasdaq Composite index rose 3.8 per cent, its biggest one-day rise since November 2020."
The gains nonetheless confounded many traders and investors who believed policymakers had shifted more hawkishly than expected as the Fed attempts to tame inflation.
"Many of the best-performing stocks on Wednesday were lossmaking tech companies, which have been among the hardest hit this year."
"“I threw my hands up today and said I’m not trying to make a call on this market,” said Matthew Tym, the head of equity derivatives trading at Cantor Fitzgerald."
“Am I convinced this rally will continue?
The stock market has weakened in recent weeks as investors fret over the effect to the global economy from Russia’s war in Ukraine and a resulting jump in energy and commodities prices.
"Marko Kolanovic, a strategist at JPMorgan Chase, said: “We think it is important to remember what path we were on before the [Ukraine] crisis started:"
"namely, the global economy was on track to accelerate sharply on reopening from the Omicron wave, with factory output surging, inventories lean, and mobility and the service sector rebounding."
"Despite the current tumultuous conditions, we believe a lot of risk is already priced in, sentiment is depressed and investor positioning is low.”"
"The yield on the benchmark 10-year Treasury note hit its highest level in almost three years shortly after the Fed’s announcement, before falling back to 2.17 per cent — a slight increase for the day but lower than the level before the Fed’s announcement."
Bond yields fall when prices rise.
"In addition to Wednesday’s move, Fed officials projected six further interest rate increases this year."
Signs that they will lift rates decisively this year and next year had many traders moving to lower their expectations for just how high inflation would run over the next decade.
"Five-year break-evens, which measure how high investors expect inflation will run five years from now, fell 0.12 percentage points to 3.4 per cent, the biggest one-day drop since November."
Global stocks were boosted earlier in the day on news that Ukraine and Russia were making “significant progress” in negotiations for a ceasefire and potential Russian withdrawal if Kyiv declared neutrality.
"Also supporting market sentiment was a statement from top Chinese official Liu He, who said that Beijing would take measures to “boost the economy in the first quarter”."
"Europe’s regional Stoxx 600 share index rose 3.1 per cent, Germany’s"
Xetra Dax added 3.8 per cent while London’s FTSE 100 rose 1.6 per cent.
Hong Kong’s Hang Seng share index closed 9.1 per cent higher as markets across the Asia-Pacific region rallied.
The CSI 300 index of mainland Chinese shares rose 4.3 per cent and the Nikkei 225 in Tokyo added 1.6 per cent.
"Some investors view short-term equity market rallies as fragile, put at risk by the unpredictability of the Ukraine war as well as central banks tightening monetary policy to battle high inflation."
The Stoxx remains more than 8 per cent lower for the year while the Dax has lost about 9 per cent.
"China’s economy continues to be affected by the nation’s “zero-Covid” policy, which has led to widespread social restrictions and trade disruptions."
"Shanghai and Shenzhen, two crucial commerce hubs, are in partial lockdown while Chinese businesses are grappling with western sanctions against Russia pushing up prices of energy, metals and agricultural commodities."
"Oil prices continued their recent decline, influenced by both the easing tensions in Ukraine and concerns that the return of coronavirus lockdowns in China — the world’s largest oil importer — could knock demand."
"International benchmark Brent crude oil, which had approached $140 a barrel earlier this month, fell 1.9 per cent to $98.02."
"Benchmark oil prices on Tuesday fell below $100 a barrel for the first time since March 1 on expectations that lockdowns could slow petroleum demand in China, the world’s largest importer of crude."
"Brent crude, the international oil marker, settled at $99.91, its lowest close since February 25, down 6.5 per cent on the day."
"West Texas Intermediate, the US crude contract, declined 6.4 per cent to settle at $96.44, its lowest closing price since February 28."
"Oil prices were at their highest levels since 2008 earlier this month, as Russia’s isolation from the international community over its invasion of Ukraine began to limit its exports of crude."
"That pressure on the oil market has eased slightly in recent days as Covid-19 infections in China have risen to the highest levels since the virus first emerged more than two years ago, prompting lockdowns in some the country’s main manufacturing hubs."
But oil analysts also said that the sell-off could be brief.
"“The reprieve of cheaper oil may be shortlived,” said Louise Dickson, Rystad Energy’s senior oil analyst, “as falling prices indicate the market has not fully realised the potential impact of lost Russian barrels on global supply.”"
Equity markets in China and Hong Kong posted a second day of sharp declines on concerns over the outbreak as well as reports that Beijing had signalled its willingness to provide Russia with military assistance to support its invasion of Ukraine.
"Hong Kong’s benchmark Hang Seng index dropped 5.7 per cent, while the Hang Seng China Enterprises index of large and liquid Chinese stocks shed 6.6 per cent."
"In China, the CSI 300 index of Shanghai and Shenzhen-listed stocks fell 4.6 per cent."
Falling oil prices drove US stocks higher on Tuesday even as traders prepared for the Federal Reserve to raise interest rates on Wednesday.
Economists widely expect the central bank to deliver a quarter-point increase — the first rate rise since 2018 — as the war in Ukraine threatens to exacerbate inflation that is already running at its highest annual rate in 40 years.
"A report from the Bureau of Labor Statistics on Tuesday showed a 10 per cent annual rise in US producer prices in February, setting the stage for the Fed to lift rates."
"Wall Street’s benchmark S&P 500 ended up the day 2.1 per cent higher, with every market sector rising except energy."
"The technology-heavy Nasdaq Composite, which is down 17 per cent year-to-date, added 2.9 per cent."
"Meanwhile, Europe’s regional Stoxx 600 index ended the day down 0.3 per cent."
Germany’s Dax lost 0.1 per cent and France’s
Cac 40 index dropped 0.2 per cent.
"In London, the FTSE 100 closed 0.2 per cent lower."
"Russia’s invasion of Ukraine late last month had left Europe “flirting on the edge of recession”, said Peter Oppenheimer, chief global equity strategist at Goldman Sachs, who added that the fighting would stoke inflation and curb growth."
"In government debt markets, the yield on the 10-year US Treasury note rose 0.01 percentage points to 2.14 per cent, hovering around its highest level since 2019, which it hit earlier in the day."
"The yield on Germany’s 10-year Bund, which serves as a barometer for eurozone borrowing costs, fell 0.04 percentage points to 0.33 per cent."
"Additional reporting by Derek Brower in New York, Neil Hume in London and Tabby Kinder in Bangkok"
"US government bond yields rose to multiyear highs on Monday ahead of this week’s Federal Reserve meeting, while optimism about peace talks between Ukraine and Russia lifted European stocks and caused a sharp pullback in oil prices."
"The US central bank is expected to begin lifting interest rates for the first time since 2018 after its two-day policy meeting, which starts on Tuesday."
"The yield on the benchmark 10-year Treasury, which rises when prices fall, jumped 0.14 percentage points to 2.15 per cent, its highest level since mid-2019."
"Sebastiano Chiodino, head of fixed income at Generali Insurance Asset Management, said the sell-off in US bonds had been encouraged by a relatively hawkish update from the Fed’s counterparts in the eurozone last week."
"The European Central Bank said it would scale back its bond-buying stimulus package in response to spiralling inflation, despite the potential hit to economic growth from Russia’s invasion of Ukraine."
"“If the ECB is hawkish, you’d expect the same from the Fed,” given that the US economy is less exposed than Europe’s to the war in Ukraine, Chiodino said."
"The yield on Germany’s 10-year Bund, which serves as a barometer for eurozone borrowing costs, rose 0.08 percentage points to 0.37 per cent, its highest level in more than three years."
"The prospect of rising rates weighed on US stocks, with Wall Street’s benchmark S&P 500 dropping 0.7 per cent and the Nasdaq Composite — which is dominated by tech stocks that are particularly sensitive to interest rates — falling 2 per cent."
The decline in the S&P was exacerbated by falling energy stocks which were knocked by a big drop in oil prices.
"Oil and other commodity prices have surged since Russia invaded Ukraine last month, but peace talks between the two sides resumed on Monday afternoon and officials on both sides reported tentative progress over the weekend."
"“If you compare the positions of both delegations at the talks at the start and now, then there has been substantial progress,” Leonid Slutsky, one of the Russian negotiators, said in an interview with RT Arabic, a Russian state-owned news channel."
"WTI, the US oil benchmark, fell below $100 a barrel for the first time since March 1 before pulling back some of the losses to settle at $103.01 — a 5.8 per cent decline for the day."
Global marker Brent dropped 5.1 per cent to $106.90.
News of a potentially demand-sapping return to lockdowns in China gave further impetus to the declines.
"Kaushal Ramesh, senior analyst at Rystad Energy, said: “Oil prices continue to demonstrate volatility on the back of uncertain incremental supplies from outside of Russia, in addition to continuing geopolitical risk from the war.”"
"The positive messaging lifted European stocks, with the continent-wide Stoxx 600 index closing 1.2 per cent higher."
"Elsewhere, shares in China fell on signs that widespread lockdowns could again become commonplace as the world’s second-largest economy deals with its biggest Covid-19 outbreak since the start of the pandemic two years ago."
Hang Seng index fell almost 5 per cent and
China’s CSI 300 index dropped 3.1 per cent after 17.5mn residents of Shenzhen were put under lockdown to contain a surge in cases of the Omicron coronavirus variant.
"The restrictions followed similar measures in Changchun, a city of 9mn in north-east China, with cases rising in Shanghai and a number of other big cities."
"Global equities and government bonds sank on Thursday, as investors braced for central banks to tighten monetary policy despite Russia’s invasion of Ukraine."
"The European Central Bank surprised market participants after it said that it would reduce its bond-buying scheme earlier than initially planned, damping expectations of continued support to safeguard economies from the fallout of the war in Ukraine."
"In the US, fresh inflation data paved the way for the Federal Reserve to raise interest rates when its officials meet next week."
"The yield on Germany’s 10-year Bund, a barometer for eurozone borrowing costs, rose 0.06 percentage points to 0.27 per cent, reflecting a sharp fall in the price of the debt."
"The benchmark 10-year US Treasury yield rose 0.04 percentage points to 1.99 per cent, having earlier moved above 2 per cent for the first time in two-weeks."
"In equity markets, the European regional Stoxx 600 index lost 1.7 per cent on Thursday."
"Germany’s Xetra Dax, which jumped almost 8 per cent on Wednesday, fell 2.9 per cent on Thursday."
"In the US, tech stocks led the fall, with the S&P 500 dropping 0.4 per cent and the Nasdaq Composite declining 1 per cent."
"While analysts had expected the European Central Bank to delay its plans to withdraw pandemic-era emergency policies in response to the effects of Russia’s invasion of Ukraine, “they’ve basically said they are going to keep moving along”, said David Zahn, head of European fixed income at Franklin Templeton."
"In its monetary policy statement, the ECB said it had “revised” its schedule for purchasing bonds issued by eurozone governments and would cut monthly purchases to €20bn by June, instead of October as previously planned."
"The ECB, which has kept its main deposit rate at minus 0.5 per cent through the coronavirus era, “is going to be hiking rates by the end of the year, in my opinion”, Zahn said."
"On Wall Street, investors reacted to expectations of higher US interest rates after inflation data confirmed analysts’ expectations for a 7.9 per cent annual rise in consumer prices in February."
"Surging inflation in the US, alongside record-high consumer price increases in the eurozone, have piled pressure on central banks to tighten monetary conditions after pursuing policies of ultra-low borrowing costs and massive bond-buying schemes since March 2020."
"“The monetary punchbowl is being taken away and we won’t get the relief of more stimulus,” said Patrick Spencer, vice-chair of equities at RW Baird."
"The euro, which has fallen steadily since Russian president Vladimir Putin launched the invasion of Ukraine, lost 0.9 per cent against the dollar to $1.0981."
"The dollar index, which measures the greenback against a basket of six other currencies, added 0.6 per cent."
"Elsewhere, Brent crude gave up earlier gains to settle 1.6 per cent lower at $109.33 a barrel, having dropped 13 per cent on Wednesday as the United Arab Emirates moved to encourage fellow Opec members to increase production."
Russia is the world’s second-largest crude oil producer and biggest exporter of gas.
"Futures tracking TTF, the European wholesale gas contract,"
fell by about a tenth to €133 per megawatt hour after rising as high as €335 on Monday.
"In Asia, Japan’s Topix rose 4 per cent in its best day since June 2020, while Australia’s S&P/ASX 200 gained more than 1 per cent."
China’s benchmark CSI 300 index advanced 1.6 per cent while in Hong Kong the Hang Seng index climbed 1.3 per cent.
Oil prices rose and US stocks retreated further in another choppy day on Wall Street after US President Joe Biden announced a ban on imports of Russian oil and gas.
"Brent crude settled 3.9 per cent higher at $127.98 on Tuesday after Biden stepped up economic sanctions on Moscow over the invasion of Ukraine, a move matched by the UK."
Wall Street stocks hit fresh closing lows after the announcement — ending the day at the lowest level since 2021 — after recording on Monday their biggest single-day decline since October 2020.
"The blue-chip S&P 500 index, which closed almost 3 per cent lower on Monday, ended down 0.7 per cent on the day at its lowest level since June 2021."
"The technology-heavy Nasdaq Composite fell 0.3 per cent, its worst close since March 2021."
Neither index hit the intraday lows plumbed on February 24.
"Across the Atlantic, the regional Stoxx Europe 600 share gauge slipped 0.5 per cent."
"European natural gas prices earlier rose as much as 33 per cent to €285 a megawatt hour, according to Refinitiv data, after Moscow warned that it could cut off supplies to the region in response to western sanctions."
"Futures linked to TTF, the region’s wholesale gas price, later fell back to about €210."
"A year ago, these contracts traded at about €16."
Prices of wheat and nickel also rose sharply as Russia’s forces intensified their shelling of Ukrainian cities and moved closer to the southern port of Odesa.
"Alexander Novak, Russia’s deputy prime minister, on Monday said the nation, which supplies 40 per cent of Europe’s gas, had “every right” to “impose an embargo on gas pumping” in retaliation for Germany having frozen approvals of the Kremlin-backed Nord Stream 2 pipeline."
"“Given Russia’s key role in global energy supply, the global economy could soon be faced with one of the largest energy supply shocks ever,” Damien Courvalin, head of energy research at Goldman Sachs, said in a note to clients."
“The uncertainty on how this conflict and oil shortages will be resolved is unprecedented.”
"Equity markets in Europe and the US have tumbled since Vladimir Putin, Russia’s president, launched his invasion of Ukraine."
Investors have been rattled by higher energy prices that could push up consumer price inflation as well as the economic implications of potential industry shutdowns prompted by shortages of commodities produced in Russia and Ukraine.
"In government debt markets, the yield on the 10-year US Treasury note added 0.8 percentage points on Tuesday to 1.85 per cent, reflecting a sharp fall in the price of the benchmark security."
The yield on the equivalent German Bund rose 0.13 percentage points to 0.11 per cent.
"In other commodities, the benchmark nickel contract surged to a record high above $100,000 a tonne on the London Metal Exchange, prompting the venue to halt trading as the “evolving situation in Russia and Ukraine” shakes up commodities markets."
The LME does not expect nickel trading to resume this week.
"Asian equity markets were mostly lower, with China’s benchmark CSI 300 index closing down 2 per cent and Japan"
Topix falling 1.9 per cent.
"Oil and natural gas prices see-sawed as global stocks fell on Monday after a US push to ban Russian crude faced German resistance, leaving markets rattled over the risk of energy sanctions cascading through the economy."
"On a day of extraordinary volatility, the international benchmark Brent crude oil surged to a high of $139 per barrel — a level last hit 14 years ago — before falling back to settle at $123.21, a 4.3 per cent increase for the day."
Oil leapt after US President Joe Biden
"’s administration signalled it was open to a freeze on Russian oil imports, setting aside initial reservations over the hit to consumers."
But the price fell back after Germany’s chancellor Olaf Scholz expressed reluctance to restrict trade of “essential importance” to Europe’s economy.
"Later on Monday, Moscow warned of “catastrophic consequences” from abandoning Russia’s oil."
"“The price spike would be unpredictable — over $300 a barrel, if not more,” said deputy prime minister Alexander Novak."
Stocks dropped sharply.
"Wall Street’s benchmark S&P 500 index closed down almost 3 per cent, its biggest drop since October 2020, while the tech-dominated Nasdaq Composite entered bear market territory as it fell 3.6 per cent."
"Those losses followed a 1.1 per cent decline in the Europe-wide Stoxx 600 index, and drops of more than 3 per cent for Hong Kong’s Hang Seng and China’s CSI 300 indices."
Russia normally exports 5mn barrels a day of crude oil and about 2.7mn b/d of refined petroleum products.
Many buyers are boycotting Russian oil in response to western sanctions.
"The Opec+ alliance, which includes Russia, has declined to accelerate agreed increases to production of 400,000 b/d each month."
"“There is no capacity in the world at the moment that can replace 7mn barrels of exports,” said Mohammed Barkindo, Opec’s secretary-general, on Monday, referring to the effects of an embargo on Russian crude."
“Things are just evolving almost by the hour.
"And we don’t know where we are heading,” he told reporters at the CERAWeek energy conference in Houston."
"Natural gas prices were roiled by the debate, climbing as high as €345 a megawatt hour in Europe before slipping back to trade at about €214."
This remains far above the €16 they were trading at one year ago.
Novak said Moscow had “every right” to “impose an embargo on the flow of gas” through the Nord Stream 1 pipeline that runs from Russia to Europe.
"Such a decision would “mirror” the decision by Germany to freeze the approval of Nord Stream 2, he added."
"Even before Russia invaded Ukraine last month, stockpiles of many commodities had already been running low as the global economy began to throw off the constraints of Covid-19 lockdowns."
The Ukraine war has deepened concerns over a supply crunch.
"“Global oil markets are in the throes of the biggest crisis for decades,” said Ehsan Khoman, head of emerging markets research for Europe, the Middle East and Africa at MUFG."
"“Oil’s rally will accelerate inflation, rates will go much higher, financial conditions will tighten significantly, consumers will be squeezed and corporate activity will be jolted."
Recessionary territory is on the horizon.”
Monday’s volatility was spread across financial markets.
"In one of the most extraordinary moves ever recorded on the London Metal Exchange, the benchmark nickel contract surged more than 70 per cent to a 15-year high above $50,000 a tonne as those holding short positions rushed to cover their trades."
"The sharp moves in oil came after Antony Blinken, US secretary of state, said Washington was in “very active discussions” with European allies over a ban on Russian oil."
"With political support for a tougher measures growing in Washington, senior US lawmakers said on Monday they had agreed a plan to introduce bipartisan legislation banning US energy imports from Russia and Belarus, and suspending normal trade relations with both countries."
"The tougher approach stands at odds with Germany’s Scholz, who argued for “sustainable” pressure that would not be too much of a burden on citizens."
"“All our steps are designed to hit Russia hard, and be sustainable over the long term,” Scholz said in a statement."
"“At the moment, Europe’s supply of energy for heat generation, mobility, power supply and industry cannot be secured in any other way.”"
"Boris Johnson said on Monday that Britain could place a ban on Russian oil, which accounts for 8 per cent of UK oil consumption."
"“Something that perhaps three or four weeks ago we would never have considered is now very much on the table,” he said."
Additional reporting by Erika Solomon in Berlin and Myles McCormick in Houston
"US stocks dropped and government bond prices rose on Friday, as investors sought out havens amid the escalating war between Russia and Ukraine."
"On Wall Street, the S&P 500 share index slipped 0.8 per cent and the technology-focused Nasdaq Composite fell 1.7 per cent in choppy trading."
"Instead, investors sought out the safety of US government bonds, gold and the dollar."
"The yield on the 10-year US Treasury note, which underpins borrowing costs worldwide, fell 0.1 percentage points to 1.74 per cent."
Yields move inversely to prices.
"The dollar index, which measures the US currency against six others, rose 0.7 per cent."
Spot gold rose 1.7 per cent.
"“The market is struggling to very quickly process the new information that is constantly coming out about the escalating conflict,” said Georgina Taylor, multi-asset fund manager at Invesco."
"Equity market declines were even sharper in Europe, with the regional Stoxx 600 share index closing 3.6 per cent lower."
Germany’s Xetra Dax fell 4.4 per cent and London’s FTSE 100 declined 3.5 per cent.
The moves came after Russian forces seized a Ukrainian nuclear plant.
"The assault on the Zaporizhzhia facility prompted Joe Biden, US president, to urge an immediate ceasefire on the site of Europe’s largest nuclear facility in south-eastern Ukraine."
A fire was extinguished at the site early on Friday.
"The euro fell 1.2 per cent against the dollar to $1.093, dipping below $1.10 for the first time since May 2020, as traders rushed to reduce their exposure to a region that may feel the most impact from Russia’s invasion of Ukraine and associated western sanctions."
"“Investors are looking to distance themselves from the conflict in any way they can,” said Baylee Wakefield, multi-asset portfolio manager at Aviva Investors."
“And that means reducing exposure to Europe.
"“It makes sense for asset managers to reduce risk ahead of the weekend,” she added."
“The situation is changing all the time and short-term news flow can really impact markets at the moment.”
Oil prices soared on Friday following calls by politicians on both sides of the aisle for a US embargo on Russian oil earlier this week.
"Brent crude, the international oil benchmark, settled nearly 7 per cent higher to $118.11 on Friday as western sanctions outweighed hopes for a nuclear deal between Washington and Tehran."
The oil benchmark hit its highest level since 2012 the previous day.
"Futures linked to TTF, Europe’s wholesale natural gas price, surged as much as 41 per cent to hit €208 per megawatt hour."
"“The risk of a disruption to the suddenly increasing amounts of gas transiting through Ukraine is also now significant given the escalating military action taking place across the region,” analysts at S&P Global Markets said."
"As the impact of the war reverberates through markets, investors are debating whether the US and European central banks will reverse plans to raise borrowing costs from pandemic-era record lows."
"Before Russia invaded Ukraine, the US Federal Reserve had been expected to increase interest rates more than seven times this year."
"Derivatives markets are now pricing fewer than six quarter-point rises by December, even though non-farm payrolls data released on Friday showed that US employers added a much larger than expected 678,000 jobs in February."
"In Asia-Pacific, Hong Kong’s Hang Seng share index closed 2.5 per cent lower and Tokyo’s Nikkei 225 lost 2.2 per cent."
Additional reporting by Neil Hume
"Wall Street stocks rose and a powerful rally in debt markets reversed on Wednesday, as Federal Reserve chair Jay Powell signalled that the US central bank would raise interest rates this month despite economic uncertainty created by Russia’s invasion of Ukraine."
"The S&P 500 share index ended the day 1.9 per cent higher, and the technology-heavy Nasdaq Composite rose 1.6 per cent."
"In Europe, the regional Stoxx 600 equity benchmark added 0.9 per cent."
"The equity moves came as Brent crude oil climbed 7.6 per cent to $112.93 a barrel; Joe Biden, US president, hinted at further sanctions against Russia; European natural gas prices hit an all-time high; and data showed that eurozone inflation had surged to a new record."
"Powell told US legislators on Wednesday that he still saw interest rate rises coming, starting with a 0.25 percentage point increase in March, but that the Ukraine conflict had injected “uncertainty” into the Fed’s outlook."
"The two-year US Treasury yield, which closely tracks monetary policy expectations, rose 0.19 percentage points to 1.53 per cent, fully reversing the previous session’s drop, as traders accepted that the Fed would proceed with its intended monetary tightening to tamp down inflation."
Bond yields move inversely to their prices.
"As Powell spoke, investors reasserted bets on that aggressive tightening."
Futures markets earlier this week cut the number of quarter-point interest rate increases expected this year from between six and seven to between four and five because of the conflict in Ukraine.
"But that shifted as Powell spoke, when nearly six quarter-point rises were once again priced in."
"The 10-year US Treasury yield, which underpins borrowing costs worldwide, rose 0.17 percentage points to 1.90 per cent, reversing some of this week"
’s move lower.
"Investors seeking out high-quality assets, perceived to be lower risk, had bought up the benchmark debt instrument earlier this week."
"The rise in the 10-year yield was slower than that on the two-year yield, marking a so-called flattening of the yield curve, an indication that the market is expecting growth to slow as borrowing costs rise."
"Meanwhile, futures linked to TTF, Europe’s wholesale natural gas price, rose more than 50 per cent on Wednesday to as much as €185 per megawatt hour, later trimming some of their gains."
The latest increases for oil came as big energy consumers boycotted Russian crude following Moscow’s invasion of Ukraine.
The Opec alliance on Wednesday resisted calls to boost output.
"Biden has come under mounting pressure to ban Russian oil imports, with Republicans and Democrats calling on him to cut off energy ties with the Kremlin."
"In his State of the Union speech on Tuesday, Biden voiced support for punitive measures against Russia but stressed that getting prices under control was his “highest priority”."
"“Brent crude is the biggest fear factor for equity markets,” said Maarten Geerdink, head of European equities at Dutch investment house NN Partners."
"“If it goes ballistic and moves towards $150 or more a barrel, then [economic] growth really gets hammered.”"
"Russia’s central bank said that the Moscow stock exchange, which did not open for trading on Monday, would remain closed on Wednesday."
"US and European stocks fell, government bonds rallied and oil prices rose sharply on Tuesday as traders weighed the global economic implications of Russia’s invasion of Ukraine."
"Wall Street’s blue-chip S&P 500 index fell 1.6 per cent per cent, dragged lower by the worst day since June 2020 for financial stocks, with the S&P sub-index dropping 3.7 per cent."
"The technology-heavy Nasdaq Composite ceded 1.6 per cent, having closed 0.4 per cent higher in the previous session."
"In Europe, the Stoxx 600 share index slipped 2.4 per cent."
"Shares of utilities, consumer cyclicals and financials were among the biggest fallers."
"The regional gauge is trading more than 9 per cent lower for the year and has swung lower since last week, when western powers began launching their latest wave of sanctions against Russia."
"Meanwhile, government bond prices rose significantly both in the eurozone and the US."
The move was bigger in Europe as traders sought shelter from economic risk and bet on the European Central Bank maintaining supportive monetary policies.
"The yield on Germany’s 10-year Bund, a benchmark for borrowing costs across the eurozone, dropped 0.21 percentage points to minus 0.08 per cent, reflecting a significant rise in the price of the debt instrument."
Italy’s equivalent bond yield fell 0.31 percentage points to 1.40 per cent.
"“It’s a bid for safety and away from equity market risk,” said Antoine Lesne, head of research and strategy at State Street’s"
SPDR ETF business.
“But it also suggests that one of the key consequences of this conflict will be a gradual shift away from monetary tightening and rate hikes in the eurozone area.”
"Kim Catechis, investment strategist at Franklin Templeton Institute, said the conflict could reduce global gross domestic product by between 0.3 per cent and 0.5 per cent this year — less than it would have done"
had consumers not had their incomes topped up by government support programmes during the pandemic.
The ECB has not raised its main deposit rate since 2011.
It has bought more than €1.6tn of eurozone government bonds under its pandemic emergency purchase scheme and had been expected to turn less accommodative to tackle record-high levels of inflation.
"US government debt rallied on Tuesday, with the yield on the 10-year Treasury dropping to its lowest level since January 2022."
It later pulled back from that low to trade down 0.10 percentage points at 1.72 per cent.
"The two-year US yield fell as low as 1.26 per cent, its lowest level since early February, as investors’ expectations of an aggressive cycle of rate rises from the Fed moderated."
"For the first time since January, the market was no longer fully pricing in a 0.25 percentage point rate increase at the Fed’s March meeting."
"By December, the market is now betting on between four and five quarter-point increases, versus between six and seven less than a week ago."
"“Given the war in Europe, the terminal rate, two-year yields, fed funds futures are all pretty aggressively pricing out what was a very hawkish Fed assumption,” said Benjamin Jeffery, US rates strategist at BMO Capital Markets."
"Brent crude, the international oil benchmark, settled at its highest price since 2014, up 7.1 per cent at $104.97 a barrel."
The International Energy Agency said on Tuesday that member countries had agreed to release as much as 60mn barrels of crude to tackle surging prices.
Oil prices have repeatedly topped $100 since Russia’s invasion of Ukraine.
"In Asian equity markets, Japan’s Topix share index rose 0.5 per cent and Hong Kong’s"
Hang Seng index added 0.2 per cent.
"Additional reporting by Andy Bounds in BrusselsUnhedged — Markets, finance and strong opinion"
Robert Armstrong dissects the most important market trends and discusses how Wall Street’s best minds respond to them.
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"US and European stocks rallied on Friday as war in Ukraine raged, with investors watching for signs that the conflict with Russia would be contained to the two countries."
"The S&P 500 stock index, which had swung wildly on Thursday, advanced 2.2 per cent."
"The Wall Street benchmark had dropped as much as 2.6 per cent on Thursday before closing 1.5 per cent higher, as hedge funds unwound earlier bets that stocks would fall."
Traders said that many investors had sought to reduce their positions given the uncertainty in the market and an uptick in volatility.
The technology-focused Nasdaq Composite gained 1.6 per cent on Friday.
Both Wall Street indices eked out moderate advances for the week.
"As Russian troops advanced on Kyiv, the US and EU imposed a range of sanctions on Moscow that stopped short of curbing energy exports, calming market jitters that a rising oil price would exacerbate already high levels of global inflation."
"“The news on sanctions yesterday was not as aggressive as perhaps some in the markets had feared,” said Sebastian Mackay, a multi-asset fund manager at Invesco."
"On Thursday, the White House explicitly excluded Russian oil and gas companies from a number of new sanctions announced against Moscow."
The news helped reverse most of a rally that had pushed crude to almost $106 a barrel after the invasion of Ukraine.
“I will do everything in my power to limit the pain the American people are feeling at the gas pump.
"This is critical to me,” said Joe Biden, US president."
"The decision to spare Russia’s energy trade “was a sigh of relief for markets”, said Mona Mahajan, senior investment strategist at Edward Jones."
"Brent crude fell 1.2 per cent to settle at $97.98 a barrel on Friday, while West Texas Intermediate, the US marker, was down 1.3 per cent."
"“We continue to expect volatility in the near term,” said Mahajan, “but over time, we would expect oil prices to moderate back down into the $70-$80 range”."
"In Europe, the regional Stoxx 600 share index gained 3.3 per cent, after dropping 3.3 per cent in the previous session and briefly entering a technical correction."
"Meanwhile, London’s FTSE 100 closed 3.9 per cent higher — recovering the previous day’s declines in its biggest single-day advance since November 2020."
Russian stocks also rebounded after falling dramatically on Thursday.
"Maria Municchi, lead manager of a portfolio of multi-asset funds at M&G Investments, said investors would now also be seeking out bargains in heavily sold-off stock market sectors."
"“When you have these big moves in a very short period of time it is often exaggerated,” she said."
Demand for haven assets also weakened on Friday.
The yield on the 10-year US Treasury note ended the day unchanged at 1.96 per cent.
"Germany’s 10-year Bund yield rose 0.06 percentage points to 0.23 per cent, reflecting a sharp drop in price of the benchmark European debt instrument."
"Spot gold lost 0.8 per cent to $1,889 a troy ounce."
"The dollar index, which measures the greenback against competing currencies and tends to rise in times of market stress, fell 0.6 per cent."
"Tancredi Cordero, founder of investment advisory boutique Kuros Associates, argued that a sustained equity market rally was unlikely, at least for the next few weeks."
"“Equity valuations are not as high as they were a couple of months ago but they are still high,” he said, noting that the Federal Reserve was readying to raise interest rates."
"“We’re on the edge of the cliff,” he added, estimating that the S&P 500 stock index “could fall another 5 to 10 per cent from here”."
"Stocks on Wall Street shifted violently on Thursday, with the Nasdaq Composite registering its biggest intraday swing since the throes of the pandemic in March 2020, after Russian president Vladimir Putin launched a military invasion of Ukraine."
"The benchmark S&P 500 stock index closed 1.5 per cent higher, rebounding from a loss of as much as 2.6 per cent, in a sign that hedge funds were getting out of many popular positions and unwinding bets that stocks would fall, traders said."
"The technology-heavy Nasdaq Composite index had rallied 3.3 per cent by the closing bell, reversing a 3.4 per cent loss earlier in the day."
"Hedge funds were closing out short trades, bets that a stock or exchange traded fund would decline in value, as they sought to reduce their exposure given the market volatility, the head of one of the largest trading desks on Wall Street said."
"To cover those short positions, funds bought the underlying stocks and ETFs they had bet against, helping to buoy the entire market, traders said."
"Several pointed to the advance in prices of heavily shorted stocks, including Ark Invest’s flagship Innovation ETF, as a sign of the move by hedge funds."
"The rebound in the US stood in contrast to a stinging sell-off in European and Russian stocks, as well as a shift into low-risk government debt, following Russia’s invasion in the early hours of Thursday morning."
"The regional Stoxx 600 share index closed down 3.3 per cent, in a technical correction — defined as a 10 per cent decline from a recent peak — with heavy falls across bourses in Germany, France, Italy and the UK."
"The escalation of the conflict in Ukraine is dominating the global market narrative because of the potential for Russia’s energy and resources being cut out of global supply chains, exacerbating already high inflation and prompting central banks to respond with rapid interest rate rises."
"“A situation which seriously chokes off energy supplies from Russia will affect the world as a negative supply shock,” said Sunil Krishnan, head of multi-asset funds at Aviva Investors."
"Ahead of a meeting by EU leaders on Thursday to decide on further sanctions against Russia, Brent crude oil rose as much as 9.2 per cent to $105.79, crossing the $100 threshold for the first time since 2014."
Brent pared most of those gains to settle up 2.3 per cent at $99.08 after US President Joe Biden laid out fresh sanctions against Russia that spared energy exports.
"“A big inflation impact in the US and Europe means central banks could raise interest rates further than anticipated, which brings a risk of economic stagflation,” said Trevor Greetham, head of multi-asset at Royal London Asset Management."
The US Federal Reserve is expected to embark on a string of rate rises starting next month — having pinned borrowing costs close to zero since March 2020 — in response to consumer price inflation hitting a 40-year high.
"Traders on Thursday, however, bet that the uncertainty and market volatility would encourage the central bank to be slightly less aggressive in the near term, with the likelihood of a 0.5 percentage point increase in March no longer priced into markets."
"Russia’s benchmark Moex index plummeted as much as 45 per cent, before paring back to a 26 per cent loss."
"The rouble weakened to almost 90 per dollar, a record low against the US currency, and later traded at Rbs85.1."
"In government debt markets, the yield on the 10-year US Treasury note fell 0.03 percentage points to 1.96 per cent as the benchmark government debt instrument rose in price."
"German Bunds rallied, with the yield on the 10-year security, which sets borrowing costs across the eurozone, 0.07 percentage points lower at 0.15 per cent."
"Traders turned to derivatives markets as the market shifted, with more than 25mn US equity put option contracts changing hands on Thursday, among the 10 busiest days of put trading."
Put contracts can pay-off if a security falls in price.
The dollar index rose 0.9 per cent as market stress drove up demand for the reserve currency.
The euro fell 0.9 per cent against the dollar to $1.12.
"In Asia, Hong Kong’s benchmark Hang Seng index fell more than 3 per cent."
Additional reporting by Robert Smith in London and Leo Lewis in Tokyo
"US stocks closed at their lowest levels since last June as tensions escalated between Russia and the west over Ukraine, exacerbating a sell-off that has taken the benchmark S&P 500 index deeper into correction territory."
"The S&P 500 fell 1.8 per cent on Wednesday, bringing its losses to 12 per cent from a January intraday peak."
The technology-heavy Nasdaq Composite index registered a 2.6 per cent decline and is now almost 17 per cent lower for the year.
"The potential for war in Ukraine has weighed heavily on the global stock market in recent days, with the US warning that the threat of a full invasion by Russia could happen at any moment."
On Wednesday the EU sanctioned senior Russian figures while a fresh wave of cyber attacks hit Ukrainian government websites and banks.
"The Vix index, a measure of expected volatility in the S&P 500, rose above 30, above its long-run average of about 20, indicating market stress and a signal that investors believe the uncertainty will continue."
Concern about the global fallout from a conflict in Ukraine has heightened jitters among investors who were already concerned about the effect of rising interest rates.
"Jeffrey Kleintop, chief global investment strategist at Charles Schwab, said markets were showing “a textbook-like response to this type of event: an initially relatively mild sell-off and then some volatility in the ensuing days”, though he said it usually led to “a recovery afterward”."
"Kleintop said the potential that mutual sanctions between the west and Russia will drive up energy prices “reinforces some of the negative concerns in this market”, when investors are already fretting about the effect of inflation."
Futures markets show that investors in recent days have ramped up their bets that the US Federal Reserve will make six quarter-point interest rate hikes by the end of the year.
The biggest drivers of the decline in the S&P 500 on Wednesday were technology and consumer cyclical stocks that are seen as particularly vulnerable to higher rates.
"The S&P ended the previous session in a technical correction, meaning it was down more than 10 per cent from the record high set in early January."
"European stocks were similarly volatile, with the continent-wide Stoxx 600 index swinging from a 1.2 per cent gain earlier on Wednesday to close down 0.3 per cent for the day."
Ukraine’s parliament approved a national state of emergency on Wednesday as President Volodymyr Zelensky called up reserve troops and his administration pleaded with the west to enact even tougher sanctions on Russia.
"Germany halted certification of the Nord Stream 2 Russian gas pipeline, while the US said it would impose sanctions on the company and executives responsible for overseeing its construction."
The US earlier had cut Russia off from western financing and announced measures to target two of the nation’s largest financial institutions.
"Several Ukrainian government websites were also temporarily shut down and banking services disrupted on Wednesday by a fresh wave of cyber attacks, which experts have previously warned could precede further Russian aggression."
"The mounting tensions helped to propel Brent crude, the international oil benchmark, to a high of $99.50 a barrel on Tuesday as traders also grappled with the possibility of disrupted supply from Russia."
Prices fluctuated on Wednesday but settled flat at $96.84.
The marker has gained more than 3 per cent so far this week.
European natural gas contracts gained more than 10 per cent to €87.9 per megawatt hour.
"Andreas Billmeier, European economist at Western Asset Management, said there was “some relief” among investors that sanctions levelled at Russia “so far” would not disrupt the global economy."
"“It could have been worse, for example by taking Russia out of Swift,” he said, referring to the international payments system that underpins trillions of dollars worth of transactions each year."
"Spot gold, a popular investment during heightened geopolitical tensions, added 0.6 per cent to $1,909 an ounce."
"However, not all assets seen as safe havens rallied, with government bond markets remaining calm."
"The yield on the 10-year US Treasury note rose 0.04 percentage points to 1.98 per cent, reflecting lower prices."
"The dollar index, which measures the US currency against six others, rose 0.2 per cent."
"US stocks fell, with the S&P 500 index dropping into a correction, while oil prices neared $100 a barrel on Tuesday after Russian president Vladimir Putin ordered troops into eastern Ukraine."
"The international crude oil benchmark Brent rose as high as $99.50 a barrel, the highest price since 2014, as traders weighed the possibility of disrupted supply from Russia."
"It later trimmed its gains to settle at $96.84 a barrel, up 3.5 per cent from the previous day."
"The moves came after Putin directed his military to enter Ukraine’s rebel-held Donetsk and Luhansk regions, prompting Germany to halt the approval of the Nord Stream 2 natural gas pipeline and western powers to announce new sanctions against Moscow."
"Wall Street’s benchmark S&P 500 ended the day down 1 per cent to its lowest closing level since late 2021, led lower by energy and consumer discretionary stocks."
"The decline on Tuesday brought the index into a correction, or 10 per cent below its recent peak in January."
The technology-heavy Nasdaq Composite fell 1.2 per cent.
"The Stoxx Europe 600 share gauge slipped as much as 1.9 per cent, before recovering to close 0.1 per cent higher."
"Volatility indices showed traders expected equity markets to continue to swing on headlines concerning Ukraine, with the Vix gauge of expected volatility on the S&P 500 trading at 28.9."
"European natural gas contracts rose by about a tenth to €79.50 per megawatt hour, ahead of the US and western allies launching a package of sanctions against Moscow later in the day."
Sanctions on Russian sovereign bonds will prohibit purchases of debt issued after March 1.
"Russian sovereign bonds issued in euros showed little reaction to the news, having already sold off earlier in the day."
European government bonds came under selling pressure on the prospect of higher gas prices in the bloc exacerbating record-high inflation levels.
"“One of the very few definitive things we can see from this crisis is that energy prices are going higher,” said Bastien Drut, chief thematic macro strategist at CPR Asset Management."
"“Even if there is no further escalation in Ukraine, the main consequence is still going to be higher inflation.”"
"The FTSE All-World index of global shares has lost 3.3 per cent this month, taking its year-to-date loss to 8 per cent, as geopolitical tensions added to market jitters caused by the US and European central banks tightening monetary policy."
"“An energy price shock amidst an aggressive central bank pivot focused on inflation could further dampen investor sentiment and [the] growth outlook,” strategists at JPMorgan wrote in a note to clients."
"The US Federal Reserve is expected to embark on a string of interest rate rises from next month, after pinning borrowing costs close to zero two years ago."
"The European Central Bank, meanwhile, is set to phase out emergency government debt purchases this year."
The yield on the 10-year Treasury note was flat on the day at 1.93 per cent.
The yield on Germany’s 10-year Bund rose 0.04 percentage points to 0.24 per cent as the price of the benchmark European debt instrument fell.
The UK’s 10-year gilt yield rose 0.06 percentage points to 1.47 per cent.
Russian assets were volatile on Tuesday.
"The rouble hit its weakest level against the dollar in more than 15 months early in the session, before paring losses to trade 0.7 per cent higher."
"In Asia, Hong Kong’s Hang Seng index fell 2.7 per cent and Tokyo’s Nikkei 225 share index closed 1.7 per cent lower."
"European equities dropped sharply on Monday after Russian president Vladimir Putin convened his top security advisers to discuss recognising two Moscow-backed separatist regions in eastern Ukraine, a step that would greatly escalate the crisis in the country."
The regional Stoxx Europe 600 share gauge fell as much as 1.9 per cent in the early afternoon and closed the session 1.3 per cent lower.
"The meeting of the national security council came as Russia claimed on Monday that it had destroyed two Ukrainian military vehicles that strayed into its territory, killing five people."
"The unconfirmed incident would be the first direct clash with Ukrainian forces since Moscow mobilised 190,000 troops on its border."
"Dmytro Kuleba, Ukraine’s foreign minister, denied that the country’s troops made an incursion into Russia."
"“Russia, stop your fake-producing factory now,” he said in a tweet."
US president Joe Biden and Russian leader Vladimir Putin had earlier accepted “the principle” of a possible summit to ease tensions over Ukraine.
"The Kremlin on Monday then said there were “no concrete plans” for such a meeting, but did not rule out the option."
"In Russia, the Moex share index declined by more than a tenth, marking its worst single-day fall since Russia seized control of Crimea in 2014."
The rouble lost 1.3 per cent against the dollar.
"Investors have become increasingly cautious about how to respond to the flow of news concerning Russia’s intentions over Ukraine, with bad news causing sharp equity market sell-offs while relief rallies have been moderate and short lived."
The FTSE All World share index has fallen for six of the past eight sessions and has lost 2.2 per cent so far this month.
"Meanwhile, the price of spot gold, which dipped 0.1 per cent to $1,896 a troy ounce on Monday, has gained about 5 per cent since the end of January."
"“Since last week, every market top is getting lower and lower and institutional money is getting cold feet,” said Florian Ielpo, head of macro at Lombard Odier Investment Managers."
"“Every bit of news we are getting [about Ukraine] is more confusing,” he added, while overall, “the market is preparing itself for a bad moment”."
"On Sunday, French president Emmanuel Macron spoke to Russia’s president in two lengthy phone calls, in what a French official described as “part of the last possible and necessary efforts to avoid a major conflict”."
"Moscow has massed as many as 190,000 troops on Ukraine"
’s borders despite previously pledging they would return to Russia.
"Belarus, meanwhile, said over the weekend that 30,000 Russian troops participating in joint drills would stay indefinitely."
"Currency and government bond markets started Monday’s session pricing in some cautious optimism about a diplomatic resolution to the Ukraine stand-off, before the mood became more subdued."
"The yield on Germany’s 10-year Bund, which moves inversely to its price, was steady at 0.2 per cent."
Brent crude rose 1.9 per cent to $95.27 a barrel.
Oil prices had recently touched a seven-year high over concerns of an imminent Russian invasion of Ukraine.
"“The market was already fragile from a sentiment perspective,” said Jeremy Gatto, multi-asset fund manager at Unigestion, referring to the US, UK and eurozone central banks tightening monetary policy."
"The Russia-Ukraine situation, he said made it “very difficult to trade”, with new headlines about the crisis “coming out every five minutes”, and the overall feeling that “the chance of an escalation is growing”."
US stock and bonds markets were closed for a public holiday.
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Wall Street and European stocks sank on Thursday as the US said Russia was on the brink of invading Ukraine within several days.
"The technology-heavy Nasdaq Composite index faced the brunt of the losses, sliding 2.9 per cent, while the blue-chip S&P 500 closed down 2.1 per cent."
"The market declines this year have wiped more than $3tn off the value of US stocks, with the S&P 500 down over 8 per cent."
"Linda Thomas-Greenfield, US ambassador to the UN, said in a tweet that “the evidence on the ground is that Russia is moving towards an imminent invasion”."
"Speaking at the White House later on Thursday, US President Joe Biden said there was a “very high risk” of a Russian invasion, adding he believed that Moscow was engaged in “a false flag operation to have an excuse to go in”."
"The selling in the US was broad-based, with 85 per cent of the stocks in the S&P 500 declining."
Thursday’s slide ranked among the five worst trading days of the past year for the benchmark index.
Market measures of volatility also jumped.
"The Cboe’s Vix volatility index, known as Wall Street’s fear gauge, jumped to 28.1, above its long-term average."
"“The [stock] market was under pressure already, with geopolitical tensions now adding to that,” said Hani Redha, global multi-asset manager at PineBridge Investments."
“It was already raining and now it’s pouring.”
"Russia’s Moex share index dropped 3.7 per cent, while the rouble lost 1.6 per cent against the dollar."
"Elsewhere in Europe, the region-wide Stoxx 600 index closed 0.7 per cent lower and London"
’s FTSE 100 dipped 0.9 per cent.
Financial markets have whipsawed over the past week as the developments in Ukraine and threat of tighter monetary policy to tamp down surging inflation have weighed on investors.
Oil has fluctuated this week as investors have speculated about possible western sanctions on Russia and their effect on fuel supplies.
"Brent crude, the international benchmark, settled at $92.97 a barrel, down 1.9 per cent from the previous day."
“I think the Ukraine situation has a lot of people spooked and there has been a flight to safety . . . 
"We don’t know what the sanctions are going to look like, but there is going to be an impact on energy,” said Michael Loukas, chief executive of TrueMark Investments."
The market unease spurred investors to seek haven assets such as government debt and gold.
"The yield on the 10-year US Treasury note, which moves inversely to its price, fell 0.08 percentage points to 1.96 per cent, while the yield on the equivalent German Bund dropped 0.04 percentage points to 0.23 per cent."
"Gold neared $1,900 per troy ounce, rising 1.5 per cent."
Money markets have priced in six quarter-point interest rate rises by the Federal Reserve this year after US inflation surged to a four-decade high in January.
"Minutes from the Fed’s policy meeting on Wednesday highlighted its officials’ determination to combat stubbornly high prices, although some warned about the risks posed to markets and the wider economy by tightening policy too quickly."
"In Asia, Japan’s Topix fell 0.8 per cent."
Hong Kong’s Hang Seng trimmed losses from earlier in the day to close 0.3 per cent higher.
Additional reporting by Hudson Lockett
"US and European shares rallied on Tuesday, while oil prices fell after Russia said it had begun pulling some troops back to their bases, easing concerns that an attack against Ukraine was imminent."
The S&P 500 index advanced 1.6 per cent following a statement from Russia’s defence ministry that units from the country’s southern and western military districts were returning to base after the completion of drills.
"The Nasdaq Composite index, which has heavy weightings of technology stocks that are sensitive to swings in market sentiment, rose 2.5 per cent."
"The Stoxx Europe 600 share index, which fell nearly 2 per cent on Monday, closed 1.4 per cent higher on Tuesday, while the FTSE 100 rose by a little over 1 per cent."
Dax index gained 2 per cent.
The Stoxx is down 4.1 per cent this year while the S&P has lost 6.2 per cent.
"In Asia on Wednesday, shares followed Wall Street higher, with Japan"
Topix rising 1.4 per cent and Hong Kong’s Hang Seng index up 0.9 per cent.
"Brent crude, the international oil benchmark, fell another 0.4 per cent on Wednesday to $92.88 a barrel, adding to a more than 3 per cent fall from the previous session."
"Brent had risen to as high as $96.78 on Monday, its steepest level in seven years."
"Russia is estimated to have maintained a force of more than 100,000 troops near Ukraine in recent weeks."
"But on Tuesday afternoon, President Vladimir Putin said Russia was ready to hold “dialogue” with the west on core security issues."
"Nato had earlier said there were no signs of de-escalation, but also reason for cautious optimism that Russia would continue with diplomacy."
"“Up until now the momentum has been towards more escalation, more troops at the border, diplomatic stalemate,” said Tiffany Wilding, US economist at Pimco."
“Today was the first sign that the situation may be de-escalating and that is important for markets.”
"Tensions over Ukraine, which have been building for more than two months, have dominated global markets since the US warned last Friday of an immediate threat that Russia would invade its neighbour."
"The potential for western sanctions against Russia, an important supplier of oil, gas and metals to global supply chains already snarled by Covid-19-related disruptions, has added volatility to markets that have in recent weeks been jolted by high inflation and expectations of central bank action."
"“We’re dealing with a fearful market,” said Kevin Rendino, chief executive of 180 Degree Capital, noting last week’s hot inflation print and the prospect of more aggressive interest rate rises in addition to tensions between Ukraine and Russia."
"Government bonds, which are often sought out in periods of geopolitical turmoil, slipped in value on Tuesday."
"The yield on the 10-year US Treasury note rose 0.06 percentage points to 2.05 per cent, close to its highest level since late 2019."
"The yield on Germany’s 10-year Bund, which moves inversely to the price of the security, rose 0.03 percentage points to 0.30 per cent."
"“The Russia-Ukraine situation is coming at an inopportune time when markets were already fragile,” said Olivier Marciot, cross-asset fund manager at Unigestion, referring to expectations the US Federal Reserve would raise interest rates up to seven times this year after pinning borrowing costs close to zero in March 2020."
“Markets are therefore being very reactive to any incremental piece of news that comes out.”
Additional reporting by Hudson Lockett in Hong Kong
US and European stocks fell in volatile trading on Monday as investors were spooked by fears of an imminent Russian attack on Ukraine.
The FTSE All World index slid 1 per cent as global equities lurched lower.
"The declines were most significant in Europe, where the benchmark Stoxx 600 index fell 1.8 per cent as the geopolitical crisis intensified."
Germany’s Xetra Dax fell 2 per cent while the CAC 40 in Paris shed 2.3 per cent.
"The pain was also felt in the US, with the benchmark S&P 500 closing 0.4 per cent lower."
"Monday’s market moves came after Jake Sullivan, US national security adviser, said on Sunday that an attack by Russia against Ukraine could begin “any day now”, including “this coming week before the end of the Olympics”."
Stocks whipsawed on various news reports related to the crisis.
"European equities had bounced off their lows after Sergei Lavrov, Russia’s foreign minister, told President Vladimir Putin in a televised meeting on Monday that diplomatic engagement with the west should continue."
"“There’s always a chance,” Lavrov said, when asked by Putin whether there was any likelihood that an agreement with the west could be reached in the flurry of negotiations between Moscow and western capitals aimed at defusing tensions on the border with Ukraine."
"US stocks lurched lower after Volodymyr Zelensky, Ukrainian president, warned that “the date of the military invasion is being set again”, before recovering some of their losses later in the afternoon."
A Ukrainian official had subsequently sought to clarify the president’s comments.
"They had already been hit late last week after the White House issued its first warning of an “immediate threat” of invasion, with the S&P dropping almost 2 per cent on Friday."
"The pace of falls slowed on Tuesday in Asian trading, with Japan’s benchmark Topix index off just 0.3 per cent and Hong Kong’s Hang Seng down 0.7 per cent."
Futures markets tipped the FTSE 100 to open flat while the S&P 500 was expected to rise 0.2 per cent.
"Western nations are continuing to withdraw diplomatic and military personnel from Ukraine, and airlines have cancelled flights to the country."
The tensions have exacerbated what was already a weak start to the year for stock markets driven by changing monetary policy.
"With global supply chains snarled up from Covid-19, all major commodity markets are in a “state of severe depletion”, said Jeff Currie, head of commodities research at Goldman Sachs."
"“Such depleted systems are highly vulnerable to even the smallest shocks, even [with just] a few days of disruption.”"
European natural gas contracts for next-month delivery jumped 7 per cent on Monday to €79.40 per megawatt hour.
"International oil benchmark Brent crude advanced more than 2 per cent to $96.48 a barrel, hitting its highest level in seven years."
"“If western claims of [a] Russian invasion of Ukraine turned out to be unsubstantiated [or] Russia withdrew its troops from its western borders, oil prices will come crashing,” said Tamas Varga at PVM Oil Associates, a broker."
“For the time being all eyes are on Ukraine and on the $100-a-barrel level.”
"The situation between Russia and Ukraine did not push investors into haven securities, including sovereign debt."
Germany’s benchmark 10-year Bund yield was flat for the day at 0.28 per cent.
The equivalent 10-year US government bond yield rose 0.05 percentage points to 1.99 per cent.
"In Asia, Hong Kong’s benchmark Hang Seng fell 1.4 per cent, while Japan’s Topix and South Korea"
Kospi both closed 1.6 per cent lower.
Additional reporting by Tommy Stubbington and Hudson Lockett
Wall Street stocks and government bond prices fell on Thursday after data showed the rate of US inflation hit a 40-year high in January.
"The latest hot consumer price index print prompted traders to bet on more aggressive action from the Federal Reserve, with six quarter-point interest rate increases priced into the market for 2022."
"With higher rates, and therefore higher borrowing costs, on the horizon, US stocks stumbled."
"The broad-based S&P 500 index closed down 1.8 per cent, pulled lower by the real estate and tech sectors, while the technology-heavy Nasdaq fell 2.1 per cent."
"The S&P 500 real estate sub-index had its worst day in more than a month, dropping 2.9 per cent, as higher interest rates feed into mortgages."
US government debt also came under renewed selling pressure.
"The yield on the two-year Treasury note, which moves inversely to its price and closely tracks interest rate expectations, rose by as much as 0.27 percentage points to 1.64 per cent, its highest level since December 2019."
"The 10-year Treasury note, which moves with inflation and economic expectations, rose to a high of 2.05 per cent, breaching 2 per cent for the first time since August 2019."
"Though the move in 10-year yields was significant, the biggest changes were in shorter-dated notes suggesting that the market’s focus on Thursday was more on the Fed’s potential policy reaction to inflation rather than inflation itself."
"US consumer prices rose at an annual pace of 7.5 per cent last month, higher than the 7.3 per cent forecast by analysts and marking the fastest pace since 1982."
"The month-on-month inflation rate hit 0.6 per cent in January, higher than the 0.5 per cent figure expected by economists."
"“The bond market is being brought kicking and screaming into this rate hiking cycle,” said Tom Graff, head of fixed income at Brown Advisory."
"Across the Atlantic, the yield on Germany’s 10-year Bund, which last month traded in positive territory for the first time since 2019, added 0.07 percentage points to rise to 0.28 per cent."
"The yield on Italy’s 10-year bond, which is viewed as particularly sensitive to rising rates because of the government’s high debt, rose 0.14 percentage points to 1.89 per cent."
"In European equity markets, the Stoxx 600 index dipped 0.2 per cent, after closing 1.7 per cent higher in the previous session."
FTSE 100 added 0.4 per cent.
A late rally pushed the dollar to a 0.2 per cent gain for the day against a basket of its peers.
"Brent crude settled at $91.41, a 0.2 per cent increase from the previous close."
"Global stock and government bond prices rose on Wednesday, with the sovereign debt market rebounding from a sell-off earlier in the week that had been driven by concerns about tighter monetary policy."
"Government bond yields, which fall when prices rise, on both sides of the Atlantic hit multiyear highs this week as the Federal Reserve, Bank of England and European Central Bank all move closer to normalising monetary policy after years of extraordinary stimulus."
"However, the sell-off paused on Wednesday, with yields falling across developed markets."
"The yield on the 10-year US Treasury dropped 0.02 percentage points to 1.95 per cent, while Germany’s 10-year Bund fell 0.05 percentage points to 0.21 per cent."
"The yield on Italy’s 10-year bond, which is seen as particularly sensitive to rising rates due to the government’s high debt levels, dropped 0.1 percentage points to 1.75 per cent."
"The brighter mood was also reflected across stock markets, with the big indices across the US, Europe and Asia registering solid gains."
"Wall Street’s benchmark S&P 500 rose 1.5 per cent, with stocks across every sector rising."
The technology dominated Nasdaq Composite climbed 2.1 per cent.
The Europe-wide Stoxx 600 index rose 1.7 per cent.
"Italian assets again performed particularly well, with the FTSE MIB rising 2.7 per cent."
"Tech stocks are seen as particularly vulnerable to rising bond yields, which reduce the valuation investors put on their future earnings."
"However, with the Nasdaq already down about 7 per cent in 2022, sessions when bond yields decline have prompted bargain hunting in the sector."
"Shares in Google owner Alphabet rose 1.6 per cent, while Facebook owner Meta — which plunged last week following disappointing earnings — gained more than 5 per cent."
"“When equity market sentiment has been very poor for a while, sometimes there is a feeling things can’t get any worse,” said Guillaume Paillat, multi-asset portfolio manager at Aviva Investors."
"“There’s been a sense of looking for the entry point to buy back into mega-cap tech,” he said."
"“Although, as it is going to be a choppy environment driven by rates for a while, I’m not all in.”"
"Money markets have priced in more than five quarter-point rate rises by the Fed this year, in response to surging inflation."
"Data on Thursday are expected to show US consumer prices climbed to 7.2 per cent in the year to January, a four-decade high."
"Optimism is building that price rises, fuelled by global supply chain issues and surging energy costs, have peaked."
"Stock markets have swung heavily in recent weeks, however, as investors struggle to forecast where bond yields and interest rates will settle."
"“Everyone understands inflation is coming down but we don’t know by how much,” said Caroline Simmons, UK chief investment officer at UBS’s private bank."
“This is what unnerves people.”
The S&P 500 is down 4 per cent for 2022 and has moved more than 1 per cent in either direction on a third of trading days this year.
Bets on the European Central Bank tightening monetary policy rose last week when its president Christine Lagarde expressed concern about record eurozone inflation and declined to rule out interest rate rises.
"François Villeroy de Galhau, Bank of France governor, said on Tuesday, however, that markets may have overreacted to Lagarde’s comment."
"Brent crude, the international oil benchmark, rose 0.8 per cent to $91.55 a barrel, remaining close to its highest level since October 2014."
"Global government debt prices fell on Tuesday, with the benchmark US Treasury yield scaling levels not seen since late 2019, as traders bet on central banks withdrawing pandemic-era monetary stimulus."
"The yield on the 10-year US Treasury note, which underpins global borrowing costs and stock market valuations, rose to a high of 1.97 per cent."
"Tuesday’s move extends an ongoing upward trend, in which the 10-year yield this year has risen by 0.44 percentage points."
"Bond yields, which move inversely to prices, also climbed in the eurozone, the UK, Canada and Brazil ahead of what is expected to be another US report showing high inflation on Thursday."
"With the Federal Reserve already having signalled its willingness to raise interest rates from historic lows, data on Thursday are forecast to show US consumer prices climbed 7.3 per cent from January 2021, a fresh four-decade high."
A blockbuster employment report for January has reinforced views that the Fed will be aggressive in its tightening of monetary policy.
"The stronger-than-expected report, which also included upwards revisions to December and November estimates, suggested that the US economy is strong enough to withstand interest rate increases."
"“There is still some reshuffling going on after the employment report and trying to price the right path for the Fed,” said Tom Simons, money market economist at Jefferies, about the ongoing moves in Treasuries."
"Wall Street’s benchmark S&P 500 index, which has lost 5 per cent of its value in 2022, rose 0.8 per cent on Tuesday, bolstered by bank stocks, which benefit from higher interest rates."
"The tech-heavy Nasdaq Composite index, down about 9 per cent this year, added 1.3 per cent."
Shares in drugmaker Pfizer fell 2.8 per cent after it issued earnings forecasts that underwhelmed bullish analysts.
But fitness equipment maker Peloton jumped by 25.2 per cent as its chief executive stepped down following a collapse in market value that attracted activist investors and potential bidders.
Markets have priced in more than five quarter-point US rate rises by December.
The Fed is also seeking to shrink a balance sheet that has ballooned to about $9tn after it begun debt purchases in March 2020 to suppress borrowing costs and stimulate the economy.
The 10-year yield stood at about 1.2 per cent a year ago.
"The two-year Treasury yield, which closely tracks interest rate expectations, rose 0.05 percentage points to 1.34 per cent."
"The dollar index, which measures the greenback against big currencies, rose 0.21 per cent."
"Germany’s 10-year Bund yield, the barometer of wider euro-area borrowing costs that until last month had sat below zero since May 2019, rose 0.04 percentage points to 0.26 per cent."
"This came despite Christine Lagarde, European Central Bank president, saying on Monday that any moves to tackle record inflation in the currency bloc would be “gradual”."
Italy’s 10-year bond yield rose 0.07 percentage points to 1.84 per cent and the UK’s 10-year gilt yield climbed 0.08 percentage points to 1.49 per cent.
"Markets last week priced in at least two ECB rate rises this year, sending southern eurozone governments’ borrowing costs to pre-pandemic levels."
"“The ECB is trying to moderate its stance and saying that it will act cautiously,” said Juliette Cohen, investment strategist at CPR Asset Management."
"“But there is a lot of pressure on the ECB, with other central banks moving faster.”"
"Europe’s Stoxx 600 share index closed flat, having fallen in tandem with Wall Street markets this year."
Hong Kong’s Hang Seng index fell 1 per cent and the Nikkei 225 in Tokyo added 0.1 per cent.
"US and European stock markets skidded lower late on Monday after a choppy day of trading, as investors weighed countervailing forces of resurgent economies and central banks’ next steps to fight inflation."
"The S&P 500 ended the day down 0.4 per cent, while the tech-heavy Nasdaq Composite fell 0.6 per cent."
Both indices lurched lower in the final hour of trading after swinging repeatedly between gains and losses earlier in the day.
"The two gauges made gains last week but remain significantly lower for the year, with investors adjusting expectations for the Federal Reserve’s impending end of its pandemic-era monetary support."
"“The main driver of markets at the moment is interest rates,” said Samy Chaar, chief economist at Lombard Odier."
"“Now, even the [European Central Bank] has turned slightly hawkish,” he added."
“Markets are lost.”
"The ECB has been more cautious than its peers in the USA and UK in moving towards withdrawing stimulus, but signalled a “hawkish” shift last week when Christine Lagarde, the bank’s president, refused to rule out a potential rate rise later in the year."
"The shift in expectations on Monday hit bonds of southern European countries that are seen as particularly vulnerable to rising rates, namely Italy, Spain and Greece, though the selling pressure eased later in the day after Lagarde addressed the European Parliament."
"Italian and Spanish stocks also suffered, with their benchmark indices dropping 1 per cent and 0.4 per cent respectively, in contrast to a 0.7 per cent increase in the continent-wide Stoxx 600."
Investors are grappling with a conflict between improving economic trends and the potential effects of higher interest rates on borrowing costs and company valuations.
"The technology sector, where valuations swelled during almost two years of ultra-low borrowing costs and coronavirus lockdowns boosting stay-at-home businesses, has been especially volatile."
"Shares in Peloton rose 20.9 per cent on Monday, following news that Amazon and Nike were evaluating bids for the at-home fitness group."
"The Nasdaq has dropped 10 per cent so far in 2022, while the S&P, which is broader based but still dominated by big tech shares, is down more than 5 per cent."
Disappointing earnings from Meta last week drove the Facebook owner to the largest single-day drop in a company’s market capitalisation on record.
Amazon on Friday achieved its best one-day gain since 2015.
"US jobs data on Friday showed employers in the world’s largest economy added an unexpectedly high 467,000 new roles last month, signalling the resilience of the recovery from the coronavirus-driven shocks of 2020."
But inflation data later in the week are expected to show consumer prices rose 7.3 per cent in the year to January — a fresh four-decade high.
"“A record amount of stimulus is about to be withdrawn from the global economy,” said Andrew Sheets, strategist at Morgan Stanley, noting that important central banks were expected to shrink their balance sheets by $2tn in the 12 months from May this year."
"“For investors, the scale of what lies ahead means we think they should keep overall exposure light.”"
Markets last week priced in more than five quarter-point rate rises by the Fed this year.
"The yield on the benchmark 10-year Treasury note, which moves inversely to its price, slipped 0.01 percentage points to 1.92 per cent."
"Brent crude, the global oil benchmark, fell 0.6 per cent to $92.69 a barrel, but remained close to its highest level since 2014."
Stocks on Wall Street slid by the most in almost a year on Thursday after a disappointing earnings report from Facebook parent Meta reverberated through the market.
"The S&P 500 index fell 2.4 per cent, its biggest drop since February 2021, driven largely by falls in tech stocks that dominate the blue-chip US index."
The slide ended a four-day rally and took the S&P’s declines this year to 6.1 per cent.
"The losses for the tech-heavy Nasdaq Composite were more intense, with the index that counts Meta and Amazon as members, declining 3.7 per cent, its worst day since September 2020."
"Investors were shaken by Wednesday’s results from Meta, sending the company’s shares down 26.4 per cent and wiping more than $230bn off its valuation, an unprecedented single-day loss for a listed company."
Meta overnight reported its first decline in daily active users and warned of increased competition from rivals such as ByteDance’s TikTok platform.
"Shares of PayPal fell 6 per cent, bringing their total decline to just under 30 per cent since the closing bell on Tuesday when the payments company warned that a weakening ecommerce environment would slow its growth rate."
"Music streaming platform Spotify also delivered a weak outlook for first-quarter subscriber growth, sending its shares down 17 per cent on Thursday."
"Shares in many tech companies rose during the pandemic, fuelled by a combination of coronavirus lockdowns keeping customers at home and ultra-low interest rates increasing the appeal of more speculative investments."
"But this year, some traders have started to think that the coronavirus is becoming milder and the US central bank has signalled that it is poised to rapidly raise borrowing costs, casting a pall over Wall Street’s big tech groups."
"“Fingers have been hovering over the sell trigger for the tech sector,” said Gregory Perdon, co-chief investment officer at Arbuthnot Latham."
"“So when you get an announcement like [Meta’s], investors see the beginning of the end.”"
The earnings figures from Meta sparked manic shifts in the market with investors punishing Snap and Amazon as a result.
"But results from the two companies, released late on Thursday, prompted an immediate about-face."
"Snap, which had fallen 24 per cent during the trading day, rallied nearly 40 per cent in after-hours trading."
"For Amazon, an 18 per cent surge in after-hours trading helped more than reverse the entirety of its 8 per cent decline it registered in the session."
"In Hong Kong on Friday, the benchmark Hang Seng index rose 2.6 per cent as the city’s bourse reopened following a three-day holiday."
Electric vehicle and battery maker BYD led gains with a climb of 6.3 per cent.
"Chinese tech leaders Alibaba and JD.com rose 4.5 and 1.5 per cent, respectively, helping push the Hang Seng Tech index up 2.2 per cent."
"“It’s a bit of catch-up rally for Hong Kong because during the [lunar new year] holiday, the US did quite well,” said Louis Tse, managing director at Hong Kong-based brokerage Wealthy Securities."
“But of course now there’s been a sell off for Meta.”
"In Europe, the regional Stoxx 600 share index fell 1.8 per cent, with its tech sub-index dropping 3.5 per cent."
"The yield on the UK’s benchmark 10-year gilt climbed 0.11 percentage points to 1.36 per cent, representing a significant fall in the price, after the Bank of England raised interest rates by a quarter point to 0.5 per cent and bumped up its inflation forecast to an April peak of 7.25 per cent."
"Germany’s equivalent Bund yield rose 0.10 percentage points to 0.14 per cent, after Christine Lagarde, European Central Bank president, in a press conference, declined to rule out lifting interest rates this year."
Eurozone inflation hit a record of 5.1 per cent in January.
"US tech stocks shrugged off earlier losses to close slightly higher on Tuesday, as investors braced themselves for a further batch of earnings reports."
"The technology-heavy Nasdaq Composite index rose 0.7 per cent, while the blue-chip S&P 500 closed 0.7 per cent higher."
"In January the Nasdaq slid 9 per cent and the blue-chip S&P fell 5.3 per cent, their worst month since the start of the pandemic."
"The rebound came as traders anticipated tech earnings, including from Google parent Alphabet, which reported results after the bell on Tuesday that beat analyst expectations."
Alphabet closed the day up 1.6 per cent and rose further in after-hours trading.
Amazon and Facebook owner Meta are also set to report their latest quarterly figures this week.
"Earnings from fellow tech heavyweights Apple and Microsoft had “set a positive tone for the street heading into this week”, Daniel Ives, Wedbush analyst, said in a note to clients."
"However, traders are also contending with rising interest rates, which makes holding shares of tech companies whose lofty valuations are premised on expectations for a sustained period of high growth look less appealing."
“Will a rising rate environment make the Street ultra-sensitive to valuations on the tech space looking ahead?”
“The answer is emphatically yes.
"However, the digital transformation happening today on the enterprise and consumer fronts is not slowing down,” he said."
"Following last month’s decline, some investors see February as an opportunity to buy into a dip caused by markets having priced in too many rate rises this year, while others caution it is too early to turn bullish."
"“Our bias,” said Ben Bennett, Legal & General Investment Management’s head of investment strategy, is “to buy into the weakness”."
"“Economic growth should remain robust in the coming quarters,” Bennett added, which would translate into “improving corporate fundamentals”."
"“I think we are not done,” said Kasper Elmgreen, Amundi’s head of equities, “with this battle between rising rates putting pressure on equity valuations and the counterpoint of pretty solid earnings coming through”."
"Brent crude, the oil benchmark, settled 0.1 per cent lower at $89.16 a barrel on Tuesday, still close to its highest price since 2014, hit on January 28."
"Tensions between Russia and Ukraine could further elevate oil prices, Elmgreen added."
“And energy prices are pretty important as we are already in a market where inflation is running rampant and this is the whole reason the Fed needs to step in.”
Futures markets anticipate the Federal Reserve raising rates as many as five times this year after the central bank pinned borrowing costs close to zero in March 2020.
"In Europe, the Stoxx 600 share index closed 1.3 per cent higher, helped by bank shares, which benefit from expectations of higher borrowing costs."
"Germany’s 10-year Bund yield held above zero on Tuesday, in a rare sustained move out of negative territory, as high inflation piled pressure on the European Central Bank to rethink its ultra-loose monetary policies."
The ECB holds its next monthly meeting on Thursday.
"The yield on the 10-year US Treasury note, a benchmark for debt pricing worldwide, rose 0.01 percentage points to 1.79 per cent."
"In Asia, Hong Kong’s Hang Seng index rose 1.1 per cent and South Korea’s"
tech-heavy Kospi gained 1.9 per cent.
*This article has been amended to reflect the correct year since the Nasdaq last had a bigger one-month decline
"Wall Street stocks rose on Monday ahead of an important week of financial reports from technology titans Alphabet, Amazon and the Facebook owner Meta."
"The broad-based S&P 500 index added 1.9 per cent, with its information technology sub-index jumping 2.7 per cent."
"The tech-heavy Nasdaq Composite index rallied 3.4 per cent, marking its best day since March 2021."
"Investors have had to navigate choppy conditions since the start of the year, balancing the likelihood of tighter monetary conditions with a solid underlying growth outlook and mixed fourth-quarter results."
"Of the 44 companies to have so far provided formal full-year earnings per share guidance, 23 have advised above consensus and 21 have guided below, according to Goldman Sachs research."
"Apple and Microsoft, the world’s two most valuable companies by market capitalisation, both posted upbeat results last week, helping the Nasdaq eke out a small weekly gain for the first time this year."
"Fellow tech heavyweights Alphabet, Meta and Amazon will reveal their latest quarterly figures on Tuesday, Wednesday and Thursday, respectively."
"The Nasdaq has nonetheless dropped 9 per cent this year, as higher rate expectations reduce the value investors put on high-growth companies’ future earnings."
The S&P 500 — which hit a record high as recently as early January — fell 5.3 per cent over the same period.
Those declines have come as officials at the US Federal Reserve have signalled that interest rates may have to rise faster and more aggressively to tackle inflationary pressures in the world’s largest economy.
"Raphael Bostic, president of the Fed"
"’s Atlanta branch, stuck to his call for three quarter-point interest rate increases in 2022 in an interview with the Financial Times over the weekend."
But he said a more aggressive approach could include raising the federal funds rate by half a percentage point — double its typical amount.
"However, Randeep Somel, fund manager at M&G Investments, said the Fed remained “very conscious of making a policy error and having to go back and cut rates if the market slows down”."
"January’s decline, he added, constituted an adjustment rather than the start of a proper bear market and “the market will settle down”."
"In government debt markets, the yield on the two-year US Treasury note, which closely tracks policy expectations, rose 0.01 percentage points to 1.18 per cent."
Bond yields rise when prices fall.
"Meanwhile, the German 10-year Bund yield climbed above zero ahead of the European Central Bank’s policy meeting on Thursday, with traders betting that the ECB will join the global move towards tighter monetary policy by raising rates before the end of the year."
"Markets are now pricing in two rate rises of 0.1 percentage points by December, with some analysts forecasting that the ECB could even opt for a larger quarter point increase in late 2022 in an attempt to bring down high inflation."
Investors are also weighing up how to respond should a conflict erupt in Ukraine.
"Oil prices could rise above $100 a barrel if Vladimir Putin, Russian president, were to cut natural gas supplies to Europe, according to Anatole Kaletsky at Gavekal Research."
"“This would result in a global inflation crisis comparable to the one that followed the 1973-74 Arab oil embargo,” Kaletsky wrote in a note on Monday."
“A drastic tightening of monetary policy and a profound bear market both in bonds and equities would likely follow.”
"Brent, the international crude benchmark, rose 1.3 per cent to $91.21 a barrel on Monday."
"In European equities, the Stoxx 600 index closed 0.7 per cent higher after losing 1 per cent in the previous session."
London’s FTSE 100 was flat.
"In Asia, Hong Kong’s Hang Seng and Tokyo’s Nikkei 225 both advanced 1.1 per cent."
"Wall Street stocks rallied sharply at the end of a wild week across global markets on Friday, as investors weighed the prospect of rapid interest rate rises by the US Federal Reserve and an upbeat earnings report from Apple."
"The benchmark US S&P 500 index rose 2.4 per cent as a late-day advance gathered momentum, reversing a drop of as much as 0.8 per cent earlier in the day."
"The rise was enough to put the index in the green for the week, ending a three-week run of losses."
"The Nasdaq Composite index advanced 3 per cent, enough to eke out a marginal gain for the week."
"Both indices have swung violently in recent trading sessions, with intraday moves pushing gauges of volatility to their highest levels since October 2020 this week."
"The gains on Friday followed a strong quarterly update from Apple, the world’s largest company by market capitalisation, as its shares rose 7 per cent."
The iPhone maker also revealed a lighter hit than analysts had forecast from coronavirus-related semiconductor supply chain glitches.
"Equity markets, particularly those on Wall Street, have proved volatile this week as investors grappled with a hawkish message from Jay Powell, the Fed chair, following the US central bank’s monetary policy meeting on Wednesday."
Geopolitical tensions as Russian troops gathered at the Ukraine border have also helped to drive the S&P gauge about 7 per cent lower this month.
The Nasdaq is down 15 per cent from its November record high.
"“Two factors explain this difficult period for equity markets,” said Christophe Donay, chief strategist at Pictet Wealth Management."
“Tensions over Russia and Ukraine have contributed perhaps a third of the correction and the rest is the Fed.”
Monetary policy concerns remained top of mind for investors.
Powell on Wednesday signalled the central bank was ready to raise rates from record lows to tackle soaring inflation.
"Futures markets have priced in about five quarter-point interest rate rises this year, starting in March."
Higher interest rates increase companies’ borrowing costs and lower the present value of forecast profits in investors’ models.
"The Fed’s hawkish turn has therefore challenged some investors to re-engineer portfolios, given that as recently as mid-September pricing in overnight funding markets implied the central bank would raise rates just once this year."
"“This is a huge regime change,” said Gergely Majoros, investment committee member at fund manager Carmignac."
“It is difficult to hold convictions.”
"Yields on US Treasuries, which have been under selling pressure as expectations of higher interest rates and persistent inflation reduced the appeal of fixed income-paying securities, ticked down on Friday as the price of the debt rose."
"Core personal consumption expenditure data on Friday showed the Fed’s favoured measure of inflation rose at an annual rate of 4.9 per cent in December, slightly outpacing economists’ forecasts."
"“Markets are adjusting to what is a new normal, and that the Fed will have some catching up to do in the months ahead,” said Edward Jones senior financial strategist Mona Mahajan."
"“We think they will move pretty aggressively, especially in the first few months of their tightening cycle.”"
"The yield on the two-year Treasury note, which closely tracks monetary policy expectations, fell 0.02 percentage points to 1.17 per cent."
"The 10-year yield dipped 0.01 percentage points to 1.79 per cent, though still up sharply from the end of 2021."
"The dollar index, which measures the US currency against six others, was flat after climbing to its highest point in almost 18 months on Thursday."
"European markets fell broadly on Friday, with the regional Stoxx 600 index down 1 per cent."
"In Asia, Hong Kong’s Hang Seng index fell 1.1 per cent while Tokyo’s exporter-heavy Nikkei 225 added 2.1 per cent."
Additional reporting by Tommy Stubbington
"US stocks closed lower on Tuesday after a volatile session, as investors prepared for the prospect that the Federal Reserve will signal an increase in interest rates as soon as March."
"The technology-heavy Nasdaq Composite stock index fell 2.3 per cent, earlier dropping as much as 3.2 per cent."
"The decline followed a wild ride on Monday when the index, which includes Apple and Microsoft, sank almost 5 per cent before ending the day with a small gain."
"The broader S&P 500 index, which is on course for its worst January on record, closed 1.2 per cent lower."
"Sectors of the index including tech, utilities and communication services took significant hits."
The blue-chip index has lost nearly 9 per cent of its value so far this month.
"In Asia on Wednesday morning, Japan’s Topix dipped 0.3 per cent after rising 0.9 per cent, while South Korea’s"
tech-focused Kospi edged 0.3 per cent higher.
"Shares in Hong Kong-listed Chinese tech companies stabilised, with the Hang Seng Tech index up 1.8 per cent, after a day of declines for companies including internet giant Tencent and food delivery business Meituan."
"Investors are grappling with a hawkish turn by the Fed, which will finish a two-day monetary policy committee meeting on Wednesday."
Officials there are expected to signal their willingness to raise interest rates in March to battle surging US inflation.
"Futures markets have priced in about four rate increases this year, each by a quarter of a percentage point."
"“Equities are suffering due to the fact that there is going to be some slower growth with higher interest rates,” said Tom di Galoma, managing director at Seaport Global Holdings."
"In a sign of the rising tension, measures of expected short-term volatility in US stocks, such as the Cboe Vix index, were well above historic averages."
"“Volatility hurts everything, so things that should be robust and defensive get caught up in it,” said Nitesh Shah, research director at WisdomTree, an exchange traded fund provider."
"Christopher Murphy, a strategist with Susquehanna, a broker and trading group, added that relatively poor liquidity in recent days in the US stock market was exacerbating the sharp market swings registered since the start of the year."
"“It is hard to tell when the selling will abate,” he said."
"The Fed first pushed borrowing costs near zero at the start of the pandemic and bought vast quantities of Treasury bonds and backstopped other debt markets to ease financial conditions, boosting stock markets and investors’ appetite for speculative assets."
"Trading in US Treasuries was muted on Tuesday, after prices rose in recent days as traders sheltered from stock market volatility."
"The yield on the benchmark 10-year Treasury note, which moves inversely to its price, rose 0.01 percentage point to 1.78 per cent."
"The dollar index, which measures the US currency against six others, moved 0.1 per cent higher on the day."
"The Stoxx Europe 600 index rose 0.7 per cent, rebounding partially from a 3.8 per cent drop in the previous session."
"In Asia, Hong Kong’s Hang Seng share index fell 1.7 per cent as Chinese tech companies declined."
Global equities suffered their biggest declines in more than a year as heavy losses in Netflix shares accentuated a sell-off in tech stocks that spilled into other sectors.
Investors have raced out of speculative corners of the market as the Federal Reserve moves to tighten financial conditions.
"Share declines have been particularly extreme in the US, where many of last year’s high-flying tech companies are listed."
"The tech-heavy Nasdaq Composite index fell 7.6 per cent this week, its biggest slide since the coronavirus pandemic rocked US financial markets in March 2020."
"The blue-chip S&P 500 index, the closely followed barometer of the $50tn US stock market, shed 5.7 per cent over the past week."
More than two-thirds of the companies within the index are now in a technical correction — or down at least 10 per cent from their record high — including 149 stocks that have declined 20 per cent or more.
"The FTSE All-World index of developed and emerging market shares has fallen 4.2 per cent since last Friday, recording its steepest weekly decline since October 2020."
"Among the hardest hit US stocks was Netflix, which tumbled 22 per cent on Friday after the streaming group warned subscriber growth would slow substantially."
"The decline shaved about $49bn from its valuation, or roughly the market capitalisation of foods group Kraft Heinz."
"Tim Skiendzielewski, investment director at Abrdn, the $700bn asset manager, said a weak start to earnings season had knocked investor confidence just as markets were showing signs of recovery after an earlier sell-off."
"“At a time when investors were broadly hopeful that we’d found a bottom and would get into an earnings season that would help ease investor concerns and give a lift to the market, Netflix’s report did the opposite, sending jitters through the market that things won’t pick up from a demand perspective,” he said."
The drawdown in equity markets prompted many investors to buy derivatives to hedge themselves from further declines.
"Volumes of equity put options in the US, which can pay off if a stock or index falls in value, surged above 30m contracts, the first time in history activity had ever crossed that threshold in a single day."
"Investors were heavy buyers of puts on State Street’s $420bn SPDR S&P 500 exchange traded fund, known by the ticker SPY."
"Roughly 6m put contracts on the ETF were bought on Friday, including more than 1m that expired today."
"“Some kind of contagion from tech to the rest was inevitable at some point,” said Luca Paolini, chief strategist at Pictet Asset Management."
“When you have these kinds of losses they affect sentiment and everything else goes down.”
"The shift out of highly valued and fast-growing companies such as Netflix on Friday marked the latest stage of a pullback that has reverberated across global financial markets, as investors grapple with a US central bank that is dramatically shifting monetary policy."
Traders expect the Fed to raise interest rates four times this year and to end other stimulus measures that had helped propel stock markets since the start of the pandemic.
"That pivot from the Fed has been acutely felt in the $22tn Treasury market, the backbone of the global financial system and the market that serves as a gauge for which all other assets are priced."
"Yields on Treasuries have shot higher this year, prompting a powerful stock market rotation out of tech stocks and into shares of businesses whose fortunes are pegged to the economic rebound from the shocks of coronavirus."
"Those higher yields have damped the appeal of so-called growth stocks, whose valuations are reliant on future profits that will not be earned for many years."
"Even as Treasury prices firmed on Friday, extending a rally that began in the previous session, the so-called 10-year real yield continued to rise, briefly hitting minus 0.54 per cent, its highest level since February 2020."
Other assets that had been in vogue have also had a turbulent start to the year as real yields have surged from minus 1.1 per cent at the end of 2021.
"Bitcoin, a highly speculative asset that reached an all-time high in November 2021, has fallen 17 per cent in 2022 while an index of unprofitable tech stocks collated by Goldman Sachs has shed more than a fifth of its value over the same time period."
"“The equity market has become very bearish [over the prospect that] the Fed will be forced to act,” added Jim Tierney, a fund manager focused on growth stocks at AllianceBernstein."
"“The Fed has never in the last 20 years — in most of our investing careers — been hyper hawkish, but the market now is pricing in the idea that they are going to have to be.”"
"Stock markets also fell across Europe, with the regional Stoxx 600 equity gauge falling 1.4 per cent for the week, its third consecutive weekly loss."
Stocks on Wall Street slid on Thursday with the tech-heavy Nasdaq Composite taking its losses from its record high to near 13 per cent as the prospect of higher interest rates has driven investors out of equities.
The Nasdaq index ended the day down 1.3 per cent.
It has now fallen 12.7 per cent from a record struck in November.
The index earlier this week fell into a technical correction.
This occurs when it falls more than 10 per cent from a high.
"The blue-chip S&P 500 stock index fell 1.1 per cent on Thursday, and now sits 7 per cent below a high set this month."
"Among the stocks that had the biggest losses was fitness equipment maker Peloton, dropping 24 per cent as CNBC reported it would temporarily stop manufacturing new bikes and treadmills because of waning demand."
"Shares of Netflix also fell in after-hours trading, sliding 13 per cent after the company said subscriber growth would fall short of Wall Street expectations."
"US stocks have been under pressure since the start of the year, as investors bet that in order to combat inflation the Federal Reserve will need to raise interest rates at a faster pace and by a larger magnitude than previously anticipated."
"Higher interest rates increase the cost of borrowing for companies, which can be problematic for lossmaking groups who don’t yet have the margins to absorb rising rates."
But there is another issue for many of the lossmaking but fast-growing companies in the tech industry.
"Valuations across the sector have been bolstered by low and negative yields on Treasuries, which are used by investors to value profits that will not be generated for many years to come."
"As yields on Treasuries rise, the relative appeal of those future profits decline, which in turn weighs on investor demand for shares of those companies."
A closely followed Goldman Sachs index of lossmaking tech groups has fallen 18 per cent so far this year.
Minutes of the US central bank’s December meeting released in early January revealed its officials had become more willing to raise borrowing costs.
"The futures market is currently pricing in four quarter-point rate increases this year, with the first expected in March."
"At its two-day policy meeting next week, the central bank may also provide an update on plans to shrink its $9tn balance sheet and the ongoing taper of purchases of Treasuries and mortgage-backed bonds."
“I don’t necessarily think the worst is over (for equities) . . . 
"I do think that the Fed is going to accelerate tapering next week,” said Andy Brenner, head of international fixed income at NatAlliance Securities."
"In government debt markets, the yield on the 10-year Treasury note, which underpins global borrowing costs and equity valuations, fell 0.05 percentage points to 1.82 per cent."
"The two-year yield, which closely tracks monetary policy expectations, fell 0.02 percentage points to 1.04 per cent."
Yields fall when prices rise.
"European stock markets wavered on Thursday, with the regional Stoxx 600 index ultimately closing 0.5 per cent higher."
"The Nasdaq Golden Dragon index, a collection of US-listed Chinese companies, added 2.2 per cent on Thursday after China cut its one- and five-year loan prime rates."
That will ease funding costs for mortgage borrowers and small businesses as the nation’s economic growth has decelerated to its slowest pace in 18 months.
The move by Beijing also soothed market nerves that had been building ahead of the Fed’s monthly meeting next week.
Hong Kong’s Hang Seng index rose 3.4 per cent in response to China’s loan rate cuts.
Tokyo’s Nikkei 225 index closed 1.1 per cent higher.
"“Markets have pulled back quite violently,” said Axel Botte, strategist at fund management group Ostrum."
“Developments in China are therefore helpful and a stabilising force globally.”
"Brent crude, the international oil benchmark, settled roughly flat at $88.38 a barrel after hitting its highest level since 2014 earlier in the day."
The Nasdaq Composite index closed in correction territory for the first time since last March after a volatile day of trading that saw repeated swings back and forth across US stock markets.
"The tech-heavy index rose as much as 1 per cent earlier on Wednesday, but ended the day 1.1 per cent lower."
"The decline brought the Nasdaq more than 10 per cent below the all-time high set in November, meeting the common definition of a market correction."
The S&P 500 also swung between gains and losses before settling down 1 per cent.
The benchmark index has fallen more than 5 per cent from the high it hit in early January.
"Stock markets, particularly tech stocks, have been volatile since the start of the year as investors prepare for the US Federal Reserve to rein in the ultra-loose monetary policy that has boosted markets since the start of the coronavirus pandemic."
"“Investors are now really muddling through a period of speculation about how aggressively central banks are going to move,” said Madison Faller, global market strategist at JPMorgan’s private banking unit."
"“Everything is focused on the uncertainty around the removal of policy support,” Faller added."
High-growth tech companies are seen as particularly vulnerable to higher interest rates because they reduce the value investors place on their potential future earnings.
"The Fed, which holds its monthly meeting next week, has already started reducing its monthly purchases of Treasuries and mortgage-backed bonds, which had helped pin down borrowing costs since March 2020."
It is also expected to raise interest rates several times this year and start shrinking its $9tn balance sheet.
"The 10-year Treasury yield, which falls when prices rise, dipped 0.04 percentage points on Wednesday, to 1.84 per cent."
It is still well above the 1.51 per cent level at which it started the year.
"“There are a lot of unknowns ahead about [the Fed’s] quantitative tightening,” said Jeremy Gatto, cross-asset fund manager at Unigestion."
"This, he said, was causing “choppy moves”, with markets likely to switch between conflicting outlooks for monetary conditions and economic growth until the Fed updates on its plans next week."
"In European debt markets, the yield on the 10-year German Bund, a benchmark for eurozone borrowing costs, slipped back below zero after briefly moving into positive territory for the first time in nearly three years."
"By mid-afternoon it was 0.01 percentage points higher for the day, at minus 0.02 per cent."
"“The move up in German rates is an indirect effect of what is happening in the US because these markets are connected,” said Ewout van Schaick, head of multi-asset at European fund manager NN Investment Partners."
The yield on the 10-year UK gilt rose 0.04 percentage points to 1.25 per cent — around its highest in three years — after data showed inflation in the country had hit a 30-year high.
The Europe-wide Stoxx 600 stock index inched up 0.1 per cent.
"In Asia, Hong Kong’s Hang Seng share index added 0.1 per cent and mainland China’s CSI 300 lost 0.7 per cent."
The Nikkei 225 in Tokyo ended the session 2.8 per cent lower.
"The dollar index, which measures the US currency against six others, dipped 0.2 per cent."
"Brent crude, the oil benchmark, rose 1.1 per cent to $88.44 a barrel — close to its highest price since 2014 — following an explosion on Tuesday night that temporarily halted exports on a Turkish pipeline and spooked a crude market already concerned about potential supply disruptions."
Additional reporting by Tom Wilson in London
"Investors on Tuesday cranked up their bets on monetary tightening from the Federal Reserve, reigniting a sell-off in Treasuries and pushing US stocks to multi-month lows."
"Treasury yields jumped to a two-year high as traders returned from the long weekend in the US, with markets for the first time fully pricing in four interest rate increases from the US central bank this year."
"The benchmark S&P index fell to its lowest level since December, while the tech-heavy Nasdaq hit its lowest point since October."
"The yield on the 10-year US Treasury note, which rises as the price of the global government debt benchmark falls, climbed 0.09 percentage points to 1.87 per cent as the prospects of higher rates on cash deposits and sustained inflation made the security’s fixed-interest payments less appealing."
"Meanwhile, the yield on the two-year Treasury note, which closely tracks interest rate expectations, rose to a high of 1.06 per cent — a level not seen since February 2020."
"The Nasdaq, which is stacked with tech groups and other highly valued growth companies sensitive to rising interest rates, dropped 2.6 per cent."
The broader S&P 500 fell 1.8 per cent.
Rising interest rates can rapidly affect equity valuations because they imply higher rates of borrowing.
"“There’s speculation about increasing aggression from the Fed,” said James Athey, a portfolio manager at Aberdeen Standard Investments."
"This mood, he said, was “kick-started” by"
"JPMorgan Chase chief executive Jamie Dimon “casually suggesting last week that [policymakers] could hike six or seven times this year, and the move has gathered momentum”."
"The Fed has tethered its main funds rate close to zero since March 2020, but interest rate futures contracts show traders expect it to exceed 1 per cent by December."
"In equities markets, investors were also grappling with a slowdown in corporate earnings growth following a rebound last year from the shocks of 2020."
"Analysts polled by data provider FactSet expect companies listed on the S&P 500 to report aggregate profit growth of 22 per cent for the final quarter of 2021 year-on-year, compared with 40 per cent in the preceding three-month period."
"Shares in Goldman Sachs fell 7 per cent on Tuesday, their largest daily fall since June 2020, after the investment bank’s quarterly earnings undershot analysts’ forecasts."
"Stock markets initially rose after data last week showed US inflation hit an annual rate of 7 per cent in December, though it was also moderating on a month-by-month basis."
"But new fears of prolonged price rises caused by supply chain bottlenecks have emerged after authorities in China, a big exporter of goods, reacted to the spread of the Omicron coronavirus variant with fresh lockdowns and travel controls."
"“That now is starting to cause some concern on the supply chain crunch,” said Randeep Somel, portfolio manager at M&G."
"The Bank of Japan, typically the most dovish of the world’s major central banks, on Tuesday lifted its inflation projections."
"The BoJ said the risks around its forecast were now “balanced” rather than “skewed to the downside”, a phrase it has used since 2014."
"The shift in language “lets markets envision a world where the BoJ takes its foot off the monetary easing accelerator”, said Padhraic Garvey, ING analyst."
"In Europe, the regional Stoxx 600 share index fell 1 per cent as its tech sub-index dropped 2.2 per cent."
"Germany’s 10-year Bund yield, a benchmark for European business and household borrowing costs, on Tuesday traded at minus 0.02 per cent, on the brink of climbing above zero for the first time since 2019."
"In Asia, Hong Kong’s Hang Seng share index fell 0.4 per cent and the Nikkei in Tokyo closed 0.3 per cent lower."
Oil benchmark Brent crude on Tuesday rose to a high of $88.13 a barrel — its highest level since 2014 — before settling at $87.51.
"The dollar index, which measures the US currency against six others, rose 0.5 per cent."
European stocks rose on Monday as traders weighed recent data showing persistently high rates of US inflation and looked ahead to corporate earnings picking up this week.
"The regional Stoxx 600 index closed up 0.7 per cent after declining 1 per cent over the course of last week, with all sectors apart from real estate in positive territory."
"London’s FTSE 100 climbed 0.9 per cent, Germany"
’s Dax was up 0.3 per cent and France
’s Cac 40 rose 0.8 per cent.
"Across the Atlantic, where markets are closed on Monday for"
"Martin Luther King Jr. day, investors have been assessing the implications of rising wages, declining rates of unemployment and record rates of inflation, with some questioning whether US Federal Reserve officials will tighten monetary policy faster than planned."
"Data last week showed that US consumer prices rose at an annual pace of 7 per cent last month, the fastest rate of increase in almost 40 years."
The Fed is expected to raise rates at least three times in 2022.
"However, some officials at the central bank have suggested more rate increases could be necessary this year if inflation continued to surge."
"So-called “speculative” technology stocks have suffered in particular, with the Nasdaq Composite index off 4.8 per cent so far this year."
Wall Street’s broad-based S&P 500 gauge has slipped 2.2 per cent over the same period.
"US earnings season got off to a disappointing start on Friday, when shares in JPMorgan Chase closed down more than 6 per cent after the bank said rising costs would curtail profits in 2022 even as it posted record full-year earnings of $48.3bn."
"Banks including Goldman Sachs, Morgan Stanley and Bank of America report fourth-quarter numbers later this week."
Data on Friday also showed retail sales in the US declined 1.9 per cent in December — the most in 10 months.
"Steve Blitz, chief US economist at TS Lombard, said in a note that December’s figures suggested the US economy was “transitioning from its supercharged Covid cycle to something that will eventually look a bit more ‘normal’”."
"“The challenge for investors is to see through this transition away from the Covid cycle, this downshift in activity, and keep confident the economy is transiting to a very different (better) economy than what existed pre-Covid,” he added."
"In government debt markets, the yield on the two-year US Treasury note — which closely tracks interest rate expectations — on Friday rose to 0.97 per cent, its highest level since February 2020."
Bond yields move inversely to their prices.
The 10-year German Bund yield rose 0.02 percentage points on Monday to minus 0.03 per cent.
"In Asian equity markets, Hong Kong’s Hang Seng traded 0.7 per cent lower, while China"
’s CSI 300 rose 0.9 per cent.
"China’s National Bureau of Statistics said on Monday that the economy expanded 4 per cent year on year in the fourth quarter, exceeding economists’ expectations, but marking its slowest pace in 18 months."
The People’s Bank of China also lowered its one-year policy loans rate on Monday by 10 basis points to 2.85 per cent and the rate on seven-day reverse repurchase agreements to 2.1 per cent.
"Bill Papadakis, investment strategist at Lombard Odier, said monetary policy cycles across the globe were likely to “desynchronise” further this year as economies responded differently to waves of Covid."
"“It will be an interesting experiment”, he said."
"“The moment the Fed raises rates, capital will be attracted, so emerging market economies may come under pressure to enact policies to limit capital outflows.”"
Tokyo’s Nikkei 225 gauge added 0.7 per cent.
"The Bank of Japan’s two-day monetary policy meeting started on Monday, with a decision due on Tuesday."
"Brent crude, the oil benchmark, ticked up 0.4 per cent to $86.41 a barrel, not far from its 2021 peak of $86.70 and its 2018 high of $86.74."
"US stocks notched their second consecutive weekly decline, with shares of big banks falling on Friday after disappointing results from industry bellwether JPMorgan Chase clouded an already mixed outlook for the US economy."
"While the tech-heavy Nasdaq Composite and the S&P 500 indices ended the day in positive territory, the two closely followed market gauges finished lower for the week following five volatile trading days."
"The S&P 500, which finished the week down 0.3 per cent, last recorded two back-to-back weeks of losses after the World Health Organization declared the Omicron coronavirus variant a concern last year."
"The choppy trading in stocks on Friday accompanied a relatively intense sell-off in the $22tn Treasury bond market, as investors dumped US government debt."
"The yield on the two-year note rose to 0.97 per cent, its highest level since February 2020, while the 10-year note yield climbed 0.08 percentage points to 1.78 per cent."
Yields move inversely to a bond’s price.
"The rapid increase in Treasury yields has injected volatility into global financial markets, as investors begin to adjust portfolios for a world with tighter policy from the Federal Reserve."
"Swaps markets have priced in three to four increases this year, with the benchmark federal-funds rate expected to end the year at roughly 1 per cent."
“I think the market is now pricing in the risk the Fed brought up in the [December FOMC meeting] minutes of moving sooner and faster.
"And that risk premium is being priced in,” said Priya Misra, head of global rates strategy at TD Securities."
"Higher yields have begun to weigh on stocks, particularly high-growth but lossmaking companies."
"The technology-heavy Nasdaq Composite, which finished the week down 0.3 per cent, has fallen 5 per cent since the year began."
"Financial stocks, by contrast, had largely come back into favour as rates sprung higher and investors latched on to a narrative that the economic recovery from the pandemic would allow them to easily switch winning bets from the lockdown-boosted tech sector to more cyclical businesses."
"But that too shifted on Friday, after JPMorgan said it would fall short of an important profitability target this year."
"Its shares slid 6 per cent, the biggest daily fall in 19 months."
"The S&P’s financials sub-index dropped 1 per cent as American Express, Goldman Sachs, and Morgan Stanley also came under pressure."
"Disruptions from the coronavirus, surging inflation and uncertainty about when price rises will peak have made economic trends more difficult to forecast, analysts said."
"US corporate earnings season picks up next week, with more companies poised to report results for the final three months of 2021 and their outlooks for the coming year."
"Investors said they expected to scrutinise how factors such as growing wage pressure, price inflation and a tight labour market were affecting executives’ financial forecasts."
"Companies listed on the S&P 500 index are forecast to post year-on-year earnings growth of about 22 per cent, according to analysts’ estimates collated by data provider FactSet."
"“If inflation heads higher then the fear factor really does come in,” said Aneeka Gupta, research director at ETF provider WisdomTree."
Data on Friday also showed US retail sales fell 1.9 per cent in December.
"A consumer sentiment index by the University of Michigan dropped to almost a decade low, with survey respondents citing inflation as a more serious problem than unemployment."
"US consumer prices rose at an annual pace of 7 per cent last month, the fastest rate of increase in almost 40 years."
"Global stock and government bond prices picked up for a second consecutive day on Wednesday, as investors looked past data showing US inflation had reached its highest level in nearly 40 years to focus on expectations that price rises would soon peak."
"Wall Street’s blue-chip S&P 500 closed 0.3 per cent higher, while the tech-heavy Nasdaq Composite climbed 0.2 per cent."
"US equity markets, particularly tech stocks, have had a bruising start to the year amid concerns about the impact of high inflation and rising interest rates."
Data released on Wednesday morning showed consumer prices rose 7 per cent year on year in December.
"However, the news had little impact on investors who had been reassured by comments from Federal Reserve chair Jay Powell earlier in the week."
Powell told the US Senate banking committee on Tuesday that the central bank would tackle high inflation and forecast that supply chain bottlenecks caused by pandemic disruptions would ease this year.
"“We continue to expect significant slowing in the year ahead as the boosts from reopening and fiscal stimulus fade and Covid-related supply constraints eventually ease,” strategists at TD Securities wrote in a note to clients."
"“But, for now, the data remain quite strong.”"
"The yield on the benchmark 10-year Treasury note, which falls when prices rise, was unchanged at 1.73 per cent."
"Instead, investors sold out of policy-sensitive two-year notes, sending the yield up 0.02 percentage points to 0.91 per cent."
“The willingness of rates to ignore decades-high [inflation] figures is hinting . . . 
"that the Fed’s threshold for inflation to justify rate normalisation has long-since been met and therefore any upside surprise is a shoulder-shruggable event,” said Ian Lyngen, a strategist at BMO Capital Markets."
"Following Wednesday’s inflation report, traders continued to bet that the Fed would raise interest rates between three and four times this year, to about 1 per cent."
These calculations are implied by swaps markets and predicated on a widely held view that current high rates of inflation will fade out as global supply chain bottlenecks caused by the economic disruption of coronavirus lockdowns start to unwind.
They have been cited by investors as supportive for equity markets.
"Despite a tumultuous start to the year, when the S&P 500 index fell in five out of seven sessions and the Nasdaq Composite briefly entered a correction, by the close of Wednesday’s session"
the S&P was just 1.9 per cent below its all-time high.
"“Yes, there is a removal of accommodation coming,” said Tim Graf, macro strategist at State Street, speaking before the inflation data."
“But does that make a meaningful difference to the financing environment for households and corporations?
We don’t think onerously so.”
The increased optimism in the US followed similarly positive trading in Europe and Asia.
The Europe-wide Stoxx 600 share index added 0.6 per cent and London’s
FTSE 100 gained 0.8 per cent.
"Hong Kong’s Hang Seng index closed 2.8 per cent higher, with its technology sub-index achieving its biggest daily gain since October."
"The dollar index, which measures the US currency against a basket of peers, fell 0.7 per cent."
"US technology stocks rose on Tuesday after a sell-off in the $22tn Treasury bond market finally ran out of steam, as Federal Reserve Chair Jay Powell made assurances that the central bank would act to curb inflation before it gets out of control."
"In an appearance before the Senate banking committee on Tuesday, Powell said high inflation had taken a “toll” and the central bank would act to prevent it from “becoming entrenched”."
"But Powell also reaffirmed that the central bank expected inflation to peak in the middle of the year, suggesting a dramatic increase in interest rates may not be necessary."
That disrupted a recent sell-off in Treasuries which began last week and accelerated alongside minutes revealed last week from the Fed’s December meeting that signalled a more hawkish tone at the central bank.
"The yield on the benchmark 10-year US Treasury note dipped 0.02 percentage points to 1.74 per cent, after trading above 1.8 per cent on Monday."
"The yield on the two-year Treasury note, which closely tracks interest rate expectations, was roughly steady at 0.89 per cent."
"Earlier in the trading day it briefly rose to 0.94 per cent, its highest level since February 2020."
"The tech-heavy Nasdaq Composite index rallied 1.4 per cent, its biggest rise in three weeks."
The index had briefly dropped into correction territory on Monday before recovering to end the session roughly unchanged.
"The broad-based S&P 500 stock index rose 0.9 per cent, while its information technology sub-index gained 1.2 per cent."
"In Asia, equities followed Wall Street higher as tech shares rebounded in the wake of the Fed chair’s comments."
"Hang Seng Tech index rose 4.3 per cent, while China’s CSI 300 index of Shanghai and Shenzhen-listed shares gained 1 per cent and Japan’s"
Topix rose 1.6 per cent.
"Tech stocks, and especially high-growth tech stocks, are particularly sensitive to inflation and the prospect of higher interest rates."
"Their valuations, which are often based on profits not expected for many years or even decades, have been propped up by low interest rates."
The sudden jump in rates has in turn knocked much of the sector.
"“I think the market was comforted by (Powell) saying that he will act if he needs to, but he also confirmed his view that the Fed expects inflation to peak mid-year."
"So that is, on balance, a fairly benign perspective,” said Kristina Hooper, chief global market strategist at Invesco."
Markets have struggled to establish a direction in recent days as traders debated whether inflation had crested and how aggressively the Fed would act to reverse it.
"Tuesday’s move lower in yields may not last, some investors said."
"Following a better than expected drop in the US unemployment rate last week, and ahead of monthly consumer price figures due on Wednesday, traders now expect the Fed to lift rates by a quarter-point in March."
"“Its all about the Fed now and nothing else really matters,” said Hani Redha, portfolio manager at PineBridge Investments."
The central bank has begun to wind down its pandemic-era stimulus policies.
"It has reduced the $120bn monthly purchases of Treasuries and mortgage-backed securities that were started in March 2020, and is preparing to reduce its $9tn balance sheet."
Powell on Tuesday said the US economy no longer “needs or wants” these “highly accommodative” policies.
"Economists polled by Bloomberg expect Wednesday’s inflation report to show US consumer prices rose 0.4 per cent in December, and 7 per cent year over year."
"Europe’s regional Stoxx 600 share index added 0.8 per cent, having fallen 1.5 per cent on Monday, in its worst daily performance since November."
Additional reporting by Hudson Lockett in Hong Kong
Wall Street technology stocks fell and the 10-year US Treasury yield hit its highest level since January 2020 after a strong jobs report underscored expectations for the Federal Reserve’s first interest rate rise of the pandemic era.
The blue-chip S&P 500 share index fell 0.4 per cent on Friday.
"The information technology sub-index of the S&P 500 fell 1 per cent, taking its loss for the week to 4.7 per cent."
"The technology-focused Nasdaq Composite closed 1 per cent lower, capping off a weekly loss of 4.5 per cent."
"The US 10-year yield, a benchmark that underpins borrowing costs and equity valuations worldwide, rose to 1.77 per cent, up 0.04 percentage points on the day, as bond prices fell."
"The moves came after the US labour department’s monthly non-farm payrolls report showed the unemployment rate dipped from 4.2 per cent in November to 3.9 per cent in December, lower than economists had forecast."
"Average hourly earnings jumped 4.7 per cent on a year-on-year basis, from an upwardly revised 5.1 per cent the previous month."
"The rise in employment, at 199,000, widely missed expectations of roughly 400,000."
"This further unsettled markets that have whipsawed since Wednesday when minutes of the Fed’s latest meeting revealed officials were considering a faster timetable for interest rate rises than investors had anticipated, to combat elevated inflation."
"“The labour market is very tight, said Tatjana Greil Castro, co-head of public markets at credit investor Muzinich."
"“Then you potentially have wage pressures, which means higher inflation, so markets then anticipate the Fed tightening financial conditions.”"
"“Away from the headline payroll number, this is a very strong employment report,” said Jack McIntyre, fixed income portfolio manager at Brandywine Global."
"“Clearly this is going to shift more dovish Fed officials towards the idea they have to raise rates,” he added."
double-digit gains for global stocks had been fuelled by the Fed and other central banks pushing borrowing costs to record lows as they bought huge quantities of government bonds to shield financial markets from the economic shocks of coronavirus.
"Technology shares and other growth companies, whose valuations are flattered by low interest rates that magnify the present value of future earnings streams, were among the best performers of 2021."
"“Markets are ripe for a correction, or greater, at this point,” said Phillip Toews, chief executive of US asset manager Toews Corporation."
“The combination of rising interest rates and inflated asset prices doesn’t usually end well.”
"Treasuries, meanwhile, rose in price with the Fed having more than doubled the size of its balance sheet since early 2020 to almost $9tn with purchases of government debt and mortgage-backed securities."
Those gains went into reverse this week as bond markets began the year with a heavy sell-off.
Investors dumped bonds as they unwound bets placed in December that the rapid spread of the Omicron coronavirus variant might cause the Fed to wait longer before raising rates.
"Interest rate-sensitive tech stocks endured the worst of the sell-off, after minutes from the latest Fed meeting released on Wednesday showed that it may move to raise interest rates and tighten financial conditions more quickly than expected."
"“As expectations for rates move up, it hits growth [equities] the most,” said Amy Wu Silverman, equities derivatives strategist at RBC, pointing to the Fed’s hawkish stance as “suspect number one” for the Nasdaq"
’s woes this week.
Minutes from the US central bank’s December meeting further unsettled bond markets by revealing that policymakers have begun to discuss the reduction of the size of its balance sheet.
"In Europe, the regional Stoxx 600 share index fell 0.4 per cent."
Germany’s 10-year Bund yield rose 0.03 percentage points to about minus 0.03 per cent and Italy’s
equivalent bond yield rose about 0.05 percentage points to 1.32 per cent.
"The dollar index, which measures the US currency against six others, dropped by about 0.6 per cent."
A sell-off in global technology stocks accelerated on Wednesday following minutes from the latest US Federal Reserve meeting that indicated the central bank may raise interest rates more quickly than expected.
"The technology-heavy Nasdaq Composite fell 3.3 per cent, its biggest decline in almost a year, as fading concerns about the Omicron coronavirus variant were amplified by bets on rising interest rates, lowering the appeal of the tech sector that has prospered during the pandemic."
"High-growth tech stocks are seen as particularly sensitive to rising interest rates and policy tightening that crimp future earnings potential, knocking the sector’s high valuations."
"“Participants generally noted that, given their individual outlooks for the economy, the labour market, and inflation, it may become warranted to increase the federal funds rate sooner or at a faster pace than participants had earlier anticipated,” the minutes of the December Fed meeting said."
"In addition, the minutes showed “almost all” participants on the Federal Open Market Committee thought it would be appropriate to let the central bank’s balance sheet begin to shrink in size once there has been an increase in its main policy rate."
"The two-year Treasury note yield, which is sensitive to changes in monetary policy expectations, climbed after the release of the minutes to 0.82 per cent, its highest level since March 2020."
"The yield on the benchmark 10-year US Treasury note, which moves inversely to the price of the debt, rose 0.05 percentage points to 1.70 per cent on Wednesday."
It was about 1.5 per cent on December 31.
"The broader-based S&P 500 equity index slipped 1.9 per cent, while the S&P’s information technology sub-index dropped 3.1 per cent."
"Among the worst performers were customer management software company Salesforce, down 8 per cent, and Adobe, which closed 7 per cent lower."
Tech stocks started 2022 on the back foot after early data suggested Omicron was less likely than previous strains to result in hospitalisations and therefore widespread lockdowns.
This burst of optimism has boosted shares in businesses such as banks and energy producers.
"“The Omicron variant seems fairly mild, with surging cases not resulting in higher fatalities, raising hopes that the end of the pandemic is in sight,” said Emmanuel Cau, head of European equity strategy at Barclays."
"US tech groups including Apple, Microsoft and Google owner Alphabet have been among the biggest publicly traded winners of the pandemic, measured by growth in market capitalisation in dollar terms since January 2020, according to a Financial Times study."
"“The acceleration of [tech] earnings growth is now behind us,” said Jim Besaw of US wealth manager GenTrust, despite “eye-popping valuations”."
"In Europe, the Stoxx 600 equity gauge ticked up 0.1 per cent while its tech sub-index fell 0.5 per cent."
"ASML, the Dutch semiconductor equipment maker and Europe’s largest tech company by market capitalisation, lost 1.5 per cent after a fall of almost 3 per cent on Tuesday."
"’s FTSE 100 rose 0.2 per cent after gaining 1.6 per cent on Tuesday, thanks to its high concentration of banking, energy and resources businesses."
"Dax advanced 0.6 per cent, boosted by consumer and industrial stocks."
"In Asian markets, Chinese technology groups traded on Hong Kong’s Hang Seng index closed 4.6 per cent lower, in their worst fall since July."
Brent crude rose 1 per cent to $80.80 a barrel.
"The oil benchmark was as low as $69.28 in late December, weighed down by Omicron concerns."
US Treasury prices fell sharply on Monday in a bearish start to 2022 that follows the worst year for the global bond market in more than two decades.
"The benchmark 10-year Treasury yield rose by nearly 0.13 percentage points, exceeding 1.6 per cent for the first time since the emergence in late November of the Omicron strain of coronavirus, which sent yields tumbling."
It marked one of the biggest Treasury sell-offs over the past year.
"The yield on the policy sensitive two-year note briefly rose above 0.8 per cent, its highest level since March 2020."
"The moves accompanied a dramatic shift by traders on Monday, as they bet on tighter policy from the Federal Reserve in the years ahead."
"In stocks, the S&P 500 advanced 0.6 per cent to close at a record high."
"The US benchmark was lifted by a surge in Tesla shares, after the carmaker reported blowout production numbers."
"A rally in shares of Apple, which pushed the iPhone maker’s market capitalisation to $3tn, also boosted the index."
"But the gains were not that widespread, with half of the stocks in the benchmark falling in value."
"The Europe-wide Stoxx 600 index closed 0.5 per cent higher, having reached a record intraday high on light volume."
Germany’s Dax and the Cac 40 in Paris both rose 0.9 per cent.
"Exchanges in London, Japan and mainland China were closed for holidays."
Monday’s market moves followed the worst year for global bonds since 1999 after central banks signalled that they were prepared to combat inflation pressures with interest rate rises.
"The withdrawal of stimulus that powered a global economic recovery has so far had only a modest effect on equities, with the S&P 500 plateauing at the end of 2021 but still gaining 27 per cent for the year."
"In Europe, the Stoxx 600 finished 2021 up 22 per cent."
"A survey on the US manufacturing sector, due for publication on Tuesday, along with the monthly jobs report on Friday, will provide clues on whether investors are right to be anticipating at least three quarter point interest rate rises by the Fed this year."
"“With speculative spirits high, investors will need to gauge return per unit of risk as volatility reappears,” said Sean Darby, an analyst at Jefferies."
“Perhaps equity investors should be more concerned that policymakers might get boxed in by trying to tame inflation with higher rates without upsetting asset markets.”
"Among Monday’s biggest movers, Tesla surged more than 13 per cent after the carmaker negotiated supply-chain disruption to report forecast-beating deliveries for the fourth quarter."
"Rival carmakers gained in response, with Volkswagen and BMW rising more than 2 per cent in Europe."
"Investors were starting the year with several risks bubbling in the background, said Karl Steiner, a strategist at Swedish bank SEB."
"Evergrande’s notice on Monday that it would again suspend its shares in Hong Kong injected “a bit of uncertainty”, Steiner added."
The property developer has been at the centre of a sector-wide crisis in the world’s biggest emerging markets for months.
"Hong Kong’s Hang Seng share index fell 0.5 per cent on Monday, with the property development sector off 1.1 per cent."
"Mounting tensions between western countries and Russia have also caught investors’ attention, with Joe Biden, US president, warning that Washington would act “"
decisively” should Russia invade Ukraine.
Oil prices edged higher on both sides of the Atlantic ahead of an Opec meeting on Tuesday to discuss boosting output.
"Brent crude, the international benchmark, ticked up 1.5 per cent to $78.98 a barrel following reports that Libya’s production had been choked off due to a damaged pipeline."
​Letter in response to this article:
Why are US Treasuries still so popular in the UK?
"From Jonathan Haslam, Professor Emeritus in the History of International Relations, University of Cambridge, UK"
UK stocks provided a bright spot in otherwise lacklustre global financial markets as traders sought income-paying equities to compensate for underperforming bond investments.
"London’s blue-chip FTSE 100, which is stacked with banks and commodities producers that pay high dividends relative to their share prices, closed up 0.7 per cent after the UK market reopened on Wednesday following a Christmas holiday break."
"The domestic-focused FTSE 250 that removes investment trusts from the index gained 1.4 per cent, while an index of UK real estate investment trusts also added 1.4 per cent."
"Wall Street equities were mixed on Wednesday, with the blue-chip S&P 500 share index inching 0.1 per cent higher to a new record, while the technology-focused Nasdaq Composite dipped 0.1 per cent."
"Europe’s Stoxx 600 equity gauge, which closed at its highest point since November 19 on Tuesday, declined 0.1 per cent."
"The FTSE, whose total market capitalisation of about £2tn is smaller than that of Apple, has long been overlooked by international investors who have perceived the UK as politically risky because of Brexit-related uncertainties."
"“Broadly speaking, the UK has underperformed global markets for a long time and it is now looking very attractive on valuation grounds,” said Kasper Elmgreen, head of equities at Amundi, Europe’s largest fund manager."
"With global bond markets on course for their worst year since 1999 because of a global surge in inflation, investors were also searching for “lower risk, income-paying equities”, added Elmgreen."
The moves happened as traders assessed a mixed outlook for the potential of the Omicron coronavirus strain to disrupt global economies.
The World Health Organization said in a weekly update late on Tuesday that the overall risk posed by the highly transmissible variant “remains very high”.
This came on the same day that the US Centers for Disease Control and Prevention reduced its previous estimate of the share of Covid-19 cases Omicron accounted for.
The CDC has also halved its quarantine requirement from 10 days to five for infected people whose symptoms have passed or were resolving.
"While Omicron has caused stock market volatility since its emergence in late November, investors have taken note of early data that suggests it may cause a lower share of hospitalisations among infected patients than previous strains."
The S&P 500 has gained more than 27 per cent in 2021 on the back of strong industry and labour market data and bets that the US Federal Reserve will not raise interest rates aggressively after it winds down its emergency monetary stimulus measures next year.
"In government debt markets, the yield on the 10-year US Treasury note, which moves inversely to the price of the benchmark debt security, rose 0.07 percentage points to 1.55 per cent."
"The dollar index, which measures the greenback against other leading currencies, slipped 0.3 per cent lower."
"Meanwhile, Turkey’s lira weakened about 7 per cent against the US dollar to around TL12.6."
"At the start of last week, the volatile currency hit a record low of TL18.36 to the dollar before jumping sharply a day later when President Recep Tayyip Erdogan unveiled a new lira savings scheme."
"US stocks rose in thin post-Christmas trading on Monday, while analysts queried whether the favourable market conditions that drove Wall Street to all-time highs this year would continue into 2022."
"The broad-based S&P 500 share index closed 1.4 per cent higher, extending its push into record territory after hitting a fresh all time-high on Thursday."
The rally has followed weeks of volatility driven by the Omicron coronavirus variant and the US Federal Reserve moving to reduce its emergency stimulus measures.
"Energy stocks led the rally, alongside a 3.2 per cent gain in the price of Brent crude, the oil benchmark, to $78.60 a barrel."
Technology stocks also ratcheted higher and the tech-focused Nasdaq Composite stock gauge added 1.4 per cent.
"The S&P is up more than a quarter this year, boosted by a bounceback in corporate earnings from a coronavirus-induced downturn in 2020 and rock-bottom interest rates that prompted investors to load up on equities."
US monetary conditions remain highly accommodative and recent economic data have been strong.
"Some Wall Street strategists expect more muted stock market gains for the year ahead, however."
The Fed is preparing to raise US interest rates to deal with an inflation surge driven by pressure on supply chains from pandemic-induced curbs as well as higher rents and energy prices.
"“We are generally constructive on the US equity outlook for 2022, albeit with expected upside lower than in previous years,” Citi strategist Scott Chronert wrote in a note to clients."
“Current inflation concerns imply that the Fed response will remain critical to market direction.”
"Louis Gave, of the research house Gavekal, cautioned that Omicron could “wreak havoc on economies and stretched supply chains”."
But he also pointed to what he called “encouraging” South African data that suggested the highly transmissible new variant might be less likely to result in hospital admissions than Delta.
"The Fed is poised to end its emergency stimulus package, in which it has bought about $120bn of government and mortgage-backed bonds a month throughout the pandemic, in March."
The central bank’s officials expect to raise interest rates three times in 2022.
"The yield on the benchmark 10-year US Treasury note, which moves inversely to the price of the government debt security, dipped 0.02 percentage points to 1.48 per cent on Monday."
"This debt instrument has traded relatively calmly this month as investors priced in a short period of rate rises that would not heavily affect the returns on bonds, relative to cash, over time."
"Shorter-dated government debt has borne the brunt of bets on tighter monetary policy, however."
"The yield on the two-year Treasury ticked up 0.02 percentage points to 0.70 per cent, around its highest point since March 2020."
"Elsewhere, the regional European Stoxx 600 share index closed up 0.6 per cent."
Trading on London’s FTSE 100 was halted for the holiday.
"The dollar index, which measures the US currency against six others including sterling and the euro, rose 0.1 per cent."
Sterling inched 0.4 per cent higher against the dollar to $1.3442.
"Sajid Javid, UK health secretary, said on Monday that there would be no new Covid restrictions introduced in England before the new year."
"The UK’s three devolved administrations of Scotland, Wales and Northern Ireland have reintroduced some measures."
"Global stocks climbed for the second consecutive session on Wednesday, reversing recent declines prompted by concerns about the spread of the Omicron coronavirus variant."
"The blue-chip S&P 500 benchmark closed 1 per cent higher, led by consumer stocks, with every sector within the index in positive territory."
The tech-heavy Nasdaq Composite climbed 1.2 per cent.
"Equity markets have swung back and forth in recent days as investors react to the rapid spread of Omicron and an evolving monetary policy environment, with thin trading volumes ahead of year-end exaggerating the moves."
"Core government debt advanced alongside the uptick in Wall Street stocks, taking the yield on the 10-year US Treasury note down 0.01 percentage points to 1.45 per cent."
"Wednesday’s gains in the US followed a similarly positive day in European markets, and the FTSE All-World Index rose 1 per cent, wiping out the losses suffered in volatile trading on Friday and Monday."
"The Europe-wide Stoxx 600 index rose 0.9 per cent while Frankfurt’s Xetra Dax climbed 0.9 per cent, with investors looking past the introduction of tighter Covid-19 restrictions in Germany."
"Despite falling infection rates in the country, Olaf Scholz, Germany’s new chancellor, announced this week that private gatherings among the vaccinated would be limited to 10 people from December 28, with even tighter rules for those who had not yet been jabbed."
"Boris Johnson, UK prime minister, meanwhile ruled out imposing new restrictions in England before Christmas, but warned “further measures” could be necessary the following week."
"The Office for National Statistics revised down its estimate for UK economic growth on Wednesday to 1.1 per cent, from 1.3 per cent in the third quarter of the year — the period before the new variant hit."
"London’s FTSE 100 climbed 0.6 per cent, leaving the benchmark index up 4 per cent so far for December."
"The UK’s mid-cap FTSE 250 index, which is more exposed to domestic companies, rose even further, ending the day up 1.1 per cent."
"Joe Biden, US president, said in an address this week that vaccinated Americans “should feel comfortable celebrating Christmas and the holidays” as planned."
"Cities, including Chicago, New York and Los Angeles, have instituted vaccine mandates in bars, restaurants and most public indoor settings."
The US on Tuesday reported more than 1m new Covid-19 cases in a weekly period for the first time since September.
"In Asia, Hong Kong’s Hang Seng closed up 0.6 per cent and"
225 Average added 0.2 per cent.
"Oil moved higher too, with global benchmark Brent crude rising 1.8 per cent to $75.29 a barrel — a three-session high."
"Hong Kong-listed Chinese tech stocks rose for the second day in a row on Wednesday, continuing a rebound from a sell-off triggered by regulatory action in the US and China."
"Video streaming platform Bilibili led gains, rising by as much as 8.3 per cent in early trading."
"That was followed by ecommerce group Alibaba, which opened 5.3 per cent higher."
Both stocks declined last week.
"Online travel company Trip.com, which fell last week after swinging to a loss in its quarterly earnings, also gained by as much as 5.9 per cent."
"The Hang Seng Tech index rose as much as 2.5 per cent in early trading, following a comparable rise on Tuesday, after losing more than 7 per cent last week."
Chinese tech stocks have been volatile as a result of interest rate rises in Europe and the US and regulatory actions from Washington and Beijing.
"The Nasdaq Golden Dragon China index, which tracks Chinese companies listed in the US, gained 7 per cent in New York on Tuesday."
"The latest increases came as some Chinese tech stocks matched a rally in the US, said Jeffrey Halley, senior market analyst for Asia Pacific at OANDA."
But Halley warned the tech stock sell-off “wasn’t over yet”.
"“[China tech] crawls up but is still falling much faster than it rises,” said Halley, citing the tension between the US and China as a driving factor of the declines."
The Hang Seng index was up by as much as 1.3 per cent and China’s CSI 300 was flat after gaining 0.5 per cent.
Markets in Australia and Japan were also flat.
"The Hang Seng Mainland Properties index, which tracks the Hong Kong-listed stocks of 10 of China’s biggest developers, fell by as much as 1.9 per cent after a surprise rise of 2.4 per cent on Tuesday."
"In commodity markets, West Texas Intermediate contracts rose 0.13 per cent to trade at $71.21 per barrel, gold contracts for February delivery edged downwards."
The yield on the 10-year Treasury note fell two basis points to 1.46 per cent.
Futures in the US also pointed down after a rebound on Tuesday in which the S&P 500 index clawed back its Monday losses and the Nasdaq Composite rose 2.4 per cent.
Investors remained concerned over the prospect of greater travel restrictions to combat the spread of the Omicron coronavirus variant.
"Global stocks rebounded on Tuesday, although investors remained on edge over the prospect of fresh travel restrictions to combat the fast-spreading Omicron coronavirus variant."
"Wall Street’s blue-chip S&P 500 index gained 1.8 per cent, clawing back the entirety of its losses on Monday, while the tech-heavy Nasdaq Composite rose 2.4 per cent."
"Stocks have been particularly volatile as the year draws to a close, with the benchmark S&P 500 registering 1 per cent or larger swings between the high and low points of each of the past five trading days, including today."
The previous three trading days had been the S&P’s longest losing streak since October.
"That is in part due to the panoply of factors confronting money managers at year’s end, including questions over the viability of US president Joe Biden’s $1.75tn stimulus plan that has stalled in Congress, as well as the severity and economic effect of the Omicron variant."
The Federal Reserve’s and Bank of England’s moves to tighten monetary policy have also sent ripples through financial markets.
"“A year dominated by an apparently insatiable appetite for all things risky seems to be ending in a far more nervous mood,” said Andrew Lapthorne, a strategist with Société Générale."
The turbulent moves have not been isolated to the US.
"On Tuesday, Europe’s Stoxx 600 index rallied 1.4 per cent, reversing Monday’s 1.4 per cent decline."
"London’s FTSE 100, Germany’s Dax and France"
Cac 40 all advanced by nearly 1.4 per cent.
Announcements on Monday from vaccine manufacturers and regulators offered investors hope and cause for caution.
The European Medicines Agency told the Financial Times that early evidence suggested a “clear” drop in the effectiveness of existing jabs against the Omicron variant.
"Hours later, Moderna said a half dose of its Covid-19 vaccine elicited a robust antibody response."
"In addition to the human toll, the spread of the highly mutated variant was likely to add to inflationary pressures by exacerbating existing supply chain issues, according to Emmanuel Cau, a strategist at Barclays."
"But if governments were to reimpose nationwide lockdowns — a strategy the Netherlands has already employed — “it would be a different, deflationary, story” because it would heavily knock consumer demand, he said."
Leading central banks last week adopted a more aggressive stance on tackling elevated inflation.
"The withdrawal of pandemic-era stimulus has investors girded for volatility, given equity and fixed income valuations have been supported by large-scale government spending programmes and central bank bond buying."
"While markets have whipsawed on the effects of the Omicron variant, they have not fallen meaningfully from record highs hit last month."
"Mark Haefele, chief investment officer at UBS Global Wealth Management, said he expected markets to “look through Omicron concerns”."
“While mindful of risks around . 
"variants and inflation, we keep a positive outlook on stocks for the start of 2022,” he added."
"The Omicron variant is now dominant in the US, according to the Centers for Disease Control and Prevention, accounting for 73 per cent of sequenced cases, up from 13 per cent in the previous week."
"In fixed income markets, the yield on 10-year US government debt rose 0.04 percentage points to 1.47 per cent, while the two-year yield increased 0.04 percentage points to 0.67 per cent."
Oil prices also rebounded.
"Brent, the international benchmark, gained 3.4 per cent to $73.98 a barrel, while US benchmark West Texas Intermediate climbed 3.7 per cent to $71.12."
"European wholesale gas prices continued their seemingly inexorable rise, with futures contracts linked to TTF, the region’s benchmark contract, jumping more than a fifth to close at €181 per megawatt hour."
"Equities and oil prices gave up further ground on Monday after the rapid spread of the Omicron coronavirus variant prompted governments across the developed world to reimpose lockdowns, spooking investors who fear the pandemic may again choke off the global economic recovery."
"The FTSE All-World Index fell 1.3 per cent, marking its worst one-day slide since shortly after the discovery of the new variant last month."
"Wall Street’s S&P 500 also dropped 1.1 per cent after a 1 per cent fall on Friday, led lower by stocks in economically sensitive sectors such as financials, raw materials and consumer goods."
The tech-heavy Nasdaq Composite fell 1.2 per cent.
Oil prices were also under significant selling pressure.
"Brent, the international benchmark, fell 2.7 per cent to $71.52 a barrel, while US benchmark West Texas Intermediate declined 3.7 per cent to $68.23."
"“Pandemic-driven fears have returned to the fore of investors’ concerns amid surging cases,” said Stephen Brennock of PVM, a brokerage."
"The Omicron variant has caused a wave of event and travel cancellations, with the World Economic Forum scrapping its plans to hold an in-person annual meeting in Davos in January for the second consecutive year."
"Across Europe, countries are discussing tightening restrictions."
"The Netherlands on Sunday became the first EU country to re-enter a nationwide lockdown, shutting bars, restaurants and most non-essential shops until at least mid-January."
Germany tightened travel restrictions over the weekend and is expected to agree additional curbs at a meeting between government and regional representatives on Tuesday.
"Boris Johnson, the UK prime minister, is also coming under pressure to reimpose controls and said his government would not hesitate to introduce further measures if needed."
"Tatjana Greil Castro, co-head of public markets at Muzinich, attributed the market slide to the prospects of Omicron-induced lockdowns in both Europe and Asia, although she added that volatility was likely to be exaggerated because of thin trading volumes ahead of Christmas."
"Omicron is “one of the biggest issues for markets right now” because it has “clouded the outlook moving into year-end”, said Jim Reid, strategist at Deutsche Bank."
"In Europe, the Stoxx 600 index fell 1.4 per cent."
"London’s FTSE 100 slid 1 per cent, France"
’s Cac 40 dropped 0.8 per cent and Germany’s
Dax declined 1.9 per cent.
Traders also sold out of perceived haven assets.
"The yield on the 10-year US government bond climbed 0.02 percentage points to 1.42 per cent, while the equivalent 10-year Bund rose 0.01 percentage point to minus 0.37 per cent."
"Meanwhile, US growth prospects were dealt a blow after Democratic senator Joe Manchin said he would not vote for President Joe Biden’s flagship Build Back Better bill, meaning the legislation was unlikely to pass in its current form, analysts said."
"Goldman Sachs lowered its US gross domestic product growth forecast for 2022 from 3 per cent to 2 per cent in the first quarter, from 3.5 per cent to 3 per cent in the second quarter and from 3 per cent to 2.75 per cent in the third."
"Manchin cited the country’s existing debt levels, the re-emergence of Covid-19 and rising prices for consumer goods as reasons for rejecting the bill."
"“If fiscal policy loses momentum as the [US Federal Reserve] tightens, the growth-inflation trade-off may get more difficult,” said Kit Juckes, macro strategist at Société Générale."
"China, meanwhile, eased monetary policy on Monday by cutting its one-year prime lending rate, in what Juckes said was an attempt to stop the country’s economic growth slowdown “gaining momentum”."
"“We may [soon] see more downward revisions to growth,” he added."
"In Asia, Hong Kong’s Hang Seng traded 1.9 per cent lower and Tokyo’s Nikkei 225 shed 2.1 per cent."
Additional reporting by Neil Hume
"Stocks on Wall Street finished their strongest week since February, with the blue-chip S&P 500 index closing at a record high, after a rise in US inflation fell short of the market’s worst-case forecasts."
"The S&P 500 gained 1 per cent on Friday, and had a weekly increase of 3.8 per cent, eclipsing a previous record close just over three weeks ago."
"The technology focused Nasdaq Composite climbed 0.7 per cent, bringing its weekly rise to 3.6 per cent."
"The US labour department said on Friday that consumer prices climbed 6.8 per cent in November from the same month in 2020, matching economists’ forecasts and the highest increase in 39 years."
"Despite the increase, the figures were something of a relief for investors who had girded themselves for data that could have shown a 7 per cent or larger rise."
"Investors and analysts said the reading would keep the Federal Reserve on its current course, helping buoy markets that had been worried that a higher inflation number would compel the Fed to tighten monetary policy faster, hurting stocks."
"“The market was expecting this inflation reading and high inflation has been priced into markets for many months now,” said George Ball, chair of investment group Sanders Morris Harris."
"Many investors also expect price increases to peak soon, as supply chain glitches — caused by coronavirus shutdowns and a rebound in energy markets from the depths of 2020’s economic slowdown — ease."
"November’s inflation report showed fuel prices rose 3.5 per cent over the month, down from 4.8 per cent between September and October."
The monthly rate of price gains for used cars and housing was steady.
"“The bond market is telling us inflation is not going to run out of control for long,” said Guillaume Paillat, multi-asset portfolio manager at Aviva Investors."
The yield on the benchmark 10-year Treasury note edged down 0.01 percentage point to 1.49 per cent.
"The five-year, five-year inflation swap rate, a measure of longer-term expectations of price rises, inched lower to 2.15 per cent."
"The yield on the two-year US Treasury note, which moves inversely to the price of the government debt instrument and tracks monetary policy expectations, dipped 0.03 percentage points to 0.66 per cent."
"Jay Powell, Fed chair, has given a strong signal that the US central bank, which holds its next monetary policy meeting next week, could rapidly wind down its $120bn-a-month of bond purchases that have lowered borrowing costs and boosted stock market sentiment through the pandemic era."
"This could be completed by March, in a precursor to the Fed raising interest rates from their current record low, leading economists surveyed for the Financial Times have said."
"“If the Fed does not pull back some of its support now and start to normalise monetary policy, they’ll have very little ammunition when we do get into the next recession,” said Paul Jackson, head of asset allocation research at fund manager Invesco."
“But I suspect US inflation is just about peaking out now.”
"In Europe, the regional Stoxx 600 share index closed 0.3 per cent lower."
The UK’s FTSE 100 gauge closed down 0.4 per cent.
Hong Kong’s Hang Seng index dropped 1.1 per cent.
The Nikkei 225 in Tokyo closed 1 per cent lower.
"In currencies, the dollar index, which tracks the performance of the greenback against six others, was down 0.2 per cent."
"Global stocks dipped on Thursday, as traders weighed new restrictions aimed at tackling the spread of the Omicron coronavirus variant along with questions about the direction of monetary policy."
"The technology focused Nasdaq Composite index closed 1.7 per cent lower, hitting a session low just before the bell."
"Shares in exercise bike company Peloton fell 11.4 per cent, while Tesla ceded 6.1 per cent."
"Media company BuzzFeed, which went public earlier this week, gave up 23.6 per cent."
"Wall Street’s blue-chip S&P 500 index slipped 0.7 per cent, also hitting session lows near the close."
"The equity gauge had ended the previous session within reach of its all-time closing high, wiping out almost all of its losses sustained in volatile trading since the emergence of Omicron rattled markets in late November."
European equities ended the day lower.
"The regional Stoxx 600 index dipped by just under 0.1 per cent, while London’s FTSE 100 dropped 0.2 per cent."
"The UK moved to implement its plan B restrictions on Wednesday evening, including guidance to work from home and mandatory mask-wearing for most indoor venues."
"Denmark tightened its virus control measures, following similar moves by other EU nations including Germany, Italy and Poland."
"Meanwhile, economists surveyed by Refinitiv expect data to be released on Friday to show US consumer prices rose 6.8 per cent in the year to November."
"“There was a post-Omicron rally but I think it is still too soon to interpret the recent data,” said Lale Akoner, senior market strategist at BNY Mellon."
"“If there is a big inflation uptick, then I do believe the market is going to get nervous about the Fed hiking [interest rates] earlier and faster than has been priced in so far.”"
"US inflation has exceeded the Federal Reserve’s target in recent months because of coronavirus-related supply chain disruptions, higher fuel prices and rising rents."
"Jay Powell, Fed chair, last week signalled support for a quicker reduction of the central bank’s $120bn-a-month bond purchases that have boosted markets since March 2020."
"Economists surveyed for the Financial Times by the University of Chicago Booth School of Business’s Initiative on Global Markets expect the Fed will end its asset purchases by March, setting the stage for interest rate rises soon after."
"Weekly US jobless numbers released before the opening bell on Thursday were indicative of labour market tightening, with first-time filings for unemployment benefits falling to 184,000 in the week to December 4, their lowest level since 1969."
"Economists polled by Refinitiv had expected a figure of 215,000."
"New jobless claims for the previous week stood at 227,000."
"“We’re back to where we were [pre-pandemic],” said Steven Blitz, chief US economist at TS Lombard, referencing the latest US unemployment data."
“This only serves to underscore how far behind the [Federal Reserve] is in terms of normalising policy rates.”
"Elsewhere on Thursday, Asian markets were mixed."
"China’s CSI 300 rose 1.7 per cent after official data showed factory gate inflation slowed in November to 12.9 per cent, from 13.5 per cent the previous month."
Hang Seng index gained 1.1 per cent and Tokyo
Topix fell 0.5 per cent.
Fitch on Thursday downgraded Chinese property developer Evergrande’s foreign currency credit ratings to “restricted default”.
"In government debt markets, the yield on the 10-year US Treasury note dipped 0.03 percentage points to 1.49 per cent."
Bond yields move inversely to their prices.
"The dollar index, which measures the US currency against six others, gained 0.3 per cent."
"Sterling, which hit its lowest level against the dollar in more than a year on Wednesday, was steady at about $1.32."
"Global stocks held on to their recent gains on Wednesday, inching closer towards record highs after a strong rally in the previous session."
"Wall Street’s blue-chip S&P 500 share index rose 0.3 per cent, wiping out almost all the losses suffered after the discovery of the Omicron coronavirus variant and ending the day just 0.1 per cent shy of its all-time closing high."
The tech-heavy Nasdaq Composite climbed 0.6 per cent.
Equity markets have whipsawed in the past fortnight as investors have worried about the potential effect of Omicron and the Federal Reserve signalling its willingness to speed up its tightening of monetary policy.
"However, global markets staged their biggest one-day gain for more than a year on Tuesday after early data from South Africa suggested Omicron may be less likely to result in serious illness than other strains."
"Pfizer, one of the developers of the most widely used Covid-19 vaccines, added on Wednesday that early studies showed a third shot of the BioNTech/Pfizer vaccine offered protection against Omicron, but two doses show significantly reduced effectiveness."
"The FTSE All-World index rose a further 0.4 per cent on Wednesday, but European stocks were an exception to the positive picture."
"The continent-wide Stoxx 600 index closed down 0.6 per cent, dragged lower by technology and consumer cyclical stocks."
"Sterling touched a year-low against the dollar of $1.316 ahead of Boris Johnson, UK prime minister, announcing new coronavirus-related curbs."
The Bank of England has a rate-setting meeting next week.
"“We still have a high degree of uncertainty about the pandemic,” cautioned Juliette Cohen, strategist at CPR Asset Management, adding that thin trading conditions during the holiday season meant market moves “are going to be more amplified than they should be”."
"In government debt markets, the yield on the 10-year US Treasury note rose 0.05 percentage points to 1.52 per cent."
Bond yields rise when prices fall.
"Jay Powell, Fed chair, last week indicated his support for a quicker reduction of the central bank’s $120bn-a-month bond purchases that have boosted markets since March 2020."
"Leading economists expect the Fed will end its asset purchases by March, setting the stage for rate rises soon after, according to a survey for the Financial Times by the University of Chicago Booth School of Business"
’s Initiative on Global Markets.
"“Markets are currently positive but there’s a potential narrative shift we need to be careful about,” said Anthony Collard, head of investments for the UK and Ireland at JPMorgan Private Bank."
"The Fed’s emergency stimulus has lowered borrowing costs and bond yields, in turn driving investors into speculative assets such as early-stage technology stocks and cryptocurrencies."
"“We are in a position where the Fed is starting to turn that exercise around,” Collard said."
“It is a headwind.”
"Analysts polled by Refinitiv expect US inflation data for November, set to be released on Friday, to show consumer prices rose 6.8 per cent from the same month last year because of pandemic-related disruptions to supply chains and a travel sector rebound."
"In Asia, a move by Chinese authorities to manage the decline of ailing property developer Evergrande and support the housing market boosted market sentiment."
"The renminbi rose to Rmb6.33 per dollar, its strongest level since about May 2018."
"China’s CSI 300 share index gained 1.5 per cent, while Tokyo’s Nikkei 225 added 1.4 per cent."
"Wall Street equities rose on Monday, led higher by travel stocks, as fears that the Omicron coronavirus variant would lead to fresh lockdowns eased."
"The broad-based S&P 500 index rose 1.2 per cent on Monday, after closing down 0.8 per cent on Friday."
"Travel-related stocks rallied strongly, with shares in Norwegian Cruise Line, United Airlines, Royal Caribbean Cruises and Carnival all rising by more than 8 per cent."
"“It looks like investors are worried about interest rates but not worried about Omicron,” said Jack Ablin, chief investment officer at Cresset Wealth Advisors."
“I think the market has concluded that we’re not going to lock ourselves down for it.”
"On Sunday the top US health official Anthony Fauci called early signals about the severity of Omicron “encouraging”, telling the news channel CNN"
“we feel certain that there will be some degree and maybe a considerable degree of protection” with booster jabs.
Market swings on fresh headlines about Omicron are likely while scientists await conclusive data about the variant.
The technology-focused Nasdaq Composite index closed 0.9 per cent higher on Monday.
"The narrower gain continued a trend seen over the past fortnight, in which the Nasdaq has trailed the S&P 500."
Investors have retreated from faster-growing tech shares as policymakers at the US central bank have signalled their comfort with more aggressively tightening policy than previously thought.
"Tech sector shares are particularly sensitive to changes in interest rates, given valuations in the industry are dependent on profits far off in the future."
"Tesla shares on Monday briefly fell more than 20 per cent from a record high hit last month, before recouping some of those losses."
"In the Treasury securities market, bond yields across maturities rose, with longer-dated maturities rising faster than those at the short end."
The rise in shorter-dated yields indicates a growing consensus among investors that the Federal Reserve will raise interest rates.
On Tuesday last week Fed chair Jay Powell signalled his support for a quicker reduction of the central bank’s $120bn monthly bond purchases that have reduced borrowing costs and boosted equities during the pandemic.
An acceleration in the wind-down suggests that the Fed is open to raising rates earlier than originally anticipated.
"While a rise in longer-dated maturities typically suggests investors are anticipating higher US economic growth or inflation, those expectations appear tempered as the 10-year and 30-year yields"
nevertheless remain near the low end of recent trading ranges.
The yield on the benchmark 10-year Treasury note rose 0.09 percentage points to 1.43 per cent as the price of the debt fell.
"This debt yield traded at above 1.65 per cent in late November, before the World Health Organization declared Omicron a variant of concern and before expectations of a faster tightening of monetary policy pervaded."
"US jobs data released on Friday showed American employers added 210,000 workers last month, fewer than half the number economists polled by Reuters had expected."
The data also showed a significant fall in the unemployment rate to 4.2 per cent.
Europe’s Stoxx 600 share index closed up 1.3 per cent.
"London’s FTSE 100, which has heavy weightings of commodities producers and miners, rose about 1.5 per cent."
"UK-listed travel stocks also closed higher, with shares of British Airways-owner IAG up 8.1 per cent."
"In Asian stock markets, Hong Kong’s Hang Seng index dropped 1.8 per cent, with significant price falls for large Chinese tech companies including Alibaba and Tencent."
Topix closed 0.5 per cent lower.
"Investors retreated from US stocks on Friday, dumping shares in large technology companies and sending the tech-heavy Nasdaq Composite index sharply lower."
"The Nasdaq closed down 1.9 per cent in New York, as a mixed US jobs report was seen as paving the way for more hawkish monetary policy, which would lead to tighter financial conditions and weigh on corporate valuations."
"Etsy, Adobe and Tesla were all among the biggest losers on the day, falling more than 5 per cent."
Facebook fell 1.1 per cent on the day and is now down more than 20 per cent from its intraday peak in September.
The blue-chip S&P 500 stock index declined 0.8 per cent.
The sharp drops marked a volatile end to a fortnight of trading characterised by big swings in prices across asset classes.
"“I believe investors are now expecting monetary policy to get more hawkish, and that has historically put downward pressure on tech stocks,” said Kristina Hooper, chief global market strategist at Invesco."
"The moves came after a report from the Bureau of Labor Statistics showed the US economy added just 210,000 new jobs last month, fewer than the 550,000 forecast by economists in a Refinitiv poll."
"While the economy added fewer jobs than forecast last month, the unemployment rate still fell to its lowest level since the pandemic began."
"“This was not a weak jobs report,” Hooper said."
"For investors, the data has left the door open to a faster pace of monetary policy tightening."
Federal Reserve chair Jay Powell on Tuesday signalled his support for a quicker wind-down of the central bank’s $120bn-a-month of bond purchases.
The programme has been a crucial pillar for the rally in equities prices since the depths of the coronavirus crisis last year.
Adding to the whipsaw movements across stock markets is a desire among fund managers to book profits heading into the end of the year and avoid suffering from the turn in sentiment.
"“The prospect of a Fed that shifted from friend to foe so quickly is making some traders think it’s best to cash in and spend the weekend mulling future rate paths,” said Max Gokhman, chief investment officer at AlphaTrAI."
The yield on the 10-year US Treasury note fell by 0.09 percentage points to 1.36 per cent by the close of trading in New York.
Bond yields move inversely to their prices.
Investors have been balancing a more hawkish Fed against emerging signs of slowing global growth and the potential for the Omicron coronavirus variant to derail the US economic recovery.
"Germany has moved to impose social curbs on unvaccinated people, and Joe Biden has announced measures to slow the spread of coronavirus, including tighter US testing requirements for international travellers."
"The Stoxx Europe 600 share index fell 0.6 per cent, after losing 1.2 per cent in the previous session."
London’s FTSE 100 declined 0.1 per cent.
"In Asia, Hong Kong’s Hang Seng index closed down about 0.1 per cent."
Shares in Chinese companies listed in New York also came under heavy pressure on Friday after the ride-hailing app Didi Chuxing announced plans to delist from the New York Stock Exchange and to prepare to go public in Hong Kong.
Didi’s shares dropped more than 20 per cent in US hours.
"JD.com, Baidu and Pinduoduo all fell about 8 per cent, as did Alibaba."
US equities and oil prices slid on Wednesday as concerns about the Omicron coronavirus variant and hawkish comments from the Federal Reserve chair weighed on global financial markets.
"Wall Street’s S&P 500 equity gauge closed 1.2 per cent lower in New York, erasing a gain of 1.9 per cent earlier in the session."
"The decline marked the benchmark’s largest intraday swing since March and followed a punishing session on Tuesday, which left the index almost 2 per cent lower."
"The technology-focused Nasdaq slipped 1.8 per cent, with losses accelerating just before the close."
"Investors raced to hedge themselves as markets lurched lower, with trading volumes of put options — derivatives that offer protection if the price of a security declines — hitting the highest level in 17 months, according to Bloomberg data."
The surge in purchases of puts accompanies the worst two-day sell-off in the S&P 500 since October 2020.
"In Asia, markets were mixed following the sell-off on Wall Street, with Japan’s benchmark Topix index down 0.4 per cent and Hong Kong"
’s Hang Seng up 0.3 per cent.
"Brent crude, the international benchmark, rose almost 1 per cent to $69.51 a barrel in Asia trading, as investors anticipated the result of the Opec+ meeting of the producer group and its allies this week."
"The knock to stocks came on news that the first Omicron variant had been identified in a vaccinated person in California, as well as figures that showed another surge of coronavirus cases in South Africa."
"On top of Omicron fears, investors continued to weigh comments from Jay Powell, Fed chair, who this week told Congress that the risk of higher inflation had increased."
He has also signalled his support for a quicker reduction of stimulus measures the US central bank had put in place at the onset of the pandemic.
That stimulus has been central to the stock market’s recovery since early 2020.
But Powell also characterised the economy as “very strong” ahead of jobs data on Friday that economists polled by Reuters expect to show American employers added more than half a million new hires last month.
"“Markets obviously got quite concerned about the emergence of Omicron but we remain in uncharted territory, no one really knows,” said Aneeka Gupta, research director at ETF provider WisdomTree."
“Powell’s vote of confidence in the economy has helped to bring back some risk appetite.”
"Kasper Elmgreen, head of equities at the European fund manager Amundi, warned that such confidence would remain fragile as markets swung between optimism about economic growth and the “humbling reminder that the pandemic remains with us”."
"Market measures of volatility continued to rise on Wednesday, with the Cboe’s Vix index rising above 30 for the first time since March."
That is above its long-run average of 20 and a signal of the choppy moves in markets.
"Markets, Elmgreen added, “could stay in this tug of war for some time, as really there is no clear direction”."
The chief executive of the vaccine maker Moderna predicted in an interview with the Financial Times on Tuesday that existing jabs would be much less effective at tackling Omicron than earlier strains of coronavirus.
"Later, the University of Oxford and BioNTech predicted that currently available vaccines would continue to prevent severe disease."
"In government debt markets, the yield on the benchmark 10-year US Treasury note declined 0.02 percentage points on the day to 1.42 per cent."
"The 30-year yield, which moves with growth and inflation expectations, late in the day fell to 1.75 per cent, its lowest level since January."
"The two-year Treasury yield, which closely tracks interest rate expectations fell 0.01 percentage point to 0.56 per cent."
"The Stoxx 600 index ended the European session up 1.7 per cent, marking its strongest closing performance in almost seven months, with broad-based gains on Wednesday led by tech companies, oil producers and banks among other sectors."
Government bonds advanced while US stocks fell on Friday as fresh coronavirus curbs in Europe and hawkish comments from US policymakers prompted investors to shift to safe-haven assets.
"The broad-based S&P 500 equity index closed the day down 0.1 per cent after fluctuating between minor losses and gains, as a rise in technology stocks was tempered by falls for financial services groups and US energy companies."
"Despite the loss, the index ended the week 0.3 per cent higher."
"The Nasdaq Composite index, which is stacked with tech and healthcare companies, ended the day up 0.4 per cent, marking its second consecutive record close."
"Europe’s Stoxx 600 index closed 0.3 per cent lower on Friday, but remained close to its all-time high."
"Brent crude, the oil benchmark, settled down 2.9 per cent at $78.89 a barrel."
"Meanwhile, in government debt markets, the yield on the 10-year Treasury note fell 0.04 percentage points to 1.55 per cent as the benchmark debt security rose in price."
Germany’s 10-year Bund yield fell 0.07 percentage points to minus 0.35 per cent.
"The moves came after Austria implemented a lockdown to battle surging Covid-19 cases and Germany, the Czech Republic and Slovakia toughened coronavirus restrictions."
"Investors also digested hawkish remarks from Federal Reserve officials, with vice-chair Richard Clarida opening the door to a faster withdrawal of the central bank’s massive asset-purchase programme, suggesting the Fed could take earlier than expected action to tame inflation."
"The Fed is reducing its $120bn-a-month bond purchasing programme, reflecting a rebound in hiring and consumer spending while consumer price inflation hit a three-decade high of 6.2 per cent in October."
A quicker wind down could also pave the way for earlier interest rate increases.
"Earlier on Friday, Fed governor Christopher Waller said he would favour a quicker taper, which would give the central bank more flexibility to raise rates “if necessary”."
"The comments helped to spark a sell-off in policy sensitive two-year Treasuries, with the yield on the notes rising 0.01 percentage point to 0.51 per cent."
During the pandemic investors in US equity markets have often switched between tech stocks and economic growth proxies such as banks and industrial groups as the outlook for global economic recovery has shifted.
But a perception that the US and European central banks will hold borrowing costs at record lows until they no longer perceive Covid as a major economic threat has boosted equity markets in general since March 2020.
"“It’s still hard to argue with the ‘just keep buying stocks’ theme”, said Ross Mayfield, strategist at RW Baird."
“Given where interest rates still are.”
On Friday European Central Bank president Christine Lagarde commented that “we must not rush into a premature tightening”.
The euro fell 0.8 per cent against the dollar to $1.13.
The ECB’s main deposit rate sits at minus 0.5 per cent while the Fed’s funds rate is tethered close to zero.
"The dollar index, which measures the US currency against six others, was up 0.5 per cent."
"Currencies of emerging markets, whose prospects are threatened by inflation and China’s slowdown, weakened."
"Turkey’s lira dropped to TL11.3 to the dollar earlier on Friday, a record low, after the country’s central bank slashed interest rates on Thursday despite inflation hitting almost 20 per cent last month."
"’s rand stood at R15.7 to the dollar, its weakest level in more than year."
"Hong Kong’s Hang Seng share index closed 1.1 per cent lower after the Chinese ecommerce group Alibaba cut its sales forecasts, citing slowing growth in consumer spending in the world’s second-largest economy"
Emerging market equities fell for the second consecutive session as concerns over high global inflation added to nerves about a Chinese slowdown and tighter financing conditions rippling out from the US.
"The FTSE emerging index, a broad barometer of developing nations’ shares, fell about 0.9 per cent on Thursday in US dollar terms."
"The moves came after Turkey’s central bank cut interest rates for the third time in three months, sparking concerns about its methods for dealing with spiralling inflation."
"In India, shares in Paytm owner One Communications fell 27 per cent following its $2.5bn initial public offering."
"“The situation in emerging markets is just not very positive right now, given the combination of less than stellar growth and inflationary pressures,” said Salman Baig, portfolio manager at Unigestion."
"The Stoxx Europe 600 share index closed 0.5 per cent lower, as energy and mining groups underperformed."
London’s FTSE 100 dropped by the same amount.
"Wall Street was mostly unaffected, with the broad-based S&P 500 index rising 0.3 per cent higher to set a record closing high, although it remained below its all-time intraday high set earlier this month."
The technology-focused Nasdaq Composite index was 0.5 per cent higher at the bell.
"In China, investors have been spooked by Beijing’s apparent unwillingness to prop up the nation’s economically significant real estate sector and liquidity issues at many developers."
"Analysts expect this to knock materials exporters such as Brazil and South Africa, whose economies have ridden waves of Chinese stimulus and infrastructure spending, at the same time as surging food and fuel prices have hit consumption in developing nations."
"A strong dollar, which has firmed in recent weeks as traders primed for the US Federal Reserve to lift interest rates from a record low next year, has also sparked concerns about EM companies that borrow in the global reserve currency."
"The dollar index, which measures the US currency against six others, dipped just below a 16-month high on Thursday after gaining more than 1.5 per cent so far this month."
"Turkey’s lira crossed TL11 against the dollar on Thursday, its weakest level on record, after the nation’s central bank cut interest rates by 1 percentage point to 15 per cent."
"The Central Bank of Turkey, over which President Recep Tayyip Erdogan has increasingly asserted control while promoting an unorthodox view that higher borrowing costs exacerbate inflation, also cut rates by an unexpectedly deep 2 percentage points last month."
"In October, the annual rate of consumer price inflation in Turkey soared to 20 per cent."
“Investors are mostly treating Turkey as a sideshow
"but we can’t be complacent about it,” said Remi Olu-Pitan, multi-asset fund manager at Schroders."
"“It is reflecting problems such as high inflation and weak consumer demand that are present in other emerging markets,” she added."
“So it could lead to thoughts about [which country] is next.”
"Fears of inflation put pressure on global stock markets on Wednesday, driving shares modestly lower while prices of government bonds rose."
"Wall Street closed the day modestly lower, with the S&P 500 declining 0.3 per cent as shares of energy companies and banks slipped."
The technology-heavy Nasdaq Composite also sank 0.3 per cent.
"In the UK, the annual rate of consumer price growth reached 4.2 per cent in October, data on Wednesday showed, more than double the central bank’s target and exceeding economists’ expectations for a 3.9 per cent increase."
The data added to mounting evidence of a global surge in inflation that has investors and analysts betting that some central banks will have to raise interest rates sooner than expected to keep a lid on price pressures.
"After the release of the data the pound reached its strongest level against the euro since February 2020, as markets primed for a December rate rise by the Bank of England."
"By contrast, expectations of a similar move by the European Central Bank have remained low."
"Traders expect the BoE to be the first big central bank to lift borrowing costs after global rate-setters pulled them down to historic lows in early 2020, according to Refinitiv data derived from interest rate swaps."
"“There’s a pretty good chance the [UK] base rate gets to 0.75 per cent next year” from a current historic low of 0.1 per cent, said Dean Turner, UK economist at UBS wealth management."
"Yields on gilts fell across maturities, with the most notable drops happening in shorter-dated notes, which are particularly sensitive to interest rate expectations."
The FTSE 100 index closed the day down 0.5 per cent.
"Stocks in the UK and in the US have struggled for direction as interest rate bets have risen, on the assumption that a faster than expected tightening in monetary policy may slow economic growth."
"US consumer price inflation reached a 30-year peak of 6.2 per cent in the year to October, while retail sales have also topped expectations."
"The yield on the 10-year US Treasury note, which sets the tone for borrowing costs worldwide, fell 0.05 percentage points to 1.59 per cent."
"Also on Wednesday, an auction of $23bn of new 20-year Treasury bonds was met with average demand."
"The bonds nonetheless rallied as the Treasury market made gains, with the yield falling 0.05 percentage points to 2.02 per cent."
"Strong US retail sales data helped to lift the dollar to a 16-month high on Tuesday, driving down emerging market currencies, including the Turkish lira which fell to a record low."
"US retail sales rose 1.7 per cent in October from the previous month, a larger gain than economists had expected."
"The October data indicated shoppers were accepting higher inflation, but raised questions about how long the Federal Reserve could hold US interest rates at record lows."
"Higher rates are generally seen as a boon to the dollar, increasing its attractiveness against other currencies."
And the move on Tuesday suggested that traders were betting that strong consumer demand could add to the inflationary pressures that may force the US central bank to raise rates sooner than expected.
"That view was underpinned by comments from James Bullard, president of the Federal Reserve Bank of St Louis, who told Bloomberg in an interview on Tuesday that “tacking hawkishly now could pay great dividends for the committee in the year ahead”."
"The dollar has rallied since Wednesday, when the Bureau of Labor Statistics reported that consumer prices had risen at the fastest pace in three decades."
"Earlier in the session, the retailer Walmart also raised its full-year sales and earnings forecasts alongside quarterly results that surpassed analysts’ expectations."
"“The stronger the consumer outlook, the more pressure there will be for inflation,” said Gergely Majoros, investment committee member at the European fund manager Carmignac."
"The dollar index, which measures the greenback against a basket of six rival currencies, rose 0.5 per cent on Tuesday, pushing most other currencies globally lower."
"Some of the most notable moves were in emerging markets including the Turkish lira, the South African rand and the Mexican peso."
"“This is broad dollar move,” said Mazen Issa, senior foreign exchange strategist at TD Securities."
"“Within the foreign exchange complex, what you’re seeing is the dollar strengthening against most currencies."
I think that is a dynamic that is going to be hard trend for EM currencies to buck.”
"The Turkish currency fell to an all-time low of 10.44 lira to the dollar early on Tuesday and was last at 10.31, down 2.4 per cent."
"The rise in the dollar is just the most recent concern for the lira, which has fallen 28 per cent this year, the worst performance of any emerging market currency."
"Much of that move has happened since September, when the Turkish central bank made the first of two unexpected rate cuts under pressure from President Recep Tayyip Erdogan."
Another cut may come this week.
The South African rand fell to its lowest level since March.
"The Mexican peso was only at its weakest since early November, but may move further if rate speculation ramps up."
"“Within Latin America, the Mexican peso in particular is actually the most sensitive to changes in US fixed income yields,” Issa said."
"The blue-chip S&P 500 closed up 0.4 per cent, just off its all-time high, while the technology-focused Nasdaq Composite was 0.8 per cent higher at the bell."
"While fears of prolonged inflation would generally depress the price and raise the yield of the benchmark 10-year Treasury note, it has been relatively steady in recent weeks."
On Tuesday the yield was 0.02 of a percentage point higher at 1.64 per cent.
"By contrast the two-year Treasury yield, which tracks short-term monetary policy expectations, has climbed from about 0.4 per cent ahead of the US consumer prices report on Wednesday to 0.52 per cent."
"Europe’s regional Stoxx 600 index closed the day 0.2 per cent higher, eking out its latest record high as a rally in energy shares following a surge in gas prices added to gains notched up during a better than expected quarterly earnings season."
The FTSE 100 in London closed 0.3 per cent lower.
"In Asia, Hong Kong’s Hang Seng share index closed 1.3 per cent higher to reflect optimism about discussions between US president Joe Biden and Chinese leader Xi Jinping."
"In a rare virtual meeting, Biden urged Xi to not allow competition between the two economic powers and closely linked trading partners to “veer into conflict”."
"The S&P 500 on Monday completed its longest streak of all-time closing highs since 1997, with market sentiment buoyed by strong corporate earnings and big central banks affirming their easy monetary policies."
"The blue-chip index inched up 0.1 per cent, enough to mark an eighth straight record close."
The technology-focused Nasdaq Composite also closed 0.1 per cent higher.
"Strong gains in sectors sensitive to economic growth and commodity prices were enough to outweigh the drag of Tesla, which fell 4.9 per cent after chief executive Elon Musk polled Twitter followers on whether to sell more than $20bn worth of shares in the carmaker."
"The S&P 500 has now closed at a record high 65 times this year, according to Howard Silverblatt, S&P analyst, the second-highest total in history."
"It has risen more than 25 per cent since the start of the year, and has more than doubled since the coronavirus-induced market rout of March 2020."
"The latest run has been driven by what Sean Darby, Jefferies strategist, described as “a shower of good news” over the past week, including stronger than expected data on the US jobs market, positive results from late-stage trials of Pfizer’s antiviral Covid-19 pill, the successful passing of Joe Biden’s $1.2tn infrastructure bill and reassurance that the Federal Reserve will not rush to raise interest rates."
"Scotching concerns that high rates of global inflation would dent profit margins, S&P 500 companies have also beaten analysts’ quarterly earnings expectations by 10 per cent, on aggregate, according to FactSet."
"Earnings in Europe have also been strong, with total quarterly earnings from companies listed on the Stoxx Europe 600 share index beating forecasts by 7 per cent so far, according to Goldman Sachs."
"On Monday, the Stoxx closed roughly flat."
"But some investors are now turning their attention to forecasts of corporate profit growth moderating next year, as a strong earnings recovery from the coronavirus shocks of 2020 fades into the background."
"“We’re probably not going to see the same types of returns in 2022,” said Zehrid Osmani, manager of Martin Currie’s global portfolio trust."
"“Next year is clearly a much lower forecast year for earnings as this year has been one of recovery,” he said, after companies shook off the economic shocks of 2020."
"“Also, monetary policy will shift from being accommodative to normalising.”"
"A note of caution also returned to US Treasury markets on Monday after Richard Clarida, Fed vice-chair, said expected improvements in the labour market could warrant rate rises by the end of next year."
Data on Wednesday are expected to show that US headline consumer price inflation rose to its highest level since 1990 last month.
"“The risks to the outlook for inflation are to the upside,” Clarida said in remarks at a Brookings Institution event."
"The yield on the 10-year US Treasury note, a benchmark for government borrowing costs, added 0.04 percentage points to 1.50 per cent as the price of the debt softened."
The five-year Treasury yield rose 0.07 percentage points to 1.12 per cent.
The moves came after a series of relatively dovish updates from central bankers prompted a rally across government bond markets last week.
"The Fed made a well-telegraphed move to reduce its $120bn of monthly bond purchases, but chair Jay Powell stressed that “we don’t think it’s time yet” to raise interest rates."
The Bank of England also held interest rates at 0.1 per cent after previously signalling
it was ready to raise them.
Additional reporting by Hudson Lockett in Hong Kong
"Government bonds firmed on Tuesday after whipsawing in recent days, as traders parsed predictions on how central banks may roll back loose monetary policies ahead of the US Federal Reserve’s latest meeting."
The Fed is expected to announce on Wednesday that it will begin tapering its $120bn monthly asset purchases.
"The taper has been fully priced into the market, but investors will be listening closely for hawkish signals in the announcement that could indicate when interest rate increases may begin."
"The two-year Treasury yield, which tracks US monetary policy expectations, declined 0.06 percentage points to 0.44 per cent after touching an 18-month high last week."
Bond yields move inversely to prices.
"Italy’s 10-year bond yield, a key gauge of the nation’s borrowing costs, dropped 0.14 percentage points to 1.07 per cent, having climbed as high as 1.28 per cent on Monday."
"Tuesday’s moves came after the Reserve Bank of Australia unwound some emergency monetary support, abandoning a policy of maintaining low bond yields, while affirming it was in no hurry to raise interest rates."
"Events in Australia do not always ripple across global financial markets, but analysts said government bonds had become so sensitive to central bank cues that the RBA’s move had been enough to alter traders’ thinking about what the Fed or the European Central Bank may do next."
"Betting against government bonds “is a crowded trade, meaning a day without more bad news is bad for the trade”, said John Roe, head of multi-asset funds at Legal & General Investment Management."
“The RBA didn’t say anything that would make anyone even more jittery.”
Headline inflation is running at above 5 per cent in the US and has hit a 29-year high in Germany after energy prices spiralled and
global supply chains became choked up by pandemic-related shutdowns.
"The Fed has described these price pressures as temporary, although analysts are divided over whether it will maintain this stance or speedily withdraw its asset purchases as a precursor to raising interest rates."
"“If persistent inflation risks moving much higher via wages and inflation expectations, the Fed won’t hesitate to react,” Bank of America strategists led by Michelle Meyer wrote in a note to clients."
The Bank of England will announce its latest monetary policy decision on Thursday and is expected to signal the start of a tightening cycle.
"On Tuesday, however, the two-year gilt yield ticked 0.02 percentage points lower to 0.64 per cent."
"In stock markets, Wall Street’s S&P 500 closed up 0.4 per cent to notch another record intraday and closing high, as investors cheered a quarterly earnings season that has exceeded analysts’ expectations."
This is the fourth consecutive day of record highs.
The technology-focused Nasdaq Composite was up 0.3 per cent at the bell.
"The Stoxx Europe 600 closed up 0.1 per cent, reaching another all-time high."
"“It is clear markets are pricing in a lot of upside surprises for 2022,” said Nicholas Colas, co-founder of DataTrek Research."
"Stock markets were also predicting that Fed rate rises would control inflation, Colas added, “while not causing an economic slowdown”."
The oil producer ConocoPhillips and the luxury goods group Ralph Lauren issued results that topped forecasts.
"More than eight out of 10 S&P 500 companies that have reported third-quarter earnings so far have exceeded analysts’ expectations, according to FactSet."
"In Asia, Tokyo’s Topix fell 0.7 per cent, Hong Kong"
Hang Seng index lost 0.2 per cent and mainland China’s CSI 300 dropped 1 per cent.
Wall Street stocks hovered around record highs on Monday as investors awaited the latest responses by central banks to months of above-target inflation.
The blue-chip S&P 500 share index closed 0.2 per cent higher at a fresh record high after an up and down day in which energy and consumer stocks offset weakness in the technology sector.
The Nasdaq Composite rose 0.6 per cent.
"In contrast to the mega-cap stocks that drove last week’s gains, the biggest winners on Monday were smaller companies, with the Russell 2000 index of small-cap stocks jumping 2.7 per cent and coming within 0.1 per cent of hitting a record high for the first time since March."
"Europe’s Stoxx 600 meanwhile extended an all-time high reached on Friday, closing up 0.7 per cent."
The Federal Reserve is due to meet on Wednesday.
"The US central bank may update investors on whether it still views surging prices as a temporary effect of pandemic-related supply chain and labour market disruptions, or if it is moving towards a cycle of interest rate rises."
"US consumer price inflation has run at 5 per cent or more for five months, sparking bets of interest rate rises across government bond markets."
"The S&P and the Nasdaq closed out their best month of the year on Friday, however, as strong corporate earnings dispelled fears that spiralling costs of commodities and industrial materials had hurt companies’ profitability."
"That marks a contrast from when global stock markets dropped back in September, as investors feared that price pressures caused by supply chain glitches would harm earnings."
"“Equity markets are responding to the fact investors now see price inflation as being good for earnings,” said Savvas Savouri, chief economist at the hedge fund Toscafund, adding that “we’ve seen far fewer profit warnings than many had expected."
Companies can keep pace with costs and raise prices into strong demand.”
"According to FactSet data, 82 per cent of S&P 500 companies that have reported quarterly earnings so far have beaten analysts’ forecasts."
The Fed is expected on Wednesday to announce a reduction of its $120bn a month of bond purchases that have eased financial conditions through the pandemic era.
"Meanwhile, traders are anticipating that the Bank of England could begin to raise UK rates from their current record low at its meeting on Thursday."
"Central banks in Norway, Poland and Australia also meet this week."
"“Fed officials will almost certainly announce the start of tapering,” strategists at TD Securities said."
But they also predicted that the world’s most influential central bank would not signal the start of an interest rate “lift-off” and would continue to characterise elevated inflation as a transitory effect of pandemic-driven disruptions to supply chains and the jobs market.
"“The bond markets are beginning to overrun the policymakers and price in a much faster pace of tightening,” Jefferies strategist Sean Darby said."
"The yield on the two-year Treasury note, which moves inversely to its price, remained flat at 0.50 per cent, near the one-and-a-half-year high it hit last week."
"The yield on the benchmark 10-year note, which influences borrowing costs worldwide, also rose 0.01 percentage points to 1.56 per cent."
"Meanwhile, selling of Italian bonds in the wake of last week’s European Central Bank meeting took the spread between Italian and German 10-year yields to 1.37 percentage points on Monday — its highest level in a year."
This spread is a key measure of the risk linked to holding Italian government debt.
Asian stock markets were mixed on Monday.
"Topix closed 2.2 per cent higher after the ruling Liberal Democratic party held its majority in Sunday’s Japanese parliamentary election, cementing hopes of more government stimulus spending to counteract the economic shocks of Covid-19."
Hong Kong’s Hang Seng index closed down 0.9 per cent as recent Covid outbreaks in China weighed on business sentiment.
"China’s official purchasing managers’ index, which collates executives’ responses to questions on topics ranging from hiring plans to new orders, dropped to a reading of 50.8 in October from 51.7 the previous month, just above the 50 watermark that separates expansion from contraction."
"Brent crude, the oil benchmark, rose 1.1 per cent to $84.61 a barrel."
"US stock markets slipped back from their record high on Wednesday, as strong earnings reports from technology giants were not enough to offset weakness in the rest of the market."
"The benchmark S&P 500 index fell 0.5 per cent from Tuesday’s record close, with tech groups and consumer stocks including Amazon the only sectors that made gains."
The tech-heavy Nasdaq Composite was flat.
Energy stocks were the biggest drivers of the declines as oil prices retreated from their recent highs.
"Microsoft and Google parent Alphabet were bright spots, jumping 4 per cent and 5 per cent respectively after they smashed analyst forecasts with third-quarter results released after the closing bell on Tuesday evening."
The weak showing followed a similarly disappointing day for European bourses.
The European Stoxx 600 index closed 0.4 per cent lower.
"London’s FTSE 100 was down 0.3 per cent after chancellor Rishi Sunak delivered the UK’s Budget, outlining the state of the country’s public finances and Westminster’s spending plans."
"Sunak said inflation was expected to average 4 per cent over the next year, while the Office for Budget Responsibility has upgraded its economic growth expectations from 4 per cent to 6.5 per cent for 2021."
"News that alcohol duty would be simplified, aligning higher rates with stronger drinks, along with a new “draught relief” scheme, lifted British pub stocks to a small rally on Wednesday."
Shares in JD Wetherspoon gained 5 per cent.
"In Asia, Hong Kong’s Hang Seng index closed the day down 1.6 per cent."
"In government bond markets, UK 10-year gilts rallied by the most since March last year — the early days of the coronavirus pandemic — after the Debt Management Office said that total planned gilt sales for the 2021-22 fiscal year were down £57.8bn relative to its April estimate, taking them to £198.4bn."
"The reduction came after official estimates showed that stronger-than-expected economic growth will boost government receipts, lowering spending needs."
The yield on the UK 10-year government bond dropped 0.13 percentage points to 0.98 per cent.
Lower bond yields reflect higher prices.
"The rally rippled into other markets, with the yield on the 10-year US Treasury note dropping 0.07 percentage points to 1.54 per cent."
"Elsewhere in North America, the Bank of Canada jolted markets by abruptly ending its bond-buying programme and signalling that it could raise interest rates by the middle of next year, becoming the latest central bank to respond to stubbornly high inflation with a hawkish policy shift."
Canadian two-year government bond yields — which are sensitive to interest rate expectations — surged by 0.21 percentage points to 1.07 per cent.
The prospect of higher rates helped the Canadian dollar gain 0.3 per cent against the US dollar to trade at C$1.24.
"Investors had expected the BoC to halve the pace of its asset purchases to C$1bn (about $811m) a week rather than the sudden stop, said HSBC currency strategist Dominic Bunning."
"Traders are primed for multiple central bank meetings in the coming days against a backdrop of high inflation, persistent concerns about economic growth and expectations of imminent monetary policy tightening as well as the tapering of pandemic-era bond-buying programmes."
"The European Central Bank is set to meet on Thursday this week, the Federal Reserve on Wednesday next week and the Bank of England a day later."
"US investors shrugged off concerns about rising interest rates and a growth slowdown in China on Monday, sending Wall Street stocks higher even as markets in Europe and Asia slid."
The benchmark S&P 500 index recovered from an early dip to close up 0.3 per cent.
"Technology stocks such as Facebook and Apple were the biggest drivers of the gains, gaining 3.3 per cent and 1.2 per cent, respectively."
The tech-heavy Nasdaq Composite rose 0.8.
"The S&P 500 has picked up almost 5 per cent from its recent lows hit at the start of the month, encouraged by strong corporate earnings and a Senate agreement to temporarily extend the debt ceiling."
The bullishness in the US contrasted with stock markets elsewhere.
"The Europe-wide Stoxx 600 index, which had rallied more than 2 per cent last week, closed down 0.5 per cent."
"The UK’s FTSE 100 slipped 0.4 per cent while stock markets in France, Italy and Spain fell further as investors trimmed their holdings of luxury goods businesses that benefit from Chinese demand."
"China’s gross domestic product advanced just 0.2 per cent between the second and third quarters of this year, government data showed on Monday, as economic activity was curbed by the twin pressures of an energy supply shortage and a government crackdown on real estate speculation."
"Andrew Bailey, Bank of England governor, warned over the weekend that the bank would “have to act” to curb inflation sparked by rising energy prices and pandemic-related supply chain bottlenecks."
"The yield on the two-year gilt, which tracks expectations of future interest rates in the UK, jumped to 0.73 per cent, its highest since May 2019."
Government bond yields rise when prices fall.
The two-year yield stood at 0.70 per cent later on Monday.
The yield on the 10-year gilt rose 0.03 percentage points to 1.13 per cent.
"“Markets see high inflation, central banks with their finger on the trigger and growth slowing,” said Trevor Greetham, head of multi-asset at Royal London."
“I do think interest rates will have to go up quite quickly.”
"While current high levels of inflation could “ease off next year”, he added, “I am circumspect about whether we see a bull market after that”."
"Bond yields also ticked up slightly in the US, with the yield on the 10-year Treasury adding 0.02 percentage points to 1.59 per cent."
"On Wednesday the Federal Reserve will release its Beige Book update on the state of the economy, which may cement expectations concerning the timing of the first US interest rate rise since the start of the pandemic."
"Figures last week showed that headline consumer price increases in the US topped 5 per cent year on year for the fourth consecutive month, and minutes from the Fed’s latest meeting suggested the central bank may start reducing its $120bn a month of pandemic-era bond purchases as soon as November."
"Joachim Klement, strategist at Liberum, said “the Fed is such a massive demand factor in bond markets” that the end of its purchases could add more than half a percentage point to the 10-year yield."
"The dollar index, which measures the US currency against six others, was flat at the end of the day in New York."
"In Asia, mainland China’s CSI 300 share index closed down 1.2 per cent after the GDP data were released."
Hang Seng index rose 0.3 per cent and the Topix in Tokyo drifted 0.2 per cent lower.
"Brent crude, the international oil benchmark, touched $86 a barrel, about a three-year high, as energy traders shrugged off China’s slowdown to focus on an ongoing gas shortage."
"It later retreated, falling 53 cents to $84.33 a barrel on the day."
Wall Street stocks had their best week in nearly three months as strong corporate earnings tempered nerves about inflation.
"The blue-chip S&P 500 rose 0.8 per cent on Friday for a gain of 2 per cent over the past five days, its best weekly performance since late-July."
Industrial and financial groups helped drive the gains.
The technology-heavy Nasdaq Composite ended the session 0.5 per cent higher.
"The gains continued from Thursday’s trading session, which marked Wall Street’s best daily performance for eight months as upbeat earnings tempered fears of inflation."
"Stock and bond markets have for weeks been dogged by worries about surging energy prices, jammed-up supply chains and companies failing to pass on higher costs to consumers."
"Better than expected quarterly earnings reports from Wall Street banks and iPhone chipmaker Taiwan Semiconductor Manufacturing Company, however, have lifted the mood."
"Goldman Sachs capped off a stellar quarter for investment banking revenue, beating analysts’ expectations and pulling in $3.7bn in M&A advisory fees — an 88 per cent increase from the previous year."
"“Expectations for this earnings season had really been whittled down,” said David Stubbs, global head of market strategy at JPMorgan’s private bank."
“The market is now giving this earnings season the benefit of the doubt.”
"But the record investment banking fees seen across Wall Street have boosted results amid lacklustre performances in other areas such as trading revenue, which surged in the early phases of the pandemic due to extreme market volatility."
"In Europe, the regional Stoxx Europe 600 index closed up 0.7 per cent, delivering a weekly rise of more than 2 per cent."
London’s FTSE 100 added 0.4 per cent.
"Government bonds were under pressure on Friday after data showed US retail sales unexpectedly rose last month, accelerating bets that the Federal Reserve would withdraw some of its crisis-era support for the world’s largest economy."
"The yield on the benchmark 10-year US Treasury note, which moves inversely to its price, added 0.06 percentage points to 1.57 per cent."
"The Fed, according to the minutes from its latest meeting, is poised to phase out its pandemic-era monetary stimulus, which has involved buying $120bn of Treasury and mortgage-backed bonds per month to lower borrowing costs for companies and households."
"Futures markets are also predicting the Fed will raise US interest rates by 0.25 percentage points, from their record low level, by September next year."
"“There is a definite possibility that markets are underpricing monetary tightening,” said Bastien Drut, chief thematic macro strategist at CPR Asset Management, adding that the burst of positive sentiment around earnings could prove to be short lived."
Headline consumer price inflation in the US is running at a 13-year high.
"Meanwhile, higher oil and coal prices as Europe and Asia grapple with a natural gas shortage have intensified discussion that central banks will make policy errors by raising interest rates during an economic slowdown."
"“Energy price inflation will impair growth in Europe and Asia and that will in turn impact the rest of the world,” Drut said."
"Brent crude, the oil benchmark, rose on Friday to a three-year high of $84.72 a barrel before settling at $84.46."
Sterling rose 0.5 per cent against the dollar to purchase $1.374.
"The dollar index, which measures the US currency against six others including the euro and sterling, was roughly flat on the day."
"The UK currency also gained against the Japanese yen, having earlier in the day purchased ¥157.4 — its highest level since early 2016."
It was last at ¥157.0.
"The Bank of Japan, unlike the Bank of England and the Fed, has not yet indicated that it is ready to withdraw pandemic-era monetary stimulus."
"Short-dated Treasury yields, which reflect expectations of where interest rates will be in the future, reached their highest level since March 2020 on Tuesday, as investors bet that inflationary pressures have pulled forward the date of the first US interest rate rise."
"The yield on the two-year US Treasury note on Tuesday touched 0.36 per cent, a level not reached since days after the Federal Reserve cut borrowing costs to zero to battle the coronavirus crisis."
"The five-year note yield reached a high of 1.09 per cent, its highest level since February last year."
The yield on the three-year note also reached a 19-month high.
The move came after the price of West Texas Intermediate crude oil hit a seven-year high of more than $82 a barrel on Monday before pulling back to settle at $80.64 on Tuesday.
"Brent crude, the international oil benchmark traded slightly off Monday’s three-year high to settle at $83.42."
"The IMF urged central banks to be “very, very vigilant” about inflation ahead of data on Wednesday that economists expect will show US year-over-year consumer price rises exceeded 5 per cent in September for the fourth consecutive month."
"“The market is now definitely pricing in one US rate rise by the end of next year,” said Fahad Kamal, chief investment officer of Kleinwort Hambros."
"Expectations of a 0.25 per cent interest rate increase in July next year rose from 21.7 per cent a week ago to 34.9 per cent today, according to CME Group’s FedWatch tool."
"Higher energy prices have intensified concerns that price pressures, initially caused by supply chain bottlenecks as industries reopened from Covid-19 shutdowns, will prove more than temporary, and pressure the Fed to raise rates in order to avoid eroding investment returns, corporate profits and consumer spending."
Half the Fed’s rate-setters have already forecast a rate rise next year.
The US central bank has also signalled that it is ready to reduce its $120bn a month of pandemic-response bond purchases as soon as November.
“We see a risk that September CPI . . . 
"could be higher than expectations,” Standard Chartered strategists said in a note to clients."
"But the Fed’s monetary policy committee was also likely to “debate on how aggressive to be on rates” because of the risk of creating an economic slowdown, they added."
"In stock markets, Wall Street’s blue-chip S&P 500 index closed down 0.2 per cent, following a choppy session on Monday where an initial boost for energy stocks faded as questions about economic growth came to the fore."
The technology-focused Nasdaq Composite was down 0.1 per cent.
"Europe’s Stoxx 600 benchmark was volatile on Tuesday, dropping 1.2 per cent in early dealings to fall about 5 per cent below its all-time high reached in mid-August, before closing the session 0.1 per cent lower."
London’s FTSE 100 index closed down 0.2 per cent.
"In Asia, China’s CSI 300 fell 1.1 per cent, with the stocks of utilities dropping the most amid an electricity shortage driven by a lack of adequate coal supplies."
Tokyo’s Nikkei 225 lost 0.9 per cent as utilities’ shares fell along with highly valued technology stocks that are vulnerable to the prospect of US interest rates rising.
"“Markets are clearly worried about inflation and the big concern is the rising oil price and what it will do to earnings, to growth,” said Marija Veitmane, senior strategist at State Street Global Markets."
“We don’t think it will go away very quickly.”
The price of US crude oil hit a fresh seven-year high on Monday on fears that fuel demand was recovering faster from last year’s economic slowdown than producers could bring supply to the market.
"West Texas Intermediate, the US crude benchmark, hit a high of more than $82 a barrel, its highest level since 2014, before pulling back to $80.46, up 1.4 per cent for the day."
"Oil prices have climbed more than 16 per cent since the start of September, encouraged by a global economic rebound and a shortage of natural gas that has increased demand for other energy sources."
"The rally hit a brief speed bump last week when Jennifer Granholm, US energy secretary, told the Financial Times that the Biden administration was considering tapping into the nation’s strategic stockpiles to help ease surging fuel prices."
"American consumers are paying more for fuel at the pump than they have since 2014, a political liability for an administration that has seen its popularity drop."
"However, price rises resumed after the Department of Energy added on Thursday that there was no plan to release government-held supply “at this time”, reviving worries of tight supplies that have continued into this week."
"“The market is gripped by fears — fear of stronger demand, fear of a rally contagion from gas and power, fear of missing out on the rally, and the fear to rule them all: supply anxiety,” said Roger Diwan, an oil analyst at consultancy IHS Markit."
The price moves contributed to a mixed day for US and European stock markets.
"The boost to energy stocks was initially enough to lift the entire S&P 500, overriding concerns about the affect of inflation and supply shortages on the wider market ahead of third-quarter earnings season."
"However, the blue-chip index fell back into the red as the oil price gave up some of its earlier gains, and closed down 0.7 per cent."
The tech-heavy Nasdaq Composite dropped 0.6 per cent.
"The energy- and mining-heavy FTSE 100 index enjoyed the biggest boost among big markets in Europe, rising 0.7 per cent, while the broader region-wide Stoxx 600 inched up 0.1 per cent."
"Rising energy prices have exacerbated concerns that recent high inflation rates will not be transitory, increasing the likelihood of interest rate rises and leading to an increase of the yields demanded by investors in government bonds, which rise when prices fall."
"Yields on Germany’s benchmark 10-year Bund and Britain’s 10-year gilt each rose 0.03 percentage points on Monday, to negative 0.12 per cent and 1.19 per cent respectively."
The gilt yield briefly hit 1.2 per cent for the first time since May 2019.
"“The bond market is very focused on the UK as they look likely to raise [interest] rates quite rapidly,” said Anne Beaudu, global fixed income portfolio manager at Amundi."
US Treasury bond markets were closed for the Columbus Day holiday.
"Economists polled by Reuters expect data published on Wednesday to show US consumer prices rose 5.3 per cent in September from the same time last year, marking the fourth consecutive month that headline inflation in the world’s largest economy has topped 5 per cent."
"Prolonged inflation has piled pressure on the Federal Reserve, which has already signalled it is ready to wind down its $120bn a month of pandemic-response bond purchases, to raise US borrowing costs from record lows."
"“This creates an environment that is ripe for monetary policy mistakes,” said Gregory Peters, head of multi-sector and strategy at bond investor PGIM."
“The costs of petrol and heating and all the things plaguing global supply chains are exogenous factors that central banks have nothing to do with.”
"Financial markets, Peters added, had priced in economic stagflation that could be caused by rate increases quashing growth as central banks potentially “turned dogmatic”."
"In energy marks on Monday, European gas contracts for November delivery stood at €83.75 per megawatt hour, about double the level they traded at in mid-August."
"Brent crude, the main international benchmark, topped $83 a barrel on Monday."
Wall Street charted a recovery on Friday after closing September with the worst monthly performance since the coronavirus-induced rout of March 2020.
"The S&P 500 rose 1.2 per cent on Friday, although the gain was not enough to recoup losses on Tuesday and Thursday that left the blue-chip index down 2.2 per cent for the week."
"The benchmark fell almost 5 per cent last month, pushed lower by concerns about slowing economic growth and persistent inflation, at the same time policymakers signal they are ready to tighten policy."
Surging energy prices and risks of a slowdown in China’s industrial and property sectors helped to propel the marketwide weakness.
"But data on Friday showed stronger-than-expected consumer spending in the US in August, helping to allay some concerns around the slowing expansion."
"Shares of economically sensitive industries jumped following the report, with the Dow Jones Transportation Average up 1.8 per cent and the Russell 2000 index of small-cap stocks rising 1.7 per cent."
"Both indices have started to outpace the benchmark S&P 500 in the wake of the Federal Reserve’s September meeting, as investors adjust their interest rate expectations and begin to pencil in the prospect that the Fed could tighten policy faster than previously thought."
"While the yield on the 10-year US Treasury note fell 0.02 percentage points to 1.46 per cent on Friday, it remains up from about 1.3 per cent just over a week ago."
"And figures published late on Friday showed that asset managers had increased their short bets on the 10-year Treasury, signalling that they expected the hawkish tilt from the Fed to weigh on the notes."
"In the week to September 28, asset managers added just over 93,000 new short contracts on 10-year Treasury futures, according to the Commodity Futures Trading Commission."
"When including their long positions, asset managers this week were the most short 10-year Treasury futures they have been since September 2016."
"Fed chair Jay Powell has signalled that the US central bank will soon announce reductions of its $120bn of monthly bond purchases, a programme that helped to spur lending throughout the pandemic and lifted stock and bond prices."
"“The idea of a tighter monetary environment going forward is what is driving equities at the moment,” said Nitesh Shah, research director at exchange traded funds provider WisdomTree."
"The technology-focused Nasdaq Composite index, which lost 5.3 per cent last month, ended the week up a narrower 0.8 per cent."
"Europe’s regional Stoxx 600 index, which rallied to a record in early September before losing 3.4 per cent over the month, closed 0.4 per cent lower while London’s FTSE 100 dropped 0.8 per cent."
"Supply chain bottlenecks and a natural gas shortage sent consumer price inflation in the eurozone to its highest level for 13 years in September, data on Friday showed."
"Separate US data showed that core personal consumption expenditure — the Federal Reserve’s preferred inflation measure, which strips out food and energy costs — rose 3.6 per cent in August from a year earlier, matching levels from June and July."
"“There’s a view out there that the psychology of inflation has taken hold, people are talking about it on the street, they are feeling it and once inflation takes hold it is off to the races with it,” said John O’Toole, head of multi-asset fund solutions at Amundi."
"Stock market sentiment had weakened earlier in the week because of developments in China, where the potential collapse of the debt-laden homebuilder Evergrande has highlighted stresses in the economically important property sector."
"The Beijing government is also scrambling to secure energy supplies, intensifying fears of higher prices for the rest of the world."
"Brent crude, the international oil benchmark, rose 1.2 per cent on Friday to settle at $79.28 a barrel."
The commodity has rallied more than 50 per cent for the year so far.
"The dollar index, which tracks the US currency against six others including the euro and sterling, fell 0.2 per cent after hitting a one-year high on Thursday."
Additional reporting by Kate Duguid in New York
The US dollar on Thursday traded at its strongest level in a year against major currencies as traders banked on persistent inflation driving the Federal Reserve closer to its first pandemic-era interest rate rise.
"The dollar index, which measures the US currency against six others including the euro and British pound, hit its highest level since September last year, following days of choppy trading after central bank officials signalled the end of ultra-supportive monetary policies."
"Headline inflation in the US is running at about a 13-year high after economies reopened from last year’s shutdowns, creating supply chain bottlenecks."
The Fed last week raised its inflation forecasts and indicated that it would reduce its $120bn a month of bond purchases that have boosted lending and spending during the pandemic.
The US central bank said half its monetary policymakers now expected an interest rate rise next year.
"Fed chair Jay Powell, who for much of this year characterised price pressures as transitory, on Wednesday warned that “frustrating” inflationary pressures would persist."
"“We are seeing persistent and broad-based inflation in the US and Europe,” said Tatjana Greil Castro, co-head of public markets at bond investor Muzinich."
"Powell has now “prepared the market” for the Fed to reduce its bond purchases from November, which “leaves open the possibility of the first rate hike being delivered during the second half of next year”, said Lee Hardman, currency analyst at MUFG Bank."
"The yield on the benchmark 10-year US Treasury note, which informs the valuations investors are willing to pay for higher-risk equities, fell by 0.03 percentage points to 1.49 per cent on Thursday."
"Most of the move lower happened late in the day, likely because of month-end portfolio rebalancing."
It has climbed from about 1.3 per cent just over a week ago.
"“It will easily reach 2 per cent, if not a little bit higher” by the end of the year, Greil Castro said, as investors adjusted the income returns they sought from the fixed-interest securities in line with bets on interest rates and inflation."
"Wall Street ended the day lower, closing its worst month since March last year."
The S&P 500 index closed down 1.2 per cent and was 4.8 per cent lower for the month.
"The technology-heavy Nasdaq Composite fell 0.4 per cent, taking its losses for the month to 5.3 per cent."
"Europe’s Stoxx 600 index market ended September 3.4 per cent lower, after falling 0.1 per cent on Thursday, although some investors said they remained optimistic."
"“We’re staying in the buy-the-dip camp,” said Marija Veitmane, equity strategist at State Street Global Markets, referring to the practice of topping up on shares of strong companies during periods of stock market volatility."
"Companies in the US and Europe, having benefited from cheap money during the pandemic, were now “awash with cash”, and able to invest in their businesses, which was “exciting for long-term profitability”, Veitmane said."
"Shaniel Ramjee, senior investment manager at Pictet, said rising bond yields would “push a rotation in the market” that favoured stocks in the banking and energy sectors whose dividend yields were high enough to remain attractive compared to Treasuries."
"Brent crude, the international oil benchmark, settled at $78.52 a barrel, down 0.2 per cent, after breaching the $80 mark for the first time in almost three years earlier this week."
"The prospect of the world’s leading central banks moving more aggressively to stamp out inflation rattled financial markets on Tuesday, with stocks on Wall Street suffering their biggest one-day loss in nearly five months."
"The benchmark S&P 500 fell 2 per cent, its biggest loss since May, as more than 85 per cent of the stocks in the index declined."
"The tech-heavy Nasdaq Composite slid 2.8 per cent, its largest fall since March, while Europe’s Stoxx 600 index closed 2.2 per cent lower."
The equity market sell-off was fuelled by the continued slide in Treasury prices as investors reposition themselves for the prospect of more hawkish central bank policy.
"Yields on government bonds, which move inversely to prices, have risen dramatically since policymakers at the Federal Reserve and Bank of England signalled last week that interest rate hikes may come sooner than expected in the face of persistently higher inflation."
"“The last three or four days, the market has been trying to price in a faster Fed,” said Priya Misra, global head of rates strategy at TD Securities."
“It’s a more hawkish message that’s making its way into the rates market.”
"The five-year Treasury yield, which moves with interest rate forecasts, hit its highest level in over a year on Tuesday, a clear sign investors were beginning to worry about higher inflation and slower growth."
"Concerns over rising prices were compounded by a sharp increase in commodity prices, Brent crude, the international oil benchmark, briefly traded above $80 a barrel for the first time since October 2018, driven higher by hurricanes curtailing US production and surging natural gas prices."
"The yield on the 10-year US Treasury note, which acts as a benchmark for borrowing costs for companies and households worldwide, rose 0.06 percentage points to 1.55 per cent, a level not seen since June."
And the UK 10-year gilt yield briefly breached 1 per cent for the first time since March of last year.
"The move in yields has pummelled stocks, with losses centred in the tech sector, many of which have borrowed at cheap rates to fuel growth."
An index of non-profitable tech companies run by Goldman Sachs ended the day down 5 per cent.
Tech stocks have been particularly sensitive to moves in interest rates expectations because their valuations are tied to the company’s prospects for growth years into the future.
"If interest rates and inflation are both rising, investors are likely to mark down their views of how valuable that future growth will be."
"“When bond rates go up it makes equities look less attractive, and particularly those whose dividend yields are very small, such as in the technology sector,” said Rebecca Chesworth, senior equities strategist at State Street Global Advisors’ SPDR ETF business."
Last week the Fed said it could easily move ahead with a reduction of its $120bn-a-month of bond purchases.
The world’s most influential central bank also revealed that half its monetary policymakers expect the first post-pandemic interest rate rise in 2022.
"A day later the Bank of England warned that UK inflation could top 4 per cent into next year, sparking expectations it was moving closer to raising interest rates from record lows."
"Testifying to Congress on Tuesday, Fed chair Jay Powell said supply-side constraints that have kept headline US inflation above 5 per cent for three consecutive months were “larger and longer lasting than anticipated”."
Market measures of inflation expectations have risen in recent days but on Tuesday the most noteworthy move was in real rates — Treasury yields stripped of the effects of inflation.
"The 10-year real yield rose 0.03 percentage points to minus 0.86 per cent, its highest level since June, reflecting the shift in how investors perceive shifts in Fed policy will blunt inflation."
"The US Conference Board’s consumer confidence index, published on Tuesday, hit a seven-month low in September."
The study’s authors cited concerns about the highly infectious Delta variant of the coronavirus for the drop.
"The dollar index, which measures the greenback against a basket of six rival currencies, reached its highest level since November."
The pound sterling dropped 1.2 per cent against the dollar to purchase $1.354.
Stocks on Wall Street wavered on Friday and government debt sold off as investors kept a close eye on the unfolding Evergrande crisis and digested hawkish signals from several leading central banks.
"The US blue-chip S&P 500 index ended the day 0.1 per cent higher, after falling as much as 0.4 per cent early in the session."
The advance —
third consecutive daily gain — helped to reverse the broad sell-off on Monday when market confidence had been shaken by Evergrande.
The tech-focused Nasdaq ended both the session and the week flat.
"The market turmoil was evidenced in large redemptions from mutual and exchange traded funds over the past week, with investors pulling $24.2bn from global equity funds in the seven days to Wednesday."
"It marked the first weekly outflow this year, according to fund flows tracked by EPFR Global."
"US stock funds suffered redemptions of $28.6bn over the same period, the largest weekly withdrawal since February 2018."
"The yield on the US 10-year Treasury note, a key benchmark for global borrowing costs, also continued to rise after a sell-off on Thursday."
"It rose 0.02 percentage points to 1.45 per cent, and briefly on Friday hit its highest level since July."
"The weakness in the Treasury market followed the Federal Reserve’s closely followed monetary policy decision earlier in the week, when the US central bank indicated that a growing number of policymakers expected to raise rates in 2022."
The Fed messaging was followed by Norway’s Norges Bank becoming the first big western central bank to raise rates on Thursday and the Bank of England revealing that the case had “strengthened” for “modest tightening of monetary policy” in the next few years.
"“There’s a sense that one swallow does not a summer make, but you see two and investors start to think summer is here,” said James Athey, a bond portfolio manager at Aberdeen Standard Investments."
“We had an unequivocally hawkish Fed . . .
so people get the sense that central banks are moving towards tighter policy.”
"In response to the shift in stance from policymakers, the yield on the 10-year UK gilt jumped more than 0.1pp on Thursday and further 0.02pp on Friday."
The yield on the equivalent German Bund rose 0.03pp to minus 0.23 per cent.
"Global equities were mixed on Friday as a much-anticipated bond payment deadline passed for the Chinese property developer Evergrande, sending signs of stress across China’s real estate sector amid fears that the company’s escalating liquidity crisis could ripple across to other sectors and countries."
"Evergrande, the world’s most indebted property developer, was due to make an $84m interest payment on an offshore bond on Thursday but creditors told the Financial Times that no payment had yet been received."
Evergrande has a 30-day grace period before a failure to pay would lead to a default.
"The Europe-wide Stoxx 600 benchmark closed down 0.9 per cent, although it ended the week up 0.3 per cent."
"London’s FTSE 100 also advanced more than 1 per cent for the week, even as it tallied a 0.4 per cent decline on Friday."
"In Asia, Hong Kong’s Hang Seng index closed 1.3 per cent lower, taking its fall for the week to almost 3 per cent."
Hitting investor sentiment further on Friday was a move by Beijing to crack down on cryptocurrencies by declaring that all activities related to digital coins are “illegal”.
The price of bitcoin fell 5 per cent in response as did the shares of scores of US-listed companies linked to digital finance such as Riot Blockchain and Marathon Digital.
"The dollar index, which measures the greenback against six currencies, rose 0.2 per cent."
"Brent crude, the oil benchmark, rose 1.1 per cent on Friday to settle at $78.09 a barrel."
"Treasury prices dropped on Thursday as traders reacted to the prospect of higher interest rates, after more Federal Reserve officials predicted an increase in 2022 and the UK’s central bank said the case had “strengthened” for “modest tightening of monetary policy” in the next few years."
"Earlier on Thursday, Norway’s Norges Bank became the first major western central bank to lift interest rates after the pandemic."
"In the US, the yield on the 10-year Treasury note, which moves inversely to its price, moved 0.12 percentage points higher to 1.42 per cent, reaching its highest yield since mid-July."
The 30-year Treasury yield climbed 0.12pp to 1.93 per cent.
"Government bonds tend to fall in price when traders anticipate higher interest rates or inflation, which erode the real returns on fixed interest securities."
"Prices on longer-dated bonds also fall when economic expectations rise, and the Fed’s signal that it is preparing to tighten monetary policy may be persuading investors of the strength of the economy."
"Markets are “getting past some of the fears about the economy being held back”, said Kathy Jones, chief fixed-income strategist at Schwab Center for Financial Research."
The Fed on Wednesday said a growing number of officials anticipate a US interest rate increase next year.
"Nine officials on the Federal Open Market Committee now expect an increase in 2022, according to its projections."
The Fed also signalled it was prepared to begin tapering its pandemic-era bond-buying programme in November.
"In the UK, the 10-year Gilt yield rose 0.11pp to 0.91 per cent."
The Bank of England kept UK interest rates at a record low of 0.1 per cent on Thursday but warned that consumer price inflation was expected to rise to “slightly above 4 per cent” in the fourth quarter of the year if gas prices continued to soar across Europe.
Investors are now expecting UK rates to rise by February.
"“We’ve had quite a lot of news flow [from central banks] in the last two days and that’s obviously triggered some momentum towards what we’ve been expecting for a while, which is for bond yields to be higher,” said Caroline Simmons, UK chief investment officer at UBS’s wealth management arm."
"Ewout van Schaick, head of multi-asset investing at NN Investment Partners, said he expected “very very gradual movements” towards tightening rates by the US central bank as it kept a close watch on the post-pandemic progress of the nation’s jobs market."
"“This is a patient, data-dependent Fed that will do everything it can to aid the labour market, so long as inflation permits,” added Scott Ruesterholz, portfolio manager at Insight Investment."
"Wall Street’s blue-chip S&P 500 index closed 1.2 per cent higher, as imminent concerns eased about a potential debt default by the Chinese property developer Evergrande igniting a systemic crisis in China."
The Europe-wide Stoxx 600 index closed up 0.9 per cent on Thursday.
"Evergrande, the world’s most indebted property developer whose business has been hit by Chinese government curbs on lending to the real estate sector, has a payment due on a dollar bond on Thursday."
Prices of its bonds indicate investors expect it to default.
Fears about contagion from Evergrande shook global stock markets on Monday.
"On Wednesday, however, the stressed developer said it had “resolved” payment on an onshore bond."
"“The narrative has moved away from Evergrande being a systemic issue, to one where Evergrande is eventually restructured, but where collateral damage will be localised,” said Robert Carnell, regional head of research for Asia-Pacific at ING."
"In currency markets, sterling gained 0.7 per cent against the dollar to fetch $1.372, while the euro rose 0.5 per cent to $1.174."
"The dollar index, which weights the greenback against a basket of six rival currencies, fell 0.4 percentage points."
"Global stocks advanced on Wednesday, as fears around indebted Chinese property developer Evergrande eased and the US Federal Reserve provided more details on its timetable for lifting interest rates."
"The blue-chip S&P 500 index closed 1 per cent higher, holding on to its early gains even after Fed chair"
Jay Powell signalled the US central bank could start withdrawing its enormous stimulus programme as early as November.
The technology-heavy Nasdaq Composite also rose 1 per cent.
"The yield on the US government’s benchmark 10-year bond, which rises when prices fall, dipped 0.02 percentage points to 1.30 per cent."
"New projections showed a majority of Fed officials expect to raise US interest rates at least three times in 2023, and a growing number expect an earlier rate rise in 2022."
"The Fed’s rock bottom rates and record-breaking stimulus measures have helped to prop up stock markets over the past year by keeping bond yields low and pushing investors toward riskier assets such as stocks, so earlier rate rises may be considered a risk for stock markets."
"However, recent comments from Powell and other officials had already primed many investors for a gradual tapering, and investors were relieved at the lack of a more hawkish shift in tone on Wednesday."
A positive update from Evergrande had already lifted stock markets earlier in the day.
"Fears that the Chinese property developer could default on its debt obligations sparked a global sell-off on Monday, but the company said on Wednesday that it had struck a deal on one imminent repayment."
"Powell told reporters he did not expect Evergrande’s problems to have a major direct impact on the US, describing the situation as “very particular to China”."
"He added, however that it could have a knock-on effect on global financial conditions by weakening investor confidence."
"The Europe-wide Stoxx 600 index rose 1 per cent, while the UK"
’s FTSE 100 advanced 1.5 per cent thanks to a rally in mining and commodities stocks whose fortunes are tied to the health of the Chinese economy.
"Mainland Chinese stocks also fell less severely than expected as markets reopened for the first time this week after a public holiday, as investors viewed the onshore bond repayment pledge as a sign"
Evergrande may avoid a disruptive collapse.
The CSI 300 share index dipped 0.7 per cent.
"Evergrande, which has financial obligations of more than $300bn and has been hit by government restrictions on lending to China’s vast real estate sector, said a payment due to domestic bondholders on Thursday had “been resolved”."
The developer did not say how it would meet its onshore bond payment.
"But the statement reassured investors who had hoped Beijing policymakers would try to limit potential losses by mainland Chinese lenders, suppliers and homeowners."
"“It’s likely we will see government intervention that gives some relief to the domestic creditors,” said Francesco Sandrini, senior multi-asset strategist at Amundi, Europe’s largest fund manager."
“Chinese authorities will do the best job they can to contain any spillover.”
Evergrande also has an interest payment on a bond held by foreign investors due on Thursday.
"“China’s authorities have a very clear motive, and the necessary means, to contain any threat of a systemic crisis in the country’s domestic financial system,” said Udith Sikand of research house Gavekal."
“What happens to international investors is another matter.”
"Sunil Krishnan, head of multi-asset funds at Aviva Investors, warned that while Beijing would “try and contain” Evergrande’s problems, investors should fear “a chilling effect on real estate development activity and some knock-on impact on property prices” that could slow China’s decelerating economy further."
"The dollar index, which measures the greenback against six currencies, reversed early declines to climb 0.3 per cent."
"The euro weakened 0.3 per cent against the dollar, buying $1.1693."
"Stocks on Wall Street slipped and government bond prices rallied as investors assessed the tapering of pandemic-era bond purchases, while the head of the European Central Bank reassured investors that it would only slowly withdraw its crisis-era monetary stimulus."
"Wall Street’s blue-chip S&P 500 share index closed 0.5 per cent lower in New York, while the technology-focused Nasdaq Composite ended down 0.3 per cent."
"The yield on the 10-year US Treasury note, which moves inversely to price, slipped 0.04 percentage points to 1.30 per cent."
"Markets have been focused for months on when the US Federal Reserve, the world’s most influential central bank, will announce a reduction of its pandemic-era bond-buying scheme, which has helped lower borrowing costs and boosted stocks since March 2020."
St Louis Fed president James Bullard told the Financial Times that tapering monetary stimulus “will get going this year”.
"On Wednesday, Dallas Fed president Robert Kaplan said the $120bn of monthly bond purchases should be reduced gradually from October."
"The central bank’s main challenge, said Trevor Greetham, investment strategist at Royal London, was to avoid disruptions in financial markets by convincing investors that reducing financial support measures did not mean interest rate hikes were around the corner."
"“In theory they are still going to be printing money, just a bit less,” he added."
“But it could be seen as a precursor to rate hikes.”
The moves came after the ECB earlier announced that it would be slowing its bond purchases.
"The ECB said in a statement following its latest meeting on Thursday that it would reduce the pace of its monthly government and corporate debt purchases under its €1.85tn pandemic emergency purchase programme, its main tool for keeping economies running smoothly through the coronavirus crisis."
"Having recently used the PEPP to buy about €80bn of bonds a month, the central bank on Thursday said “favourable financing conditions can be maintained with a moderately lower pace of net asset purchases”."
"The Stoxx Europe 600 closed 0.1 per cent lower, paring late gains, having fallen by its most in three weeks on Wednesday."
The euro inched up against the dollar to $1.1826.
"The yield on Germany’s 10-year bond, which moves inversely to its price and acts as a benchmark for eurozone borrowing costs, dropped 0.04 percentage points to minus 0.36 per cent."
"Italy’s 10-year bond yield dropped almost 0.1 percentage points to 0.67 per cent, as the debt rose in price following comments from ECB president Christine Lagarde that signalled continued financial support for the eurozone’s weaker nations."
"In a press conference after the ECB statement was released, Lagarde quipped that “the lady isn’t tapering”, a phrase reminiscent of former British prime minister Margaret Thatcher’s “the lady’s not for turning” speech delivered at a 1980 Conservative party conference."
"Lagarde added that while the ECB would “calibrate the pace of our purchases”, it had not “discussed what comes next”."
"Analysts had widely expected the ECB to state a new, lower monthly purchase figure."
"“So the decision was a bit on the dovish side,” said Guillaume Menuet, European economist at Citi."
"The European debt rally could prove short lived, analysts at TD Securites said, ascribing it to “profit-taking on a bearish bias ahead of the meeting”, while markets still need to assess what the ECB meant by a “moderate” cut in stimulus."
Global stocks fell on Wednesday as investors anticipated the unwinding of central bank stimulus measures that have helped prop up markets throughout the coronavirus pandemic.
"Wall Street’s blue-chip S&P 500 index closed down 0.1 per cent, while the tech-heavy Nasdaq fell 0.6 per cent."
"Declines were broad-based, with cyclical sectors such as financials and energy falling alongside technology stocks, the latter having recently been a hide-out for investors doubtful of the strength of the economic recovery."
The cautious mood in the US followed declines across Europe and most of Asia.
"The Europe-wide Stoxx 600 index closed down 1.1 per cent for its steepest fall in three weeks, while Germany’s Xetra Dax suffered its worst day since mid-July, dropping 1.5 per cent ahead of Thursday’s European Central Bank meeting."
London’s FTSE 100 slid 0.8 per cent and the CAC 40 in Paris ended the session 0.9 per cent weaker.
The ECB has been buying €80bn of bonds each month through its pandemic emergency purchase programme to keep lending costs down in the euro area.
"The policy has helped prop up stock prices by driving investors toward riskier assets, but analysts expect the ECB to announce a slowdown in bond purchases to about €60bn."
"“Investors are back from the summer and thinking about the end of the ‘Goldilocks environment’, where you had economic recovery and very loose monetary policy,” said Nadège Dufossé, head of cross-asset strategy at European fund manager Candriam."
"“The ECB looks set to be the first major central bank to communicate tapering [asset purchases],” she added, with investors worldwide poised “to see how they do it and how hawkish they appear”."
"Weak data on US jobs growth last week has added to uncertainty over when the Federal Reserve will begin scaling back its own stimulus programme, but top Fed official James Bullard told the Financial Times on Wednesday that the central bank should press ahead with its tapering plans."
"“The big picture is that the taper will get going this year and will end sometime by the first half of next year,” he said."
"Nikkei index was a rare bright spot in Asia, extending recent gains as investors continue to bet that a new government will introduce economic stimulus measures."
"However, China’s CSI 300 fell 0.4 per cent and the Hang Seng in Hong Kong dropped 0.1 per cent."
"Marija Veitmane, senior strategist at State Street Global Markets, said she did not expect a prolonged equity market correction because central banks would probably maintain interest rates at historic low levels until the end of next year."
"“This is a time where you could take a small step down in terms of risk appetite, but it is not the time to turn risk-averse,” she said."
“There is a strong distinction between tapering and rate hikes.”
The prospect of central banks reducing the scale of their bond purchases has hit prices of German and US government bonds in recent days.
"However, the yield on the benchmark 10-year US Treasury, which falls when prices rise, dipped 0.03 percentage points after the government’s most recent Treasury auction showed strong demand for the second month in a row."
"The yield on Germany’s 10-year Bund ended the day practically flat at minus 0.33 per cent, just below a two-month high."
"The dollar index, which measures the US currency against a basket of peers, rose 0.2 per cent."
"The euro lost 0.2 per cent against the dollar, purchasing $1.1818."
"Elsewhere, Brent crude rose 1.3 per cent to $72.65 a barrel, with the oil benchmark pushed higher by US producers struggling to get back to business after Hurricane Ida swept through the energy-producing Gulf of Mexico."
Government bond prices fell in the US and Europe and the dollar strengthened ahead of central bank meetings that could mark the beginning of the end of crisis-era monetary stimulus.
"The yield on the 10-year US Treasury note, which moves inversely to its price, rose 0.05 percentage points to trade at 1.37 per cent as traders placed bets that the Federal Reserve would soon reduce the $120bn of monthly bond purchases the US central bank has conducted to ease borrowing costs through the pandemic."
"The dollar index, which tracks the progress of the US currency against six others, rose 0.6 per cent."
"In equity markets, Wall Street’s S&P 500 index closed down 0.3 per cent, while the technology-focused Nasdaq Composite was roughly flat on the day."
"Jay Powell, the Fed chair, signalled in a speech at the Jackson Hole summit of central bankers last month that investors could expect a slow reduction in bond purchases to begin later this year."
"Markets at first reacted calmly, although weekly data from the Commodities and Futures Trading Commission showed that traders were buying more contracts that bet on a rise in Treasury yields than those that would profit from them falling."
The Fed’s gestures towards tapering come even as the spread of the Delta variant of the coronavirus is hitting economic growth expectations.
Economists at Goldman Sachs on Monday said that they had cut their forecasts for third-quarter growth for the US economy from 6 per cent to 5.7 per cent.
"“The timing of this move in Treasuries is strange,” said Ross Mayfield, US investment strategist at RW Baird."
"He added that expectations that the European Central Bank would discuss reining in its own monetary stimulus this week “could put some fire to the heels of the Fed”, to offer more clarity about its tapering timeline."
"Germany’s 10-year government bond yield rose by 0.04 percentage points to minus 0.33 per cent, about its highest since mid-July."
The yield on Italy’s 10-year bond added 0.06 percentage points to 0.75 per cent.
"The ECB, which has been buying €80bn a month of government and corporate bonds to keep borrowing costs low during the pandemic, is widely expected to reduce its monthly purchases to about €60bn."
"After a brief recession last year, the eurozone economy grew faster than expected by 2 per cent in the second quarter of 2021 from the first."
Consumer price inflation hit a decade high of 3 per cent in August from the same month in 2020.
"“There could be a short impact on market sentiment” from such a move, said Elisa Belgacem, senior credit strategist at Generali Investments."
“But the market is already very well prepared for ECB tapering
and I do not see any major reactions in bond prices from here.”
"In Europe, the regional Stoxx 600 equity gauge closed down 0.5 per cent, remaining just shy of its all-time high reached last month."
London’s FTSE 100 was also 0.5 per cent lower at the bell.
"The euro fell 0.3 per cent against the dollar, purchasing $1.184."
The pound lost 0.4 per cent against the dollar to $1.378.
"Brent crude, the oil benchmark, settled down 0.7 per cent to $71.69 a barrel."
Treasuries weakened while stocks on Wall Street were little changed on Friday as investors grappled with the implications of a much weaker than expected US jobs report for the world’s largest economy.
"Employers in the US added 235,000 jobs in August, the government’s monthly non-farm payrolls survey showed, about one-third of economists’ predictions of more than 728,000 new hires."
"Wages rose more than expected, however, while the participation rate was unchanged at 61.7 per cent."
"Wall Street’s blue-chip S&P 500 share index ended the day marginally lower, falling short of the record high set the day before."
"However, the decline was not enough to blunt the market’s advance over the week, with the S&P 500 notching its second consecutive weekly gain."
"The technology focused Nasdaq Composite rose 0.2 per cent, setting a new closing high."
"Meanwhile, Europe’s Stoxx 600 share index fell 0.6 per cent."
"The yield on the 10-year US Treasury bond, which moves inversely to its price, rose by 0.04 percentage points to 1.32 per cent."
"The dollar index, which measures the US currency against six others, slipped 0.1 per cent lower."
"Investors were steeled for the jobs report to provide a catalyst for a market correction or an extended rally after Fed chair Jay Powell signalled that the central bank would reduce its $120bn of monthly bond purchases this year, while emphasising the need for further progress in the pandemic-scarred labour market."
"“We were all jumping in our seats waiting for this jobs data,” said Kasper Elmgreen, head of equities at fund manager Amundi."
“With the Fed firmly focused on employment these next few months of jobs reports are going to be very important.”
"After US consumer prices rose 5.4 per cent in the 12 months to July, Powell at last month’s"
Jackson Hole central bankers’ symposium acknowledged calls from some Fed officials to wind down stimulus spending to avoid further inflationary pressures and financial market bubbles.
But the Fed chief also warned of the dangers of acting too quickly.
"The weak jobs number “supports the Fed’s cautious approach”, said Guillaume Paillat, multi-asset portfolio manager at Aviva Investors."
"The central bank, he said, “can now sit back and wait for more data”."
"Johanna Kyrklund, chief investment officer at Schroders, described the payrolls report as “disruptive” and “not the Goldilocks number many were expecting”, referring to an outcome that would have soothed fears about an economic slowdown and inflation."
"“There are some pockets of the economy facing labour shortages at the same time as [economic] growth momentum is peaking,” Kyrklund said."
"After US gross domestic product growth was also lower than economists’ forecasts in the second quarter of the year, the jobs data added to “a slightly stagflationary tilt”, she added."
"Ahead of the payrolls release, investors were focused on whether the Fed would announce the start of tapering either at its monetary policy meeting this month or its next in November, with some stating that the figures could indicate a later tapering date than expected."
"“Tapering is going to be very late this year, December if not early next year,” said Seema Shah, chief strategist at Principal Global Investors."
"“Rate hikes should come in late 2023, but we don’t think that the Fed is in that much of a rush to start normalising policy rates.”"
"The euro was steady against the dollar, purchasing $1.188."
The pound rose 0.2 per cent to $1.386.
"Brent crude, the oil benchmark, dropped 0.6 per cent to settle at $72.61 per barrel."
"Wall Street and European stock markets started September on a cautiously positive note, balancing signs that the global recovery from Covid-19 was moderating against the potential for extended support from central banks."
"The technology-focused Nasdaq Composite inched up 0.3 per cent to claim a fresh record high, though the blue-chip S&P 500 index closed flat after giving up its early gains in afternoon trading."
"In Europe, the region-wide Stoxx 600 index added 0.5 per cent while London’s FTSE 100 closed 0.4 per cent higher for the day."
"In Asia, Hong Kong’s Hang Seng index rose 0.6 per cent and the Shanghai Compsite was up 0.7 per cent, while in Tokyo the Nikkei Average and the Topix both closed 1.3 per cent and 1 per cent higher respectively."
The positive moves came despite a series of lacklustre economic updates on Wednesday.
"Emmanuel Cau, Barclays head of European equity strategy, said “investors are taking a ‘bad"
"is good’ approach, which predicts more policy easing” to offset any slowdown."
"Across the Atlantic, data from the payroll services group ADP showed a much weaker than expected increase in private sector hiring."
"Employers added 374,000 jobs in August, compared to average estimates of 618,000."
"In China, Caixin’s manufacturing purchasing managers’ index indicated that the sector was contracting for the first time since April last year, fuelling speculation that policymakers in Beijing will take steps to boost economic growth."
Federal Reserve chair Jay Powell signalled at the Jackson Hole central bankers’ symposium last week that the $120bn of monthly bond purchases the Fed has conducted since March 2020 could be dialled back this year.
"But he also pledged to maintain the bond purchases, which have helped to depress income yields on low-risk government bonds and increased the relative appeal of equities, until there was “substantial further progress” in employment."
"“The labour market is a central component of the tapering discussion,” said Madison Faller, global market strategist at JPMorgan Private Bank."
"“We are a long way from seeing a peak in labour market data and it is going to take a number of months, if not quarters, to get back to where we were before Covid.”"
"Wednesday’s data had little impact on US government debt, as investors awaited a more closely-watched government report on non-farm payrolls which will be published on Friday."
"The yield on the benchmark 10-year note, which rises when prices fall, was unchanged for the day in the New York afternoon at 1.30 per cent."
"Eurozone debt markets were similarly quiet, with the yield on Germany’s 10-year Bund rising 0.01 percentage points to minus 0.38 per cent."
"Still, the small increase, following a sharper rise on Tuesday, was enough to bring it to its highest level since mid-July."
"Consumer price inflation in the eurozone hit a decade high of 3 per cent in August, prompting the Dutch central bank governor Klaas Knot to tell Bloomberg that the data could justify an end to crisis-mode monetary policy."
"The Stoxx 600 banks index rose 1.3 per cent, lifted by expectations that higher bond yields, which influence the prices of loans, would increase lenders’ profits."
"The dollar index, which measures the US currency against those of other major economies, fell 0.1 per cent."
The euro rose 0.3 per cent against the dollar to $1.1838 while sterling also added 0.1 per cent to $1.3767.
European and US equities dipped modestly on Tuesday as transatlantic travel curbs and an unexpectedly sharp increase in eurozone inflation took some steam out of the recent rally.
On Wall Street the blue-chip S&P 500 index closed 0.1 per cent lower while the technology focused Nasdaq Composite was roughly unchanged.
Both indices had hit record highs on Monday.
"Europe’s Stoxx 600 equity index finished down 0.1 per cent on Tuesday after data showed eurozone inflation hit a 10-year high of 3 per cent in August, year on year."
"The European Central Bank has pledged to keep borrowing costs negative, until consumer price rises remain “durably” above its 2 per cent target."
But the inflation data coincided with comments from Austria’s central bank chief Robert Holzmann that the ECB should now “think about how to reduce” its €1.85tn programme of pandemic emergency bond purchases.
"London’s FTSE 100 lost 0.4 per cent and the Stoxx 600 travel and leisure index dropped 0.7 per cent after the EU moved to restrict travel to the bloc from the US, where coronavirus cases and hospitalisations have been rising."
"Despite Tuesday’s dip, the S&P recorded its seventh consecutive month of gains and a 2.9 per cent advance in August."
"Stocks have been bolstered by the dovish policy message in a speech by Jay Powell, Federal Reserve chair, at a central bankers’ symposium last week, where he spoke of the dangers of reducing the Fed’s $120bn of monthly debt purchases too rapidly."
"The bond-buying programme, designed to stimulate economic activity through the Covid-19 pandemic and continuing despite accelerating labour market improvement, has pushed down yields on US Treasuries and other debt instruments and made riskier assets such as equities more attractive."
"The yield on the benchmark 10-year US Treasury note, which moves inversely to its price, was at 1.31 per cent, having fallen from about 1.35 per cent since the day before Powell’s speech at the Jackson Hole symposium."
"Some analysts believe stock market valuations are now overly dependent on moves by the Fed, as opposed to companies’ earnings or the economic growth outlook."
Others see Powell as having struck the correct balance of recognising the risk of stimulus creating bubbles while also guarding against a market tantrum when crisis-era policies end.
"“The Fed is kicking the can down the road,” said Mobeen Tahir, associate research director at exchange traded fund provider WisdomTree."
"“This creates the risk of monetary policy itself becoming a cause of market volatility, with any slight hawkish tone from the central bank creating shocks,” he added."
"Jeremy Gatto, multi-asset investment manager at Unigestion, argued that while the Fed was “moving towards tightening,” the central bank’s message was “that it might take more time than investors had previously anticipated, which keeps markets in a Goldilocks environment.”"
"Stocks on Wall Street climbed to record highs and commodities rallied on Monday, reversing last week’s losses as the US granted full approval to the BioNTech/Pfizer jab."
"The S&P 500 advanced 0.9 per cent, with almost three-quarters of the companies in the index rising."
"Meanwhile, the technology-heavy Nasdaq Composite rose 1.6 per cent."
"In Europe, France’s Cac 40 closed up 0.9 per cent, the region-wide Stoxx 600 index ended the day up 0.7 per cent, and both Frankfurt’s Dax and the UK"
’s FTSE 100 were up 0.3 per cent.
"In Asia, Hong Kong’s Hang Seng closed the day up 1.1 per cent, while Japan’s Nikkei 225 finished up 1.8 per cent."
Oil and other commodity prices bounced back following last week’s sell-off.
"Brent crude, the international oil benchmark, rose 5.5 per cent to settle at $68.75 a barrel."
Traders pointed to falling Covid-19 cases in China as a signal that social restrictions in the world’s largest consumer of commodities may soon ease.
Brent ended July at $76.33.
"Metal prices also recovered from a decline last week, with nickel rising by 1.6 per cent and copper by 2.3 per cent."
"Metals were finding support from rising share prices in Asia and a weaker dollar, according to analysts at Commerzbank."
Goldman Sachs said demand for metals remained strong and inventories were falling in China at a rapid pace.
"The bank said it expected copper prices to rise to $10,620 a tonne in the fourth quarter from the current price of $9,218 a tonne."
The rally in commodity prices came as the US dollar weakened about 0.6 per cent against a basket of six world currencies.
"Investors were nonetheless cautious following last week’s losses, which resulted in the broad MSCI All-World equities benchmark recording its worst week in two months."
"“I don’t think anything from market behaviour tells us there’s anything new happening,” Anthony Collard, managing director at JPMorgan Private Bank, said of the rally."
“It’s a mean reversion to a degree.”
European purchasing managers’ index data — broad gauges of corporate health — painted a mixed picture across markets.
"In the UK, the manufacturing and service sectors faced a sharp deceleration in growth, falling to the lowest level in six months."
"Data from Australia also showed that the country’s private sector had lost steam in August, because of the spread of the Delta variant of coronavirus and resulting lockdown."
"By contrast, eurozone business activity grew at one of the fastest rates in the past 20 years, with employment continuing to grow at the same rate as in June, a 21-year high."
"“Although the spread of the Delta variant caused widespread problems across the region, curbing demand and causing further supply issues, [businesses] benefited from virus containment measures easing to the lowest since the pandemic began,” said Chris Williamson, chief business economist at IHS Markit."
"The big event for investors this week is the annual central bankers’ symposium at Jackson Hole, Wyoming, starting on Thursday."
Interest in the meeting of monetary policymakers has been heightened by disagreements within the Federal Reserve over the speed at which it should trim its purchases of government debt.
"The yield on the benchmark 10-year US Treasury note was little changed at 1.25 per cent on Monday, roughly at the midpoint of the range"
it has traded over the past month.
The Fed’s $120bn-a-month asset purchase programme has been a vital pillar to the market’s recovery since the shock of coronavirus lockdowns more than a year ago.
Minutes from the US central bank’s latest policy meeting published on Wednesday last week indicated that a majority of Fed officials believed that the withdrawal of the stimulus programme could start later this year.
"But analysts believe that rising case numbers due to the spread of the Delta variant, and subsequent international slowdowns, may cause a more gradual tapering announcement than initially expected."
"“I just have a really, really hard time believing that at Jackson Hole you’re all of a sudden going to have [Fed chair]"
"Powell come out and say we’re totally tapering,” said Stephanie Link, a portfolio manager at Hightower Advisors."
Additional reporting by David Sheppard and Henry Sanderson
Global stocks recorded their worst week since June as fears of a slower economic rebound and a looming reduction in US stimulus weighed heavily on sentiment.
"The FTSE All-World index fell 1.8 per cent this week, during which China has toughened data privacy rules on its fast-growing technology sector and countries such as Australia and New Zealand have implemented sudden lockdown measures due to coronavirus concerns."
"In response investors have turned to haven assets such as the dollar, while selling commodities."
"The US dollar index, which measures the greenback against other big currencies, rose 1 per cent for the week, its best in two months."
"Brent crude oil, the global benchmark, fell about 7.7 per cent over the week on concern that demand will be curbed."
"“Some time ago the planets all started aligning — we had very strong economic momentum worldwide, expectations that central banks wouldn’t move for a long time, and strong [equity] valuations,” said Olivier Marciot, senior portfolio manager at Unigestion, the asset manager."
"“Step by step the planets have dealigned, creating stress in the market.”"
Equity benchmarks recouped some losses on Friday.
"In the US, the S&P 500 traded up 0.8 per cent while the tech-focused Nasdaq Composite rose 1.2 per cent on the day."
"In Europe, stocks rallied late in the day."
The European benchmark Stoxx 600 gained 0.3 per cent.
The FTSE 100 closed up 0.4 per cent.
The Cac 40 in Paris rose 0.3 per cent while Frankfurt’s Dax 30 advanced 0.3 per cent.
"“Covid, growth and policy worries are resurfacing, just when the positive catalyst from strong earnings is behind us and technicals are weak,” said Emmanuel Cau, a European equity strategist at Barclays."
"“This should continue to feed the ‘buy the dip’ mentality, although investors may stay on a wait-and-see mode for now.”"
"Asian stocks, which began the week with a sell-off on the back of weak data out of China, looked set to end the week under further pressure."
The MSCI index for Asia Pacific markets was down 1.9 per cent.
"The effect of China’s new data privacy law, due to come into force on November 1, weighed heavily on sentiment across the region."
"The Hang Seng Tech index of China’s largest internet and ecommerce stocks, including Meituan, Tencent and Alibaba, fell 2.5 per cent."
"Tencent’s value has dropped by 11 per cent this month, while Alibaba is down 16.5 per cent for the month to date."
"Investors also turned to haven debt assets such as US and German sovereign debt this week, although they were little changed on Friday."
The yield on the 10-year Treasury rose by 0.01 percentage points to 1.26 per cent while the yield on German 10-year Bunds was up 0.01 percentage points to minus 0.496 per cent.
Yields fall when prices rise.
"Oil ended the day lower, with Brent crude falling 1.9 per cent to settle at $65.18 a barrel, about $10 below the heights it hit last month, as the Covid variant affects demand."
The dollar slipped marginally for the day.
"The greenback fell 0.2 per cent against the euro, as the common currency climbed to $1.1703."
"However, it gained 0.1 per cent against the pound, as sterling fell to $1.3626."
US stocks slid on Wednesday after policymakers at the Federal Reserve signalled they had accelerated discussions on when to wind down its $120bn-a-month asset purchase programme.
"Minutes from the most recent meeting of the Federal Open Market Committee, which sets US interest rates, revealed that a majority of central bank officials believed the withdrawal of the stimulus programme could start later this year."
"The S&P 500 fell 1.1 per cent, its worst day since mid-July, while the tech-heavy Nasdaq Composite declined 0.9 per cent."
"Energy, healthcare and technology stocks paced the declines in the S&P, with the consumer discretionary industry offering the lone bright spot."
"The eventual shift in policy by the Fed has been long awaited by investors, given its bank bond-buying programme has helped drive down bond yields."
That has pushed many investors in search of returns towards riskier assets such as stocks.
"Thanos Bardas, head of rates at Neuberger Berman, said: “The fact is 12 months from now, the Fed is not going to be providing the same level of liquidity” to financial markets."
"Bond investors, however, focused on the lack of unanimity among Fed officials, as “several” officials suggested postponing any tapering until early next year due to economic uncertainty."
Treasury yields whipsawed after the release of the minutes.
"The yield on the benchmark 10-year note rose 0.01 percentage points to 1.27 per cent, although it had fallen from the day’s high of 1.3 per cent just before 2pm in New York."
"Ian Lyngen, head of US rates strategy at BMO Capital Markets, said the Treasury market “has found some footing as it is evident that tapering in September isn’t a foregone conclusion”."
Uncertainty ahead of the minutes’ publication had encouraged a cautious day of trading on the other side of the Atlantic.
"The FTSE 100 in London ended the day 0.2 per cent lower, while the CAC 40 in Paris closed down 0.7 per cent."
"The pan-European Stoxx 600 index closed up 0.1 per cent, as shares in Germany advanced marginally."
"Data from the US, Europe and China this week has indicated the pace of the economic recovery is slowing, leaving US and European benchmark equity indices close to record highs but lacking a catalyst for further gains."
Caution was also the watchword overnight in Asia.
"In Hong Kong, financial and technology stocks led the recovery on the Hang Seng index after falling heavily in the previous session."
"China’s CSI 300, which had also fallen heavily on concerns about a regulatory crackdown on tech stocks, rose 1.2 per cent."
"Oil prices fell for a fifth successive day, facing reduced demand owing to an increase in Delta variant cases and attendant lockdowns."
The global benchmark Brent crude settled 1.2 per cent lower at $68.23 a barrel.
Copper prices hit their lowest level in a month on Wednesday as concerns grew about an economic slowdown.
"The price fell 1 per cent to a low of $9,161 a tonne on the London Metal Exchange after data showed a sharp fall in US retail sales in July."
"Malcolm Freeman, a director at commodity brokerage Kingdom Futures, said: “You now have the two largest economies in the world slowing down — one by design in the case of China and the other by circumstance in the case of the US.”"
Wall Street recorded its worst day in almost a month on Tuesday as investors ditched equities following a stock sell-off in China and weak US retail sales data.
"The blue-chip S&P 500 closed down 0.7 per cent, its steepest fall since mid-July."
"The tech-focused Nasdaq Composite was 0.9 per cent lower at the bell, its biggest drop since late-July."
"The declines come a day after the S&P 500 finished at a record high, having doubled from lows it recorded during the market turmoil of March 2020."
"The Commerce Department on Tuesday morning reported that US retail sales fell 1.1 per cent in July compared to June, worse than the 0.3 per cent decline expected by economists surveyed by Bloomberg."
"Ian Shepherdson, chief economist at Pantheon Macroeconomics, said the numbers were not as bad as they looked on the surface and that several one-off factors may have had an influence."
"“It’s impossible to separate the impact of the fading stimulus boost from the possible hit due to the Delta variant, which began to hit real-time indicators like restaurant diner and airline passenger numbers in late July,” he said."
"“The Delta hit likely will be bigger in August, so we have to scale back our hopes for third-quarter consumption quite sharply.”"
The data follow a survey from the University of Michigan that showed that consumer sentiment cooled sharply early this month.
"Jay Powell, Federal Reserve chair, spoke on Tuesday, but did not comment on monetary policy."
Investors on Wednesday will be watching the release of minutes from the Fed’s last policy meeting for insight into the central bank
’s plans to scale back its expansive policies to stimulate the US economy.
"The US 10-year Treasury yield, which moves inversely to price, oscillated throughout the trading day but ended Tuesday little changed at 1.26 per cent."
"Across the Atlantic, Europe’s Stoxx 600 ended the day almost flat as did Germany’s Dax."
France’s CAC 40 fell 0.3 per cent.
"London’s FTSE 100 closed 0.4 per cent higher as investors cheered restructuring plans by miner BHP Group, the index’s second-largest company."
"In Asia, Hong Kong’s Hang Seng shed 1.7 per cent and China"
’s CSI 300 dropped 2.1 per cent.
"Stocks of car company Geely and tech groups Tencent and Alibaba were among the biggest fallers in Hong Kong, all shedding at least 3 per cent."
"Meanwhile, the New Zealand dollar slumped 1.4 per cent against the US dollar to $0.692 after Jacinda Ardern, prime minister, announced a three-day lockdown following detection of the first community spread of coronavirus since February."
The market jitters in Asia highlight the growing unease among some traders and investors over slowing growth in China and the spread of the Delta variant of coronavirus.
Oil prices fell on Tuesday as concerns mounted that increases in the Delta variant would dent travel demand.
"Brent crude, the global benchmark, settled 0.7 per cent lower at $69.03 a barrel."
"The US benchmark, West Texas Intermediate, fell 1 per cent to $66.59 a barrel."
Stocks wavered and commodity prices sank on Monday as the spread of the Delta variant of coronavirus resurfaced doubts about the strength of the rebound of the global economy.
"The benchmark S&P 500 ended the day down 0.1 per cent, hovering around the all-time high hit last week."
The technology-heavy Nasdaq Composite closed 0.2 per cent higher.
"Energy stocks lagged, as oil added to last week’s losses and investors worried that the spread of the Delta variant of coronavirus could depress demand for fuel."
"Brent crude, the global benchmark, fell as much as 3 per cent on Monday to $67.60 a barrel, before recouping some of that weakness to trade at $69.27 a barrel."
"Since the beginning of this month, Brent has slid more than 9 per cent as China, one of the largest oil consumers in the world, tightened restrictions in an attempt to halt the transmission of the virus that has spread rapidly in Asia."
"“Any hiccup in China is going to have a huge impact on commodity markets by definition,” said Francisco Blanch, managing director at Bank of America."
He added that the possibility of the US Federal Reserve tapering its $120 billion a month asset purchases soon was also a contributing factor to oil prices rolling back.
Stocks in Asia edged up despite data released at the weekend showing
China’s imports and exports had slowed more than expected in July because of flooding and virus fears.
Hong Kong’s Hang Seng index closed up 0.4 per cent while the CSI 300 index of companies listed on the Shanghai and Shenzhen exchanges gained 1.3 per cent.
"“We also don’t expect a big economic impact from the Delta variant in the US and Europe,” noted Jan Hatzius at Goldman Sachs."
“Asia-Pacific is a different story because the greater infectiousness of Delta poses a severe challenge to the region’s combination of low vaccination rates and ambitious — in some cases zero — Covid goals.”
"In Europe, the region-wide Stoxx 600 index closed at another record high, up 0.2 per cent, having stayed in positive territory for six consecutive sessions."
"London’s FTSE 100 index, which has a significant weighting of energy companies, rose by the same margin despite oil and mining groups such as BP, Royal Dutch Shell and Antofagasta following crude lower."
"Investors are also looking ahead to Wednesday’s closely watched US inflation numbers, which will help determine the path the Fed will take."
"Economists polled by Bloomberg forecast consumer prices to have ticked up 0.5 per cent in July over the month before, a slower pace than in June."
"On a year-on-year basis, the inflation rate is expected to have eased to 5.3 per cent from 5.4 per cent in June."
"A strong inflation reading will intensify speculation as to when the Fed will rein in its ultra-supportive policies, which have buttressed the economy through the pandemic."
"US Treasury prices fell after Fed committee member Raphael Bostic on Monday said the US central bank could start to taper purchases between October and December, but that he “was open to moving it forward”."
The yield on the 10-year note climbed 0.03 percentage points to 1.33 per cent following
"Bostic’s remarks, having gained 0.07 percentage points on Friday after a better than expected US jobs report."
"Gold fell as much as 4.1 per cent in Asia trading on Monday to $1,691 a troy ounce."
"“Gold corrected on Sunday night amidst low liquidity,” said Sébastien Galy, senior macro strategist at Nordea Asset Management."
"This can lead to outsized price movements, although it remained almost 2 per cent lower at $1,730 an ounce."
"Global bond markets came under selling pressure on Friday after data showed the US created more jobs than expected, raising investors’ expectations that the Federal Reserve would ease its crisis-era stimulus package as the economy recovers."
"As optimism rose, investors re-evaluated the path of US interest rates, pushing the yield, which moves inversely to price, on the 10-year Treasury note 0.08 percentage points higher to 1.30 per cent."
Government bond prices in the UK and continental Europe also fell.
"The S&P 500 equity benchmark reached a new record high, extending its gains for the week."
"The report showed that the US added almost 1m jobs in July, ahead of analysts’ forecasts."
"The unemployment rate fell 0.5 percentage points to 5.4 per cent for the month to July, illustrating substantial progress but still well above levels reached at the end of 2019 before the pandemic struck."
"The jobs report is the last ahead of the summit of global central bankers at Jackson Hole, Wyoming, at the end of the month."
The strong employment numbers will intensify the debate over when the Fed will begin to rein in its ultra-supportive policies as the economic recovery from Covid-19 gathers pace.
The world’s most important central bank has kept US interest rates at historic lows and purchased $120bn in assets each month throughout the health emergency.
"“Today’s bumper payrolls report highlights a roaring recovery in the labour market and increases the chances of the Fed tapering their asset purchases sooner rather than later,” said Mike Bell, a strategist at JPMorgan Asset Management."
"“The strength of hiring calls into question the rally in Treasuries that took place during the past few months and we expect this to be the start of a sustained move higher in Treasury yields over the rest of the year,” he added."
"However, for other analysts, the increase in job growth does not warrant substantial action on the part of the Federal Reserve."
"“The July payroll report was a much-welcome surprise to the upside, but also not so strong as to bring forward the expected date of Fed tapering lift-off — exactly what the market needs,” said Seema Shah, a strategist at Principal Global Investors, in a note."
"“As many of the labour supply constraints fall away over the next month, labour demand should get the green light to increase, and September will hopefully bring another strong number.”"
"The blue-chip S&P 500 closed 0.2 per cent higher, extending the all-time high the benchmark index set on Thursday, while the technology-focused Nasdaq, more sensitive to rising interest rates, dropped 0.4 per cent."
"Analysts at Goldman Sachs said this week they expected the S&P 500 to gain a further 7 per cent by the end of 2021, on top of the 17 per cent rise so far."
"The dollar rose, trading up 0.6 per cent against a basket of currencies."
"Europe’s benchmark Stoxx 600 index traded in a tight range, leaving it on track for its best week in five months after repeatedly notching new records this week."
The UK’s FTSE 100 closed slightly higher as investors were encouraged by more hawkish comments from the Bank of England on Thursday.
"The yield on two-year gilts rose to as much as 0.15 per cent during the day, around levels from April 2020 that were also briefly touched last month, after the UK central bank indicated there would be “modest tightening” of its interest rate policy to control inflation."
"Markets in Asia were muted after a nervy week, as investors parsed statements from China’s ruling party to try to figure out which sectors might be targeted next as Beijing seeks to assert greater control over parts of the economy."
"Tech, tutoring and gaming stocks have all been hit in recent weeks."
Hong Kong’s Hang Seng index drifted on Friday while China’s CSI 300 fell 0.6 per cent.
"Elsewhere, Brent crude fell 1.1 per cent to $70.51 a barrel, capping a volatile week where prices slumped more than 7 per cent following worries that the spread of the Delta variant and fresh travel curbs would mute demand."
Stocks on Wall Street rose on Tuesday as strong company earnings and economic data offset worries about the spread of the Delta coronavirus variant and fears over another regulatory clampdown from Beijing.
"The blue-chip S&P 500 closed 0.8 per cent higher in New York, its best performance in more than a week."
The tech-focused Nasdaq Composite climbed 0.6 per cent.
"Investor sentiment was lifted by June data for US factory orders, which typically feed into estimates of gross domestic product."
"New orders for goods rose 1.5 per cent on the month before, well above the consensus estimate of 1 per cent."
"In Europe, another wave of strong earnings results helped propel the continent’s stocks to a fresh record."
The region-wide Stoxx 600 index rose 0.2 per cent after Paris-based bank Société Générale and London-listed lender Standard Chartered reported profits that beat analysts’ expectations.
"London’s energy-leaning FTSE 100 index rose 0.4 per cent, aided by oil major BP, which rallied after announcing a $1.4bn share buyback programme and an increase in its dividend."
"On both sides of the Atlantic, earnings have been strong."
"More than halfway through the US reporting season, 86 per cent of companies have topped expectations on profits, while in Europe 55 per cent have outperformed so far, according to data from FactSet and Morgan Stanley."
"“The continued healthy earnings outlook is a key driver of our view that the equity bull market remains on solid footing,” analysts at UBS Wealth Management wrote in a note."
"Such a growth rate is, however, “flattered by depressed levels in the year-ago period,” they said."
“But the results are still impressive compared with pre-pandemic earnings.”
Oil moderated its losses in a choppy session as the global benchmark Brent crude finished 0.5 per cent lower at $72.50 a barrel on fears that the spread of the Delta variant could depress demand for fuel.
"The seven-day rolling average for new coronavirus cases in the US, the world’s largest economy, have hit nearly 85,000 from about 13,000 a month ago, according to the Financial Times coronavirus tracker."
Similar trends have taken hold in other countries as well as authorities race to vaccinate larger swaths of their populations.
"In Asia, investors were again focused on regulation after Chinese state media criticised the online video gaming industry, calling it “spiritual opium”."
"Shares in Tencent, the Chinese internet group, fell 6 per cent before announcing it would implement new restrictions for minors on its gaming platform."
"NetEase and XD, two rivals, dropped 7.8 per cent and 8.1 per cent, respectively."
"The Hang Seng Tech index, which includes Tencent and its peers, dropped 1.5 per cent, lagging behind the wider Hong Kong bourse, which slipped 0.2 per cent."
The CSI 300 index of large Shanghai- and Shenzhen-listed stocks was flat.
Wall Street and European equities swung between modest gains and losses on Monday ahead of the US central bank’s Federal Open Market Committee meeting this week.
"The blue-chip S&P 500 index extended Friday’s gains to close at yet another high, edging up 0.2 per cent on the day."
"Meanwhile, the tech-heavy Nasdaq Composite traded flat ahead of big technology companies’ second-quarter earnings announcements."
Keeping a lid on large gains on Wall Street was a sharp sell-off in US-listed stocks exposed to China after Beijing cracked down on domestic education companies — a move expected to hit overseas investors.
"The Nasdaq Golden Dragon China index, which tracks Chinese companies listed in the US, tumbled more than 6 per cent on Monday following an 8.5 per cent drop on Friday."
"Before Wall Street opened, China’s CSI 300 share index closed 3.2 per cent lower after Beijing banned academic tuition groups from making profits, raising capital or going public."
"European markets followed Asian bourses lower, leaving the continent-wide Stoxx 600 index down 0.1 per cent and Frankfurt’s Xetra Dax 0.3 per cent weaker."
Unease around what the Fed will do next alongside market ructions in Asia suggested some traders were also taking profits off the table.
"“I don’t view markets as seeing a monetary policy shock coming through,” said Georgina Taylor, multi-asset fund manager at Invesco."
"But uncertainty about the Fed’s next moves and developments in China made this a logical time to take some stock market profits, she said."
"“Going into the summer break period people don’t want to leave big risk positions open,” she said, especially as it was hard to judge how Fed officials would balance the economic growth risks presented by the highly transmissible Delta coronavirus variant with rising inflation."
"Economists do not widely expect strong guidance from Jay Powell, Fed chair, on Wednesday about when the bank’s asset purchases will wind down."
But Fed officials do appear split about when to taper after US consumer price inflation accelerated to 5.4 per cent in the 12 months to June.
"“Rhetoric from Fed officials suggest[s] that there is a division among members on the timing, pace and composition of tapering,” said Tom Kenny, and economist at ANZ."
"Government bond prices were steady on Monday, with the yield on the benchmark 10-year US Treasury edging up 0.01 percentage points to 1.29 per cent."
"Analysts have been surprised by a strong decline in the benchmark Treasury yield, despite Fed officials last month bringing their forecast for the first post-pandemic rate rise forward by a year to 2023."
Some economists say the rally in debt is down to traders buying back into Treasuries after liquidating overly aggressive short positions taken out at the start of the year.
Others see Treasuries predicting stagflation as new coronavirus strains crimp global growth rates and exacerbate supply chain bottlenecks that have contributed to surging consumer prices in the US.
"According to David Jones, an investment strategist at Bank of America, the unprecedented low yield and high inflation figures signal slower economic growth and higher inflation in the coming months, pointing to needed adjustments within investors’ portfolios."
"“You’re not going to have the returns on equities in the second half [of the year] that you saw in the first half, so you should probably concentrate on a rotation of your allocations into commodities, real assets, and within equities there should be an inclusion of this barbell of quality defensives, utilities, and staples,” he said."
"The dollar index, which measures the greenback against leading currencies, fell 0.3 per cent after the gauge last week approached its strongest level since April."
"Brent crude, the international oil benchmark, rose 0.9 per cent to $74.76 a barrel."
"US stocks ended Friday at a new high, reversing steep losses at the start of the week, as fears about the Delta variant of coronavirus were soothed by strong corporate earnings and continued central bank support for financial markets."
"The S&P 500 climbed 1 per cent, lifting the index’s weekly gain to 2 per cent and its advance for the year above 17 per cent."
"The technology-focused Nasdaq Composite rose just over 1 per cent, giving the index its strongest weekly advance since April."
"The Stoxx Europe 600 index, which had its worst session of the year on Monday with a 2.3 per cent drop, gained 1.1 per cent on Friday and was up 1.5 per cent for the week."
The dominance of the highly transmissible Delta virus variant has helped to stir fears that global economic growth could slow.
"Such concerns, however, have been overshadowed by upbeat guidance from much of corporate America and expectations that central banks stand at the ready to intervene if growth cools."
"“It felt like a very miniature version of the spring of 2020,” said Trevor Greetham, head of multi-asset investments at Royal London, referring to last year’s plunge in global stock markets that was reversed after central banks pledged trillions of dollars worth of monetary support."
"“The markets now know if there is a period of [economic] weakness, there will be extra stimulus as required.”"
"US president Joe Biden is expected to reappoint Jay Powell as chair of the Federal Reserve, suggesting no break with the central bank’s current policies, while the European Central Bank on Thursday reaffirmed its commitment to keeping eurozone interest rates at record lows."
"Of the S&P 500-listed companies that have issued results for the second quarter of 2021 so far, 88 per cent have beaten analysts’ forecasts, according to FactSet data."
Investors had already pencilled in a blockbuster earnings season as companies’ profits were flattered by the base effects of a historic recession last year.
"“But the earnings do matter,” said Philip Toews, president of the asset manager Toews Corporation."
"He noted that the fact profits were eclipsing expectations was critical to holding on to equities, which are valued at an elevated level based on several metrics compared to historical averages."
"“When markets are as overvalued as they are now, anything that supports the rally is taken as significant,” he said."
"“We are in a bubble, we are in the top quintile of [historic] valuations, so"
it’s all about figuring out ways to remain committed to the market.”
"The cyclically adjusted price/earnings ratio of the S&P 500, a closely watched valuation measure developed by the economist Robert Shiller, is around its highest level since the late stages of the 1990s dotcom boom, according to Barclays Indices."
But some investors have warned that the shift back to growth stocks has underscored the anxiety around decelerating economic expansion.
"Small-cap stocks, seen as more sensitive to shifts in US economic growth, trailed the broader market on Friday with the Russell 2000 up 0.5 per cent."
"The Dow Jones Transportation Average, filled with economic bellwethers including railroads and shipping groups, also lagged on the final day of the trading week, rising 0.7 per cent."
"“Before the end of March, we’ve seen investor concern around deceleration continue to creep into the marketplace,” Patrick Palfrey, an equity strategist at Credit Suisse, said."
"“It’s caused investors to re-evaluate the long-term potential of these value oriented, procyclical investments.”"
"The yield on the 10-year US Treasury note was little changed on Friday at 1.28 per cent, remaining near its lowest level since February."
Bond yields move inversely to prices.
"The dollar index, which measures the greenback against leading currencies, rose 0.1 per cent."
"Brent crude, the international oil benchmark, rose 0.4 per cent to settle at $74.10 a barrel."
"Wall Street stocks climbed on Thursday, extending gains for a third consecutive day, as investors concentrated on an influx of mostly positive earnings results from corporate America."
"The blue-chip S&P 500 stock index rose 0.2 per cent in New York, reversing earlier losses after data showed US jobless claims climbed by the biggest weekly increase since March."
"The index was lead higher by mega-cap tech companies, including Microsoft, Apple and Amazon."
The relatively concentrated advance in the sector helped offset declines by three-fifths of the stocks in the S&P 500.
The Nasdaq Composite rose 0.4 per cent.
Strong results released on Thursday from companies such as private equity firm Blackstone and fast-food chain Domino
’s Pizza again lifted investor sentiment.
"But even with a flurry of results, trading volumes ranked among the weakest registered this year and investors showed less of an appetite for parts of the market, including some cyclical industries."
"Energy and bank stocks slipped, and the small-cap Russell 2000 fell more than 1 per cent."
"US government debt also advanced, with the yield on the 10-year Treasury down 0.03 percentage points to 1.26 per cent on Thursday."
The haven asset has been in relatively strong demand as investors have grown concerned over the spread of the Delta variant of coronavirus and the strength of the economic rebound.
The yield on the 10-year note hit its lowest level since mid-February earlier this week.
"“The unexpected rise in claims has pushed Treasury yields lower as the pace of job creation remains uncertain at this stage in the recovery,” said Ian Lyngen, head of US rates strategy at BMO Capital Markets."
"In Europe, equities rose for the third straight day and eurozone government debt also gained after the European Central Bank reaffirmed its commitment to buying eurozone bonds and keeping interest rates at historic lows."
"The continent-wide Stoxx 600 share index closed up 0.6 per cent, as traders banked on continued supportive monetary policy."
"Germany’s 10-year bond yield, a barometer for borrowing costs in the eurozone, hit minus 0.428 per cent, near its lowest level since February."
The moves came after the ECB signalled no changes to its bond purchases following a split on its governing council over scaling back its €1.85tn pandemic emergency purchase programme.
"The yield, meanwhile, on Italy’s 5-year bond dropped below zero to minus 0.02 per cent, near its lowest point since early April."
"The ECB pledged in a statement to maintain its pandemic emergency purchase programme “until at least the end of March 2022 and, in any case, until it judges that the coronavirus crisis phase is over”."
"Interest rates would also “remain at their present or lower levels”, the central bank said, until eurozone inflation was “stabilising at 2 per cent”."
"Consumer prices rose 1.9 per cent in the bloc in June year on year, but the ECB expects inflation to moderate next year."
"“They want to avoid some sort of tantrum risk so they could potentially extend the PEPP,” said Kevin Thozet, investment committee member at French asset manager Carmignac."
"“At the start of the programme, March 2022 seemed like miles away and now it is not.”"
"The euro slipped 0.2 per cent against the dollar to $1.177, close to its weakest point since early April."
"Brent crude, the international oil benchmark, rose 2.2 per cent to settle at $73.79 a barrel."
"Stock markets rose on both sides of the Atlantic on Wednesday, as a number of strong earnings figures captured investor attention away from the rapid spread of the Delta Covid-19 variant."
"Wall Street’s blue-chip S&P 500 index gained 0.8 per cent in New York, climbing for a second day to reverse the entirety of Monday’s sharp drop."
"The gains were led by economically sensitive industries, including energy and materials groups, bank stocks, big industrials goods companies and airlines."
"The tech-focused Nasdaq Composite rose 0.9 per cent, while the Russell 2000 index of small-cap companies advanced 1.8 per cent."
"Several strong earning results helped lift investor sentiment on Wednesday, with Coca-Cola raising its full-year sales and profit forecasts as it anticipated surging demand from reopened restaurants and stadiums."
Ad group Interpublic and telecom conglomerate Verizon also beat consensus estimates set by analysts.
"Tancredi Cordero, head of investment advisory boutique Kuros Associates, said many of his clients were still buying equities “because the alternatives are poor”."
"Government bonds, he said, provided “a lot of volatility for not much of a return”."
"US government debt sold off on Wednesday, taking the yield on the benchmark 10-year Treasury 0.07 percentage points higher to 1.29 per cent."
"The 10-year note did, however, remain near its lowest level since late February following a strong rally earlier this week and the losses moderated after an auction of 20-year Treasuries showed there was still “reasonable” investor demand, according to strategists with BMO Capital Markets."
"Against this backdrop of growing confidence in earnings, Deutsche Bank strategists warned that company bosses may be overly optimistic about pent-up lockdown savings flowing in to corporate coffers."
“Many corporates have pencilled in a strong rebound in earnings this year backed by forecasts of robust pent-up demand.
"Yet so far there is little evidence of the spending surge that so many expect,” Deutsche’s Olga Cotaga and Luke Templeman wrote in a research note."
"“Many people see their recent savings as windfall gains instead of income and, psychologically, this makes them harder to spend.”"
Other analysts cautioned that the highly transmissible Delta strain of coronavirus could cause economic stagflation by denting growth and exacerbating price rises caused by jammed-up global supply chains.
"“If the virus begins to spread rapidly again, that would curtail economic growth and prolong the inflationary supply chain disruptions that have affected so many industries, including semiconductors and housing,” said Nancy Davis, founder of Quadratic Capital Management."
"In the US, the seven-day rolling average for new coronavirus cases in the country has more than doubled from several weeks ago, according to Johns Hopkins University."
"In Europe, more positive company results lifted bourses."
"UK clothing retailer Next raised its earnings guidance, saying consumers’ lockdown savings were being unleashed."
"London’s FTSE 100 closed up 1.7 per cent for the benchmark’s best daily performance since mid-February, while the continent-wide Stoxx 600 index rose by the same amount as traders also banked on the ECB increasing its bond-buying plans beyond the end of its €1.85tn pandemic emergency purchase programme at a meeting on Thursday."
"Brent crude, the international oil benchmark, gained 4.2 per cent to $72.23 a barrel after shedding almost 7 per cent on Monday, following an agreement by members of producer group Opec+ to raise production by 400,000 barrels a day each month from August."
"The threat of the Delta coronavirus variant hit global equity markets on Monday, handing European bourses their worst session of the year and sending US stocks down 1.6 per cent."
Commodity prices also fell and investors headed for the safe haven of government bonds.
"It helped to push the yield on the 10-year Treasury note to its lowest level in six months, extending a shift in investor sentiment as fears over runaway inflation have given way to creeping concerns over the durability of US growth, compounded by the spread of the Delta variant."
"Europe’s region-wide Stoxx Europe 600 lost 2.3 per cent in its biggest one day price fall of 2021, with London"
FTSE 100 dropping by the same amount.
"On the other side of the Atlantic, the S&P 500 index lost more than 2 per cent before moderating in afternoon trading to close 1.6 per cent lower."
The technology-focused Nasdaq Composite fell 1.1 per cent.
"In commodities, Brent crude, the international oil benchmark, declined 7.1 per cent to $68.38 a barrel."
"The yield on the US 10-year Treasury note — a benchmark for assets around the world — tumbled 0.10 percentage points to 1.19 per cent, its lowest level since mid-February."
"Yields on the German 10-year Bund fell to minus 0.39 per cent and on the UK 10-year gilt to 0.56 per cent, both five-month lows."
Government bonds have been rallying for weeks as some of the acute anxiety over inflation this year has started to ebb.
But Monday’s moves mark a significant acceleration of the drop in yields and a shift in tone as gains for bonds came alongside an equity sell-off.
"“This is the market’s realisation that we are moving from a clear V-shaped recovery into something a lot more uncertain,” said Mohammed Kazmi, a portfolio manager at Union Bancaire Privée."
“The hope was that vaccines would provide us with the endgame.
Now investors are looking at the UK and there’s a bit of fear with regards to reopening so aggressively when cases are still so high.”
"The pullback in stocks, which came after months of steady gains in markets around the world, also reflected concerns that economic growth generated by industries reopening from last year’s shutdowns could peak just as inflation surges in Europe and the US."
"“Valuations and sentiment all reached extreme growth highs,” said Ewout van Schaick, head of multi-asset investment at NN Investment Partners."
"“Now, of course, the revival of the virus is causing uncertainty about economic progress in the months ahead.”"
"New York state on Saturday recorded more than 1,000 cases of Covid-19 in a day for the first time since mid-May, while authorities in countries including Australia and Vietnam battled rising infections."
Singapore tightened social distancing restrictions and preparations for Tokyo’s Olympic Games were set back by a coronavirus outbreak.
"England lifted most coronavirus restrictions on Monday while more than half a million people, including Prime Minister Boris Johnson, had been told to isolate after coming into contact with infected individuals."
“The growing apprehension surrounding the global rebound . . . 
"has contributed to the bid for Treasuries that we suspect has ample room to extend,” said Ian Lyngen, head of US rates strategy at BMO Capital Markets."
"Sterling dropped 0.7 per cent against the dollar to $1.3665, its lowest level since early February."
"The dollar index, which charts the progress of the greenback against major currencies, rose 0.2 per cent."
"Economists expect the US economy to have grown at an annualised rate of 9 per cent in the second quarter of the year, but to moderate thereafter."
Fresh data are due at the end of this month.
"US consumer prices rose 5.4 per cent in June, year on year, following pandemic-related supply chain bottlenecks and trillions of dollars in monetary and fiscal stimulus."
Inflation also exceeded the Bank of England’s target last month.
"The sharp fall in Brent crude tripped up widespread bets on further gains, as economic growth concerns compounded earlier falls caused by Opec and its allies reaching a deal to raise production to counter increasing prices."
"Opec+ agreed on Sunday to increase production by 400,000 barrels a day each month well into 2022, though traders said this amount had been widely anticipated by the market."
"Saudi Arabia and the United Arab Emirates overcame differences in how production targets are calculated by agreeing that large producers in the group would have the so-called baseline output levels revised higher, though this is unlikely to add any additional oil supplies in the short term."
"Some market participants believe Opec+ is being overly optimistic about supply and demand balances, however, with huge uncertainty over how the demand recovery from the pandemic looks."
Analysts at Facts Global Energy said the group had set itself “a very optimistic production path through next year”.
"Three-month copper futures, a barometer of likely economic growth, fell 1.4 per cent to $9,311 a tonne."
Additional reporting by David Sheppard in London
"Stocks on both sides of the Atlantic met their worst weekly performance in at least a month on Friday, as optimism over earnings season was tempered by fears about the rapid spread of the Delta variant of coronavirus."
"Wall Street’s S&P 500 fell 0.8 per cent on Friday in New York, ending the week down 1 per cent, the benchmark’s worst weekly performance since mid-June."
"The tech-focused Nasdaq Composite similarly slid 0.8 per cent, dropping a total of 1.9 per cent since Monday."
"The sell-off “isn’t at all surprising given the backdrop of weakening market internals and stretched price action”, said Matt Orton, director and portfolio specialist for Carillon Tower Advisers."
"Caroline Simmons, UK chief investment officer for UBS’s wealth management unit, added: “Concerns about the Delta variant are weighing, and while we’re coming into an earnings season that is going to be good, there’s a tussle between those two factors.”"
"Analysts expect companies listed on the S&P 500 to report average earnings-per-share growth of 66 per cent in the second quarter compared with the same time last year, forecasts collated by Credit Suisse show."
"Companies listed on MSCI’s European equity index are forecast to achieve 109 per cent earnings growth overall, according to WisdomTree."
"“We should be prepared for a bumpy summer on markets,” said Gregory Perdon, co-chief investment officer at the private bank Arbuthnot Latham."
"“It’s traditionally a time when there is less risk taking, less [trading] volume, less activity,” he added, “and we are not going to get much clarity on the intentions of the US central bank in the coming few weeks.”"
"Yields on the 10-year US Treasury note registered their third weekly decline, remaining little unchanged on Friday at 1.3 per cent."
"After starting the week at close to 1.42 per cent, the yield was driven lower by haven-buying and reassurances by Jay Powell, Federal Reserve chair, that the current high rate of US inflation, which erodes bonds’ fixed income returns over time, would subside."
But inflation fears resurfaced on Friday after data showed US retail sales increased by a higher than expected 18 per cent in June from the same month last year.
"“Markets may be digesting a bit of ‘peak reopening’ growth, both in the economy and in earnings."
"Thus we have seen the sharpest sell-off in the cyclical/economically sensitive sectors like energy, financials, and industrials,” said Mona Mahajan, Allianz US senior investment strategist, adding that lower bond yields were also an indicator of investor skittishness as pent-up demand sends prices surging."
"Kristina Hooper, Invesco Chief Global Market Strategist, said “markets often get queasy during this period” as the Fed prepared to transition to the start of normalisation, adding: “But that does not mean the bull market is anywhere near over.”"
"Across the Atlantic, stocks also ended the week lower with the continent-wide Stoxx Europe 600 down 0.3 per cent on Friday for a weekly fall of 0.6 per cent."
"Frankfurt’s Xetra sank 0.6 per cent while London’s FTSE 100 slipped 0.1 per cent, taking its fall since Monday to 1.6 per cent, the index’s biggest drop in four weeks."
"A 40 per cent jump in coronavirus infections in England in the week to July 10 meant the UK economy would hit “slowing growth momentum”, said Sanjay Raja, an analyst at Deutsche Bank, as “all signs point to voluntary social distancing constraining demand over the coming months”."
"Brent crude, the global oil benchmark, fell 0.4 per cent to $73.21 a barrel, after climbing by 0.3 per cent earlier in the day as Saudi Arabia and the United Arab Emirates neared a deal that could unlock an agreement by Opec and its allies to raise production."
Government debt rallied and big US and European stock markets slid on Thursday as slowing growth in China and the rapid spread of the Delta variant of coronavirus fuelled fears about the health of the global economy.
"Moves among long-dated bonds were the firmest, taking the yield on the 30-year US Treasury down 0.05 percentage points to 1.93 per cent as traders sought out the haven asset."
"The benchmark 10-year Treasury yield slid 0.05 percentage points to 1.3 per cent, while the five-year Treasury yield nudged lower to 0.78 per cent."
"In stock markets, Wall Street followed European bourses lower, with the blue-chip S&P 500 and tech-heavy Nasdaq Composite down 0.3 per cent and 0.7 per cent respectively, after both hit highs earlier this week."
"Bourses were in the red across Europe, where Frankfurt’s Xetra Dax, the CAC 40 in Paris and the continent-wide Stoxx 600 benchmarks all closed 1 per cent lower."
London’s FTSE 100 shed 1.1 per cent.
"Longer-dated bonds found buyers after Jay Powell, Federal Reserve chair, told lawmakers that a jump in the US consumer price index to an annual rate of 5.4 per cent in June did not mean high inflation would persist."
"While inflation erodes the value of longer-term bonds’ fixed interest payments over time, the prospect of price rises"
moderating has driven investors back into Treasuries after many cut exposure to this asset class earlier this year.
"“If you agree with the Fed that high inflation will be transitory that is a reason to buy at the long end [of the bond yield curve],” said Brandywine Global fixed-income portfolio manager Jack McIntyre."
"Market measures of inflation expectations, including the 5- and 10-year break-even rates, slid on Thursday."
"And the real yield on the 10-year Treasury, which measures the expected return on the note when stripping out the effect of inflation, slid to the lowest level since February at minus 1.06 per cent."
"The flattening yield curve is also a signal of the Fed eventually tapering its crisis policy measures, noted analysts, reducing the difference between the yield on short-dated and longer-dated Treasuries."
"China’s gross domestic product rose 7.9 per cent in the second quarter compared with the same period last year, following an 18.3 per cent gain in the first quarter."
"There may be a further slowdown in the world’s second-largest economy, analysts said, as a pandemic-driven export boom fades and the government clamps down on property speculation."
"European and US equities nevertheless remain near highs, buoyed by expectations of a surge in quarterly earnings after companies benefited from big industries reopening."
"“At the same time, the Delta [Covid-19] variant has introduced new complexities . . . "
"the longer the virus lingers, the higher the risk of longer-term damage to the global economy,” said Grace Peters, head of market strategy for Europe at JPMorgan Private Bank."
UK manufacturers have reported that rising Delta variant cases are hitting production while economists suspect rising infections in Europe risk derailing the eurozone’s recovery.
"Germany’s closely watch 10-year and 30-year Bunds rallied on Thursday, with the yields sliding 0.01 percentage points and 0.03 percentage points to minus 0.34 per cent and 0.15 per cent, respectively."
"Brent crude, the international oil marker, fell 1.7 per cent to settle at $73.47 a barrel as traders digested news of a potential agreement to raise production between Opec kingpin Saudi Arabia and the United Arab Emirates."
Additional reporting by Eric Platt
"US government bonds rallied, the dollar firmed and equities wavered as investors positioned themselves for a slowdown in the booming pace of economic growth."
The yield on the benchmark 10-year US Treasury note fell 0.07 percentage points at one point on Wednesday to a four-month low before retracing slightly to settle around 1.32 per cent.
"Germany’s equivalent Bund yield dropped 0.03 percentage points to minus 0.301 per cent, its lowest since early April."
Fears the Federal Reserve would respond to a speedy US recovery and surging inflation with a rapid round of rate rises sent the yield on the 10-year note up to almost 1.8 per cent in March.
"But such jitters have been replaced by expectations that US gross domestic product growth, which is expected to have reached an annualised rate of at least 9 per cent in the second quarter, was about to peak, analysts said."
Data from the Institute for Supply Management on Tuesday also showed US service sector activity declined in June from the previous month.
"“Bond markets are expressing a view that we are approaching the slowdown phase of the economic cycle,” said Gergely Majoros, portfolio manager at Carmignac."
"In US stock markets, the S&P 500 closed up 0.3 per cent and the technology-focused Nasdaq Composite was flat."
Both share indices remained close to record highs.
"The Stoxx Europe 600 rose 0.8 per cent, close to the record it hit last month."
"The dollar index, which measures the greenback against major currencies, was up 0.3 per cent at one point in the day to its highest level since early April."
The euro fell 0.2 per cent to $1.18.
"The intensifying spread of the Delta variant of coronavirus had stymied the “gangbusters narrative” that had dominated markets for most of 2021, said Deutsche Bank strategist George Saravelos."
"Since drugmakers announced effective coronavirus vaccines in November last year and Joe Biden unleashed trillions of dollars of stimulus after being elected US president, financial markets had been supported by “an unprecedented mix of procyclical fiscal and monetary policy just as the economy was taking off”, Saravelos said."
"But growth now had to “be much more reliant on private rather than public sector spending”, he said."
"On Wednesday the Fed published minutes of its June meeting, when officials brought forward projections for the first post-pandemic US interest rate rise by a year to 2023."
Officials engaged in a fierce debate about whether the US economy was on firm enough footing for the central bank to begin considering a reduction of its $120bn a month of emergency debt purchases.
"“Presumably, the bond market believes that the Fed is unlikely to raise rates anywhere close to the peak of the last cycle,” Jefferies strategist Sean Darby said, “as structural forces” such as high public and corporate debt “keep the Fed close to the zero bound”."
"Elsewhere in markets, Brent crude dropped 2 per cent to $73.25 a barrel, following a fall of 3.4 per cent on Tuesday."
This came after talks between members of the Opec+ group of producer nations ended without any agreement about winding up Covid-19 supply curbs.
"“If the current stand-off continues, compliance with [the] production quota will eventually deteriorate,” analysts at Morgan Stanley said."
“Much of Opec’s spare capacity could come to the market quickly.”
"US government bonds rallied on Tuesday, pushing the 10-year yield to the lowest level in four months, as investors unwound bets for tighter monetary policy and reacted to a disappointing survey on the services sector."
"The yield on the benchmark 10-year note fell 0.07 percentage points to 1.36 per cent, its lowest level since late February when fears of a rapid pick-up in inflation began to reverberate through financial markets."
"The 10-year yield, which moves inversely to its price, surged as high as 1.77 per cent earlier this year as investors began to anticipate a more aggressive response from the Federal Reserve to tame rising inflation."
"The moves on Tuesday added fuel to a rally in long-dated US Treasuries that began on Friday, when government data showed US hiring had accelerated, but not at a pace sufficient to prompt a policy shift by the central bank."
"The Fed’s ultra-loose monetary policies, including historically-low interest rates and a massive bond-buying programme, have been key elements in keeping borrowing costs low and lifting other asset prices."
"Data published on Tuesday from the Institute for Supply Management, which tracks activity in the service sector, intensified the rush into government debt, which tends to perform well during times of heightened uncertainty."
"The figures showed business and employment conditions in the service industry weakened in June from the previous month, with the ISM citing company comments that it was difficult to find qualified candidates to fill open positions."
"“The ISM reading just added more motivation to extend the move in Treasury yields lower,” said Ian Lyngen, an interest rate strategist at BMO Capital Markets."
“A big portion of what we are seeing is a capitulation of the higher rates thesis.”
"Market measures of expected future inflation in the country also slipped on Tuesday, with the so-called 10-year break-even rate declining to 2.33 per cent."
"Yields on other long-term Treasuries, including the 20- and 30-year bonds also fell as traders shifted into the debt."
The drop pushed the difference in yields between policy-sensitive two-year notes and 10-year notes towards the lowest level since February.
"The moves ricocheted to the $50tn US stock market, where shares of big industrial goods companies, oil majors and large banks slid in value."
"The three sectors had been buoyed this year by expectations of faster growth, with large banks also rising as investors bet higher rates would help lift earnings."
"The benchmark S&P 500 stocks index slid 0.7 per cent, before moderating later in the afternoon to close 0.2 per cent lower for the day."
"“As the equity market got slammed, the Treasury market caught a bid,” said Andrew Brenner, head of international fixed income at National Alliance Securities."
Investors rotated into big tech groups like Apple and Oracle — companies that have prospered during the pandemic and which are seen as less sensitive to economic fluctuations.
"The move helped contain losses on the Nasdaq Composite, which finished 0.2 per cent higher for the day."
European stocks closed higher for the third consecutive session on Monday as business activity in the region expanded at its fastest pace in more than a decade.
"During a day of lower trading volumes because of an Independence Day public holiday in the US, which closed Wall Street, the region-wide Stoxx Europe 600 index climbed 0.3 per cent."
"Strong services purchasing managers’ indices readings in Spain and Italy in particular lifted the overall reading for the eurozone services sector to 58.3 in June, its highest level since July 2007."
"In the case of Italy, “the improvement was linked to easing of Covid restrictions”, said Mel Debono, senior European economist at Pantheon Macroeconomic."
“Most of the country’s regions moved into the least restrictive white zones midway through the month.”
"Madrid’s Ibex 35 index rose 0.4 per cent, while Milan’s"
FTSE MIB ended the session up 0.6 per cent.
"London’s FTSE 100 index, which has a heavy weighting to energy groups, also closed up 0.6 per cent as the price of oil rose further."
"Global marker Brent crude jumped more than 1 per cent to $77.26 a barrel, its highest level since October 2018, as Opec and its allies abandoned a decision over whether to increase its oil output."
"West Texas Intermediate, the US benchmark, rose more than 1.5 per cent to $76.35 a barrel, nearing a three-year high."
"In Asia, markets were rattled after Beijing broadened its crackdown on tech platforms to include Boss Zhipin, an online recruitment company, and Chinese truck-hailing apps Yunmanman and Huochebang."
"The moves rippled through markets in the region, taking the Hang Seng Tech index down 2.3 per cent, underperforming the wider Hang Seng benchmark, which slid 0.6 per cent."
"In the US, analysts were digesting Friday’s non-farm payrolls data that showed the labour market had added 850,000 jobs in June, well above economists’ expectations and higher than the revised 583,000 figure for May."
"Investors would now be watching for economic signals on the direction of the recovery from the US this week, said Luca Paolini, chief strategist at Pictet Asset Management."
Further strong weekly jobless claim numbers could increase pressure on the US Federal Reserve to consider winding down its policies that have supported the economy through the pandemic.
“We will have the minutes of the Federal Reserve [Wednesday].
"People will try to see if anything in that can shift the Fed in unpredictable ways,” Paolini said."
"US stocks closed at new all-time highs on Friday after jobs data for June came in better than expected, signalling that the world’s largest economy was emerging from the pandemic at a robust pace."
"The US labour market added 850,000 positions last month, beating economists’ expectations for 720,000 new jobs and substantially above the 583,000 revised figure for May."
"Wall Street’s broad S&P 500 and technology-heavy Nasdaq Composite built on records hit earlier this week, with both benchmarks closing up 0.8 per cent."
"The advance marked the seventh straight trading day the S&P 500 has closed at a record, the longest such streak since 1997."
The rise took the weekly gain for the S&P 500 to 1.7 per cent and to just under 2 per cent for the Nasdaq.
"The latter’s stronger advance reflected the continued shift by investors back into growth and tech stocks, which had lagged earlier this year as portfolio managers bet on shares of companies tethered to the country’s reopening."
The employment reading was not so strong as to suggest
the US Federal Reserve would be tempted to rein in its pandemic-era stimulus that has underpinned asset prices throughout the health crisis.
"“The US jobs figures couldn’t have delivered better news for Wall Street,” said Danni Hewson, financial analyst at AJ Bell, which said this was a “Goldilocks” moment for financial markets — “not too hot, not too cold”."
"“Enough new jobs to confirm the economy is on a roll, [but] enough jobless to give the Fed’s"
"current strategy a warm hug,” she added."
Accompanying the rise in stocks was a modest rally in government bonds.
The yield on the benchmark 10-year US Treasury note slid 0.03 percentage points to 1.42 per cent.
"While the 10-year yield is up from the 0.91 per cent at which it started the year, it has fallen from a high of 1.77 per cent hit in March."
"Investors have ratcheted down their inflation expectations over the past month and a half, which has reverberated throughout markets."
The lower inflation projections have amplified the appeal of growth and tech stocks whose future earnings appear stronger when rates are low.
"Tech stocks within the S&P 500 gained more than 3 per cent this week, their best weekly showing since April."
"Shares of Apple and Microsoft both rose more than 4 per cent over the week, while the chipmaker Advanced Micro Devices was up more than 10 per cent."
"“What works within the market is clearly influenced by rates,” said Jonathan Golub, a strategist with Credit Suisse."
"“And that is influenced by this belief that inflation is not going to be persistently high and to the extent that the Fed is influencing that decision, then they’re having an influence on markets.”"
"In Europe, the yield on the equivalent German Bund was down 0.03 percentage points at minus 0.24 per cent."
The region-wide Stoxx Europe 600 and Frankfurt
"Xetra both closed up 0.3 per cent, while London’s FTSE 100 was flat."
"“We think that the European market is really benefiting from euro depreciation,” said Bastien Drut, chief thematic macro strategist at CPR Asset Management, referring to a month-long rally for the dollar against peers."
"The single currency, which was up slightly at $1.1863 on Friday, is down more than 3 per cent against the greenback since the beginning of June."
"While some decision makers at the US central bank are beginning to talk more openly about the need to prepare for the gradual winding down of pandemic-era stimulus, in the eurozone the European Central Bank has maintained a more dovish stance, reflecting the different paces of recovery on each side of the Atlantic."
Oil prices hovered near their highest level for two and half years after officials at the Opec+ meeting of key crude-producing nations struggled to reach an agreement on production output.
"Brent crude, the global oil benchmark, and the US marker West Texas Intermediate both settled above $75 a barrel."
The dollar strengthened and government bonds firmed ahead of Friday’s US jobs data that will be closely watched by rate-setters at the Federal Reserve.
"The US dollar index, which measures the currency against its peers, edged up on Wednesday to post monthly gains of almost 3 per cent."
"Investors also bought government debt, which — like the dollar — tends to rally when uncertainty causes investors to hold back from buying riskier assets."
"The yield on the benchmark 10-year US Treasury note, which moves inversely to its price, fell 0.04 percentage points to 1.44 per cent at one point, before paring back slightly to settle around 1.46 per cent."
Germany’s equivalent Bund yield dropped 0.03 percentage points to minus 0.20 per cent.
Economists surveyed by Bloomberg expect Friday’s
"non-farm payrolls report to show US employers added just over 700,000 jobs in June, up from 559,000 the previous month."
But fund managers have become reluctant to make big bets ahead of the jobs report since economists’ predictions for the April payrolls turned out to be wildly inaccurate and the one for May also came in significantly below forecasts.
"“The jobs data has become very hard to predict,” said Ken Taubes, US chief investment officer for Amundi."
“We’ve had professional economists getting it wrong in the hundreds of thousands.”
"ADP’s national employment report on Wednesday showed US private sector employers added 692,000 jobs in June, down from 886,000 a month earlier but ahead of economists’ expectations for a 600,000 increase."
"Michael Pearce, senior US economist at Capital Economics, warned the ADP survey had “completely missed the labour-shortage driven slowdown in payroll gains evident in the official figures” in recent months."
"“So we would treat the survey with an even bigger dose of scepticism than normal,” he said."
"David Lefkowitz, head of equities at UBS Global Wealth Management, said a weak report on Friday may push back expectations around the Fed’s timeline to tighten monetary policy."
"A majority of economists polled in the inaugural FT-IGM survey see a 75 per cent or greater chance of at least two US interest rate increases by the end of 2023, in line with the central bank’s so-called dot plot of individual projections."
On Wall Street on Wednesday the blue-chip S&P 500 closed higher by 0.1 per cent.
"The index’s gains surpassed 2 per cent in June, marking the fifth-straight month of gains."
"The tech-heavy Nasdaq Composite, meanwhile, slipped 0.2 per cent, after notching a new record high this week."
"Across the Atlantic, the region-wide Stoxx Europe 600 slid 0.8 per cent."
"Analysts have upgraded their 2021 earnings per share forecasts for companies by 15 per cent since January, said Citi, as businesses benefit from economies reopening and vaccine rollouts."
"Earnings expectations have increased the most for companies whose fortunes are linked to economic cycles, such as industrial groups and materials producers, Citi found."
"But the prices of companies’ equity and debt instruments have already been lifted so high by this optimism that “everywhere you look there is nothing left in terms of value”, said Tatjana Greil Castro, co-head of public markets at Muzinich & Co."
"“So now everything is about the Fed and how much liquidity they will continue to pump into markets,” she said."
"Global oil marker Brent crude added 0.5 per cent to $75.13 a barrel, trading around its highest point since April 2019 as buyers shrugged off concerns about the spread of the Delta variant of Covid-19 to focus on a drop in US oil stockpiles."
Additional reporting by Shubham Saharan in New York
"US stocks moved further into record territory on Friday to secure their strongest weekly performance since February, as enthusiasm for President Joe Biden"
’s infrastructure spending deal outweighed concern over the highest US inflation reading in 29 years.
"The S&P 500 rose 0.3 per cent on the session, ending the week up 2.7 per cent."
The tech-focused Nasdaq Composite closed fractionally down from its record close on Thursday.
"US stock markets hit highs after Biden this week secured an infrastructure spending deal worth about $1tn, boosting industrial, energy and financial stocks."
"“If enacted, [the infrastructure plan] would increase GDP by roughly 1 per cent at its peak effect in 2025-26,” a note by Evercore ISI Research predicted."
"The deal outweighed Friday’s release of data showing core personal consumption expenditure in the US — the Federal Reserve’s preferred measure of price rises — hitting 3.4 per cent in the 12 months to May, its largest annual increase since 1992."
"The month-on-month inflation rise was slightly below economists’ expectations, however, potentially taking some pressure off the US central bank to change its ultra-loose monetary policy."
"“We’re seeing a small sigh of relief, with equities also supported by the infrastructure news,” said Keith Parker, chief US equity strategist at UBS."
Expectations that companies would report strong second-quarter earnings as they reaped the benefits of the US economy’s
"reopening were also “a strong tailwind”, he added."
Ten-year US Treasury yields rose by nearly three basis points to 1.53 per cent at the market close as government debt prices softened.
"Investors holding bonds, which are more sensitive to inflation than equities, fear price rises are becoming more persistent."
"For the first time since April 2018, inflation was the issue credit investors were most worried about, according to a Bank of America survey published on Friday."
"“There is little doubt that inflation prints in the next few months will continue to be high,” said Francesco Sandrini, senior multi-asset strategist at fund manager Amundi."
"“But markets are struggling to find confidence in terms of what to do about it” following mixed messages from Fed officials about whether price rises should result in tighter monetary policy, he said."
"Jay Powell, Fed chair, has continued to characterise surging prices as transitory"
but St Louis Fed president James Bullard indicated on Thursday he thought price rises could be problematic.
"“A new risk is that inflation may continue to surprise to the upside,” he said in a presentation."
"Schroders strategist Sean Markowicz said: “What we might see into next year is that higher commodity prices will feed into higher input prices, which feed into higher consumer prices and then higher wages.”"
"That left open the question of whether Powell’s “transient” inflation “means six, 12, 18 months or more”, added Markowicz."
"In Europe, the Stoxx 600 index closed up 0.1 per cent, leaving the continent-wide benchmark up 1.2 per cent for the week."
"The recent rally in oil gathered pace, with Brent crude climbing a further 0.7 per cent to above $76 a barrel, the global marker’s highest level since October 2018."
This story has been corrected to make clear the S&P 500’s
weekly performance was the best since February
"US stocks bounced back and government bonds softened on Monday, reversing some of the tumultuous moves last week that followed a Federal Reserve meeting where officials took a more hawkish tone on interest rates and inflation."
"The S&P 500 closed higher by 1.4 per cent, a resurgence that came after it posted its worst performance in almost four months last week."
"The yield on the 10-year US Treasury bond, which also dropped sharply last week, rose 0.05 percentage points to 1.49 per cent."
"“What the market has priced in has eliminated completely the fears of a new inflationary regime that was the main narrative [before the Fed meeting],” said Alessio de Longis, senior portfolio manager at Invesco."
Fed policymakers on Wednesday projected that they would twice raise interest rates in 2023 from their record-low level.
That marked a shift from a previous median forecast showing the first increase as far away as 2024.
Fed officials’ statements prompted some investors to fear a rapid tightening of monetary policy in the US that could derail the global economic recovery from Covid-19.
"Investors also backed out of so-called reflation trades, which had involved selling government bonds and buying shares in companies that benefit from economic growth, such as materials producers and banks."
"On Monday, however, energy, basic materials and banking stocks were the best performers on the S&P 500."
"The technology-focused Nasdaq Composite index was also up, gaining 0.8 per cent on the day."
"The Russell 2000 index of smaller US companies, whose fortunes are more closely tied to US economic growth, rose 2 per cent."
"In Europe, the Stoxx 600 share index climbed 0.7 per cent, with materials stocks at the top of its leaderboard."
"The market’s about-turn was exemplified by the yield on the 30-year Treasury bond, which briefly fell below 2 per cent early on Monday morning for the first time since February 2020, before rebounding and moving nearly 0.10 percentage points higher to 2.1 per cent."
"The gyrations helped to push up the ICE Bank of America Move index, a measure of expected volatility in the Treasury market, to about 65, having languished at about 50 at the start of the month."
"Some analysts said the bond market reaction had been too pessimistic, predicting a broad-based economic slowdown in response to Fed rate increases that had not happened yet."
"Gregory Perdon, co-chief investment officer at private bank Arbuthnot Latham, said: “The facts are that the Fed hasn’t done anything yet."
Wall Street loves to climb the wall of worry.”
"The fall in long-term yields “is only justified if the Fed is making a policy error, choking the economy”, said Peter Chatwell, head of multi-asset strategy at Mizuho."
“We think this is far from the truth — the Fed has simply sought to prevent inflation expectations from de-anchoring.”
"Elsewhere in markets, the dollar index, which measures the greenback against other main currencies, dropped 0.4 per cent on Monday after gaining almost 2 per cent last week."
"Brent crude, the international oil benchmark, rose nearly 2 per cent to $74.93 a barrel."
Additional reporting by Tommy Stubbington in London
Stocks on Wall Street had their worst week in nearly four months after comments from Federal Reserve policymakers that signalled the US central bank was acutely aware of budding inflationary pressures.
"The benchmark S&P 500 slid 1.3 per cent on Friday, taking its losses for the week to 1.9 per cent."
"Roughly 90 per cent of the stocks in the blue-chip index were lower on the day, including shares of big banks and US oil majors."
"Investors shifted out of some of their most popular trades of the year, including an earlier push into shares of smaller companies seen as particularly sensitive to economic growth."
"The small-cap Russell 2000 index recorded its heaviest weekly loss since late January, falling more than 4 per cent."
"The moves followed comments from Jay Powell, Fed chair, on Wednesday that investors took as a signal that the US central bank would act to tame inflation and that policymakers were not solely focused on aiding the country’s hard-hit labour market."
"Fed policymakers on Wednesday projected that interest rates would rise from record-low levels in 2023, from their earlier forecast of 2024."
"That view came into sharper focus following an interview James Bullard, president of the St Louis Fed, held with television network CNBC on Friday, where he said the first rate rise could come next year."
"The shift by Fed policymakers has shaken the so-called reflation trade, and instead helped buoy technology stocks that had lost momentum this year."
"While the tech-heavy Nasdaq Composite was 0.9 per cent lower on Friday, it ended the week down only 0.3 per cent."
Inflation expectations have been dramatically marked down this week as investors digested the latest Fed decision.
"George Saravelos, a strategist with Deutsche Bank, noted that shifting inflation and growth expectations were “consistent with continued equity resilience, especially in growth stocks”, where lower bond yields make the value of future earnings more appealing."
He added that the fact the swings in financial markets were “led by huge relative rotation from the Russell to the Nasdaq should not be a surprise”.
"Saravelos compared it to the market between 2010 and 2019, when the valuations of growth stocks surged on the back of moderate or low growth and low inflation."
The equity declines accompanied a rally in long-term US government bond prices on Friday as investors viewed the earlier-than-expected projections of a US rate rise as a signal of the central bank’s willingness to control inflation.
"The yield on the benchmark 10-year US Treasury bond, which moves inversely to its price, was 0.06 percentage points lower at 1.44 per cent."
This yield has climbed from about 0.9 per cent at the start of the year but has moderated in recent months as investors have come to view leaps in US inflation as temporary.
Persistent inflation erodes the fixed-interest returns on bonds.
"“Markets are now anticipating the Fed tightening sooner, which could dampen economic growth, hence the drop in the 10-year yield, and a rotation away from the [pandemic] reopening trade and towards more secular growth parts of the stock market such as tech,” said Kristina Hooper, Invesco’s chief global market strategist."
"The dollar also enjoyed its best week since April 2020 as yields on short-term Treasuries rose, pricing in future expected rate rises."
"The dollar index, which measures the greenback against big currencies, rose 0.4 per cent on Friday, taking its weekly gain to 1.9 per cent."
"Gold, which is priced in dollars and often moves inversely to the US currency, traded at $1,764 an ounce on Friday — a decline of more than 6 per cent since Monday in its largest weekly fall since March 2020."
"“Because of the hawkish surprise of rate rise expectations having been brought forward, you’ve seen a pretty aggressive move in the dollar,” said Keith Balmer, multi-asset portfolio manager at BMO Global Asset Management."
"“Most of the market was bearish on the dollar ahead of this meeting,” he said, as traders had previously anticipated the Fed keeping monetary policy ultra-loose."
The dollar notched its largest two-day gain of the year after US central bank officials brought forward the anticipated timing of the Federal Reserve’s first post-pandemic interest rate rise.
"The dollar index, which measures its value against a basket of other big currencies, jumped 0.87 per cent on Thursday after gaining almost 0.6 per cent in the previous session."
"The euro lost 0.77 per cent against the dollar, taking it to $1.19 and taking the US currency"
’s gain over its eurozone counterpart to 1.8 per cent over two trading sessions.
"The Fed said on Wednesday that most of its officials expected a rate rise in 2023, against earlier predictions of 2024, as the US economy recovered strongly from the pandemic and consumer price inflation hit an annual rate of 5 per cent in"
"May. Fed chair Jay Powell also said officials were “talking about talking about” reducing the Fed’s $120bn-a-month asset purchases, which have boosted financial markets since March 2020."
"“The dollar reaction has been disproportionate,” said Brian Nick, chief investment strategist at asset manager Nuveen."
"“I feel there was just a lot of money behind that trade waiting for a trigger,” he added, after the dollar index had barely moved for weeks as traders waited on interest rate clues."
"Investors largely expect the Fed to begin discussions on reducing support later this summer, with the focus shifting to further potential signals from global policymakers’ Jackson Hole summit in August."
"Brian Rose, chief economist at UBS Global Wealth Management, believed the central bank would give market participants “plenty of warning”, and seek to wrap up the so-called taper process before raising interest rates."
"The change in Fed policymakers’ rate rise projections had caused a sell-off in the US Treasury market on Wednesday, where the yield on the 10-year Treasury note jumped 0.09 percentage points."
There were follow-on declines in European government bond prices on Thursday.
"Treasuries reversed sharply on Thursday, however."
The 10-year yield traded 0.06 percentage points lower at 1.51 per cent.
"The ultra-long 30-year bond made an even larger move, its yield dropping roughly 0.1 percentage points to 2.1 per cent."
"Shorter-dated Treasuries extended Wednesday’s moves, however."
The yield on the two-year note hovered nearly 0.01 percentage points higher at 0.21 per cent.
"Stock markets, meanwhile, stayed near recent highs as investors focused on the fact that Fed officials had raised their outlook for economic growth."
"Wall Street’s blue-chip S&P 500 share index closed flat, after falling 0.5 per cent on Wednesday."
The technology focused Nasdaq Composite index rose 0.9 per cent.
The Stoxx Europe 600 was also flat.
"The next US rate rise “will be happening at a time when the [global] economy is able to stand on its feet”, said Zehrid Osmani, manager of Martin Currie’s global portfolio trust."
"If Fed officials had stuck to expecting the next rate rise as late as 2024, Osmani added, “there would be more to worry about as we could be at risk of [the US economy] overheating”."
"Juliette Cohen, strategist at CPR Asset Management, warned equity investors were exhibiting “complacency” about inflation, which could erode companies’ earnings if they were unable to pass higher input costs on to their customers."
"If companies highlighted such problems in their upcoming second-quarter earning statements, Cohen said, “the positive mood in equity markets . . . "
will come into question”.
Treasury yields surged and US stocks slipped after policymakers at the Federal Reserve
"signalled that they expected to lift interest rates in 2023, a year earlier than previously thought."
"The yield on the benchmark 10-year Treasury note rose 0.09 per cent to 1.58 per cent following the decision from the US central bank and comments from Fed chair Jay Powell, who struck an upbeat tone about the US economic recovery while also acknowledging the risk of higher inflation."
"Among shorter-dated government bonds most sensitive to interest rate policy, there were even larger moves."
The yield on the five-year note climbed 0.12 percentage points to 0.895 per cent — its largest one-day gain in almost four months — while the yield on the two-year note hit its highest level in a year at 0.2 per cent.
"The equity market slid alongside the rise in Treasury yields, with the blue-chip S&P 500 declining 0.5 per cent and the technology-heavy Nasdaq Composite sliding 0.2 per cent."
"“Just as the market was getting comfortable with a patient Fed and inflation considerably above target, the dot plot has shifted,” said Seema Shah, the chief strategist of Principal Global Investors, referring to the graph showing Fed officials’ interest rate predictions."
“Now it will be up to Powell and other Fed speakers to once again reassure markets that tightening in 2023 doesn’t need to be disruptive.”
"The equity market rally over the past year has been in part predicated on rock-bottom interest rates, which the Fed has anchored near zero since the crisis began in March last year."
"Accompanying the signal from policymakers at the US central bank that they could raise rates sooner than previously thought, Powell also acknowledged that the Fed was now “talking-about-talking-about” tapering the Fed’s $120bn-a-month asset buying programme, which investors expect will soon happen."
"Markets have worried that signs of higher inflation, which Fed policymakers acknowledged in their economic projections published on Wednesday, could force the central bank’s hand."
"“In the past six months there has been a significant change in where Fed policy is heading in terms of an exit strategy,” said Kevin Flangan, head of fixed income strategy at WisdomTree."
“This was a meeting that created a stir in the bond market and it provided a little bit of a snapshot of what investors can expect during the second half of the year.”
"Aneta Markowska, an economist with Jefferies, added that the comments Powell were “a much more hawkish outcome” than the market had anticipated."
"“After dismissing rising inflation and inflation expectations for the past three months and focusing solely on the labour market, it feels like the Federal Open Market Committee just put its hands back on the wheel,” she said."
Traders dialled back their expectations for higher inflation as a result.
The 10-year break-even rate fell 0.06 percentage points to 2.32 per cent.
The US dollar index climbed 0.8 per cent along with the uptick in Treasury yields.
"The pound fell 0.6 per cent against the dollar, while the euro slipped 1 per cent to $1.20."
European stocks finished at new records before the release of the Fed decision.
"The Stoxx Europe closed up 0.2 per cent for another all-time peak, the region-wide benchmark’s ninth session of back-to-back rises."
"Frankfurt’s Xetra Dax rose 0.1 per cent, while both the CAC 40 in Paris and London’s FTSE 100 climbed 0.2 per cent."
Additional reporting by Michael Mackenzie in New York and Siddharth Venkataramakrishnan in London
European equities made gains while stocks on Wall Street slipped as investors digested a drop in retail sales and speculated on the direction policymakers will take ahead of the conclusion to the Federal Reserve’s latest monthly meeting.
"US retail sales in May were down 1.3 per cent against the previous month, although this was “arguably a lot better than it looks”, said Michael Pearce, senior US economist at Capital Economics."
"There were “big upward revisions to the April data and spending on food and drink services posted another solid increase last month”, he said, suggesting the recovery in services consumption was “on a solid footing”."
"Wall Street’s blue-chip S&P 500 ended the trading session 0.2 per cent lower, after reaching its 29th record closing high on Monday."
The technology focused Nasdaq Composite lost 0.7 per cent.
"Across the Atlantic, the region-wide Stoxx Europe 600 index closed up 0.1 per cent, hitting another high, while London’s FTSE 100 rose 0.4 per cent."
"Attention was mostly on the Fed, however, which finishes its two-day meeting on Wednesday."
Some analysts predict its members will bring forward its projections for its first post-pandemic interest rate rise by a year to 2023.
"The central bank may also hold initial talks about reducing its $120bn of monthly bond purchases, although any tapering is expected to be carefully communicated and gradual."
"“Economic data highlight that the US economy is growing at a rapid clip,” said Tom Kenny, ANZ economist."
“We don’t anticipate any change to the policy guidance language on either rates or asset purchases.”
"Steve Englander, a strategist at Standard Chartered, said it would “be hard for the Fed to avoid discussion of tapering, but relatively easy to dismiss any expectation of imminent action as very premature”."
"In 2013, when former Fed chair Ben Bernanke announced the central bank was about to reduce its post-financial crisis asset purchases, it roiled asset markets in what became known as the “taper tantrum”."
"“We anticipate the [Fed committee] giving itself a few more months to assess incoming data on both inflation and growth, recognising the potential embarrassment of another episode of premature hawkishness,” Englander said."
"The Fed’s asset purchases, which have been followed by central banks worldwide, have lowered the yields on government bonds and boosted the appeal of riskier assets such as equities."
"The S&P 500 had notched up 28 closing highs for 2021 by the end of last week, according to Jonathan Golub, a strategist at Credit Suisse."
"“Importantly, economic activity has improved over this period, the true catalyst of the S&P 500’s advance,” Golub said."
Economists expect US gross domestic product to rise at an annualised rate of about 10 per cent in the second quarter of this year as the global economy stages its strongest recovery from a recession in eight decades.
The yield on the benchmark 10-year US Treasury was flat at 1.496 per cent on Tuesday.
"The dollar index, which measures the US currency against trading partners, was flat, too."
"The euro was up 0.1 per cent against the dollar, purchasing $1.2127."
"Sterling dropped 0.2 per cent to $1.4081, its weakest level in a month."
"International oil benchmark Brent crude added 1.7 per cent to $74.13 a barrel, its highest level since 2018."
"Stocks on Wall Street staged a late rally on Monday, erasing earlier losses ahead of a two-day US central bank meeting that will be closely watched for clues on the future path of monetary policy."
"Wall Street’s S&P 500 index finished 0.2 per cent higher in New York, having been on course for a 0.2 per cent loss less than hour before the final bell."
It marks another high for the index following a 0.2 per cent gain on Friday.
The technology focused Nasdaq Composite index climbed 0.7 per cent.
"Core US government debt sold off, taking the yield on the benchmark 10-year US Treasury note up 0.04 percentage points to 1.49 per cent."
This followed a rally last week in which investors banked on the Federal Reserve looking past high US inflation to maintain its pandemic-era support for financial markets.
The Fed is widely expected to maintain its $120bn of monthly bond purchases when it meets on Tuesday and Wednesday.
"These asset purchases, which have been followed by rate-setters in Europe and the UK, have lowered the yields on government bonds, reduced corporate borrowing costs and boosted the appeal of riskier assets such as equities."
"But after a rapid recovery of the US economy fuelled by coronavirus vaccines and President Joe Biden’s massive stimulus programmes, some analysts see the Fed’s policymakers bringing forward their predictions of the first post-pandemic interest rate rise."
"“We expect the Fed to upgrade its outlook for growth and materially revise up the inflation forecast,” Tiffany Wilding, US economist at the bond investment house Pimco, said in a research note."
“We think the majority of Fed officials will also pull forward their projections for the first rate hike to 2023 [from 2024].”
Headline US consumer price inflation hit 5 per cent in the 12 months to
"May. Jay Powell, Fed chair, has maintained that the rises are a temporary effect of the US economy reopening after coronavirus shutdowns."
"“But others are concerned inflation is more structural,” said Marco Pirondini, head of US equities at Amundi."
“I’d say it is 50-50 on either side.”
"A rise in used car and truck prices, after a global semiconductor shortage lowered the production of vehicles, accounted for about a third of the increase in May’s CPI, according to the Bureau of Labor Statistics."
"US wages could also “go up in a more sustained way”, Pirondini said, after Biden signed an executive order in late April to increase government pay, pressuring private industry to also raise salaries."
"Across the Atlantic, the pan-regional Stoxx Europe 600 gained 0.2 per cent to another high, with energy the top-performing sector following a further rise in oil prices."
"Brent crude climbed as much as 1.3 per cent on Monday to $73.64 a barrel, a two-year high for the international oil benchmark, before easing back to finish 0.4 per cent higher."
"Elsewhere in the region, the UK’s travel and leisure companies lagged the wider market, with a full reopening of the economy being delayed by four weeks."
The FTSE 350 travel and leisure sector was 1.4 per cent lower compared with a rise of 0.2 per cent for the broader FTSE 350 index.
"The dollar index, which measures the US currency against peers, dipped 0.1 per cent."
"The euro was up 0.1 per cent against the greenback, purchasing $1.212."
Sterling finished flat at $1.411.
Global stocks hit an all-time high on Friday as investors balanced expectations that the economic recovery will remain robust with caution ahead of next week’s US Federal Reserve meeting.
"The FTSE All-World index was up less than 0.1 per cent but still reached a new record by the afternoon in New York, even though the global equities benchmark rose just 1 per cent so far in June."
"Wall Street’s blue-chip S&P 500 index closed the trading session up 0.2 per cent, also reaching an all-time high, while the technology-focused Nasdaq Composite was up 0.4 per cent by the time the closing bell rang."
"Momentum was strong across the Atlantic, too, where the Stoxx Europe 600 closed up 0.7 per cent to another record — the benchmark’s fourth consecutive week of rises."
This followed an upgrade to growth forecasts for the eurozone by the European Central Bank on Thursday.
London’s FTSE 100 index rose by the same margin for its best weekly performance since early May.
"“The economic data is all continuing to improve, but everyone was expecting it,” said Caroline Simmons, UK chief investment officer for UBS wealth management."
“People are now waiting to see what happens with central banks.”
Next week’s Fed meeting will be closely watched after vice-chair Randal Quarles called for talks about trimming its $120bn of monthly bond purchases that have supported financial markets since March 2020.
"“The Fed is likely to start talking about reducing asset purchases more openly in the next couple of months, with a view that they actually do some tapering next year,” Simmons said."
This week’s rally in US Treasuries ran out of steam.
Traders were anticipating the Fed would look past strong inflation in the US and stick to its view that high price rises were a temporary effect of industries reopening.
"The yield on the 10-year note was little-changed at 1.45 per cent on Friday, although it remained around its lowest level since early March."
Germany’s equivalent Bund yield was also steady at minus 0.27 per cent.
"Data on Thursday showed headline consumer price inflation in the US rose 5 per cent in the 12 months to May, the largest increase since 2008."
"Investors dismissed this jump “as being mainly due to pandemic-related price normalisation”, said Daiwa economist Chris Scicluna."
"Credit Suisse, however, warned in a research note of an “elevated level of investor complacency”."
“Should another round of high inflation indicators prompt central banks . . . 
"to indicate less patience to keep monetary conditions easy, markets could be caught rather off guard,” the bank said."
"The dollar rose 0.5 per cent against a basket of peers, while the euro weakened by the same amount against the greenback to purchase $1.211."
Sterling lost 0.4 per cent against the dollar to $1.4118.
"Brent crude, the international oil benchmark, gained 0.1 per cent to $72.61 a barrel, its highest level since May 2019."
"Government bonds rallied, the dollar weakened and US stocks fluctuated between small gains and losses on Wednesday, as gauges of price pressures in the economy battled with Federal Reserve officials affirming that higher inflation will be transitory."
"The blue-chip S&P 500 traded flat at lunchtime, having given up earlier gains, before slipping even lower to close down 0.2 per cent for the day."
"The tech-heavy Nasdaq Composite traded flat for much of the afternoon, closing marginally lower."
The softer performance on Wall Street followed data showing declining consumer confidence and higher home prices.
"Sales of newly built homes in the US fell more than expected last month, with higher prices stifling demand."
"The commerce department said new residential sales fell 5.9 per cent in April to an annualised rate of 863,000 units, which missed economists’ expectations of 970,000 units."
Fed vice-chair Richard Clarida reiterated the view held by many on the central bank’s board that inflation will be transitory.
"However, he also acknowledged that, “it may well be in the upcoming meetings, we’ll be at the point where we can begin to discuss scaling back the pace of asset purchases”."
"Ian Lyngen, an interest rate strategist at BMO Capital Markets, said the movement lower in stock markets, “speaks to the worry that scaling out of the extremely accommodative monetary policy stance would have negative ramifications for domestic equities”."
The yield on the benchmark 10-year Treasury slid 0.05 percentage points to 1.56 per cent as the price of the debt rose.
"This yield, which influences borrowing costs and equity valuations worldwide, approached 1.8 per cent in late March when inflation jitters were even stronger."
"Despite nervousness, there is widespread expectation that the Fed will hold back from any immediate raising of interest rates or reduction to its bond purchases, despite signs of higher prices."
"Headline consumer price inflation in the US hit 4.2 per cent in the 12 months to April, the biggest jump in 13 years and more than double"
the Fed’s target of 2 per cent over time.
"“The market has pushed expectations for Fed rate hikes further into the future,” said Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management."
The Fed views the leap in inflation as temporary as industries reopen following the height of the coronavirus crisis.
"While central banks have been raising rates to control inflation since the early 1980s, Fed chair Jay Powell has taken the world’s most powerful rate-setter in a new direction by tolerating price rises instead of risking a slowdown in the post-pandemic economy."
"The five-year forward inflation rate, a market measure of expected price rises over time in the US, has dipped to 2.25 per cent after climbing as high as 2.37 per cent earlier this month."
"The dollar index, which measures the greenback against a basket of trading partners’ currencies, lost as much as 0.3 per cent on Tuesday before recovering to trade 0.2 per cent lower."
The index remained around its weakest level of 2021 so far and has fallen more than 10 per cent in the past year.
"Brent crude, the international oil benchmark, slipped 0.1 per cent to $68.39 a barrel."
"The renewed drop in US yields is taking a toll on the dollar, said Win Thin, global head of currency strategy at Brown Brothers Harriman."
"“As we have said countless times before, these rates all need to rise in order for the dollar to mount a sustainable recovery,” he said."
"Investors on Wall Street looked past last week’s cryptocurrency jitters to send stocks higher on Monday, led by the technology sector."
"Tech shares were the top performers on the S&P 500, propelling the blue-chip benchmark to close 1 per cent higher, while the tech-focused Nasdaq Composite index gained 1.4 per cent."
"Energy stocks also climbed after Goldman Sachs forecast Brent crude, which leapt 3 per cent to $68.45 a barrel on Monday, would reach $80 this year as economies recovered from the pandemic."
Wall Street was rattled last week by the prospect that a cryptocurrency rout could ripple into other asset classes.
"Bitcoin fell 13 per cent on Sunday, before rising 18 per cent on Monday, although it remains roughly 38 per cent below its April peak."
"Analysts are examining correlations between trends in cryptocurrency and other financial markets, such as richly valued tech stocks, citing the possibility that investors who borrowed money to trade digital currencies could sell other assets to offset losses."
"“The cross-asset consequences have been mild,” said John Normand, strategist at JPMorgan."
"But he warned that a deflation of what he said was a $2tn market could create “a substantial wealth loss, which can impact the real economy by impairing the balance sheets of households, corporates and the banking sector”."
"The People’s Bank of China has warned financial institutions against using digital currencies for payments while the US government said cryptocurrency transactions exceeding $10,000 should be reported to tax authorities."
The S&P has traded choppily since closing at an all-time high on May 7.
"Almost nine out of 10 S&P-listed companies beat earnings forecasts for the first quarter, according to DataTrek Research."
"US equities would remain volatile, DataTrek’s Nicholas Colas said, until companies reported second-quarter results and investors could assess whether the first three months of this year represented the peak of the recovery from last year"
’s industry shutdowns.
"“The volatility you see in stock prices day to day is the tug of war between earnings bulls and bears,” Colas said."
"Investors also bid up the price of longer-dated US government bonds on Monday, sending yields lower."
The benchmark 10-year Treasury note traded 0.02 percentage points lower to 1.61 per cent.
"This yield, which sets the tone for equity valuations and global borrowing costs, has risen from about 0.9 per cent at the start of the year."
It has stayed within a narrow range for the past month as Federal Reserve rate-setters repeated a long-held message that jumps in inflation would be transitory as the US economy recovers.
"“I’m still leaning bearish on bonds,” said Jack McIntyre, fixed income portfolio manager at Brandywine Global, as the Fed inches towards talk of tapering its $120bn of monthly bond purchases."
“But it is going to be more of a gradual slowdown
",” he added, as investors in the eurozone and Japan, where income yields from government bonds are lower, “find 1.6 per cent quite attractive”."
"In currencies, the dollar index fell 0.2 per cent."
"The euro added 0.3 per cent against the dollar to $1.2217, remaining around its highest point since January."
Cryptocurrency prices took a renewed dive on Friday after China launched its second broadside against bitcoin in three days.
"The new swoon wiped 12 per cent off the value of bitcoin, 20 per cent from ethereum and 18 per cent from dogecoin and also appeared to bleed over into the US stock market, where the tech-heavy Nasdaq dipped in the last hour of trading to close near its low for the day."
A Friday statement from China’s vice-premier Liu He that restated Beijing’s determination to curb cryptocurrency mining and trading triggered the latest decline.
"The crypto exchange Coinbase was showing a bitcoin price just above $34,000 late in the US afternoon on Friday, still above the low of about $30,000 set on Wednesday after the People’s Bank of China warned financial institutions off accepting cryptocurrencies as payment or offering related services and products."
The technology-focused Nasdaq Composite index ended 0.5 per cent lower on the day although the index remained 0.3 per cent higher for the week.
"The S&P 500 index closed 0.1 per cent lower, also near its low for the day and 0.4 per cent down on the week."
The result meant the index’s first back-to-back weekly losses since February.
On Wednesday the Federal Reserve published minutes of its latest policy meeting that showed some of its rate-setters thought the US central bank should “at some point” start to discuss “a plan for adjusting the pace of asset purchases”.
"Global equities had been volatile in the run-up to the release of the minutes, but settled as analysts and investors reacted to signals that the US central bank remained in no hurry to reduce $120bn of monthly bond purchases that have boosted financial markets since March last year."
"“We remain sceptical that officials will be ready to send what might be construed as a taper countdown signal” in June or July, said Jim O’Sullivan, TD Securities chief US macro strategist, “which would likely be needed for tapering to be announced before year-end”."
On Friday a survey investors watch for signs of changes in economic output indicated that business conditions in the US were booming.
"IHS Markit’s purchasing managers’ index for the US, based on manufacturing and service sector executives’ responses to questions on topics such as hiring plans and new business, produced its highest-ever reading of 68.1 for May."
"A reading of 50 separates growth from contraction in the index, with the so-called flash reading for May driven higher by what IHS called “the fastest service sector upturn on record”, as previously shuttered sectors of the economy reopened."
"While the PMI surveys are closely scrutinised for signs of economic recovery, they also offer insight into future levels of inflation that can eat into the real returns from stocks and bonds."
"“The rate of input price inflation soared to a new survey record high,” IHS said."
"And while the Fed’s policymakers still largely view inflationary pressures as a transitory effect of a post-pandemic boom in demand, a lengthy rally in global stocks has paused in the past month as investors query whether the central bank could move too slowly to tackle price rises."
"“While economic activity is steadily improving, what equity markets will internalise is that there is less cause for support on the monetary policy front as the data improves,” said Mobeen Tahir, research director at WisdomTree."
"The price of spot gold, perceived as a hedge against inflation, traded at $1,880 an ounce on Friday, its highest level since January."
The yield on the US 10-year Treasury note was flat at 1.623 per cent.
Germany’s equivalent Bund yield was also steady at minus 0.126 per cent.
The euro fell 0.3 per cent against the dollar to $1.2185 as the US currency bounced following the PMI survey.
"The dollar index, which measures the greenback against trading partners’ currencies, was up 0.2 per cent by the end of the trading day in New York."
"Brent crude, the global oil benchmark, also added to gains from earlier in the session, rising 2.4 per cent to $66.68 a barrel."
"Europe’s Stoxx 600 index rose 0.6 per cent, in a late-session rally led by energy stocks."
"Positive US jobs data helped boost global stocks on Thursday, a day after markets were roiled by a sell-off in cryptocurrencies and hints that central bank policymakers were contemplating winding down crisis-era support."
"The S&P 500 closed 1 per cent higher, snapping a three-day losing streak."
The tech-focused Nasdaq Composite bounced back 1.8 per cent.
Europe’s continent-wide Stoxx 600 index closed up 1.3 per cent while London’s FTSE 100 ended the session 1 per cent higher.
"Applications for unemployment aid in the US fell to a pandemic-era low last week, according to labour department data released on Thursday, indicating that lay-offs continued to slow as some states prepared to stop offering supplemental benefits."
"The brighter news also came after Wednesday’s minutes from the Federal Reserve, which indicated that some policymakers thought the conversations about scaling back the central bank’s $120bn in monthly bond purchases would need to begin as the recovery from the pandemic gained momentum."
"Thursday’s equity rises on both sides of the Atlantic suggested a return to calm after a volatile day for stocks on Wednesday, which saw the S&P 500 index close 0.3 per cent down after falling as much as 3 per cent, and the Stoxx 600 lose 1.5 per cent."
“Global risk sentiment appears to be stabilising . . .
"after yesterday’s crypto contagion fears drove a broad risk-off day across European and US markets, which were already on shaky ground ahead of the [Fed] minutes,” analysts at JPMorgan wrote."
"In currencies, the pound rose 0.52 per cent against the dollar to $1.4189, while the euro increased 0.4 per cent to $1.2227."
"The US dollar, as measured against a basket of its peers, dropped 0.5 per cent."
"Arnab Das, a global market strategist at Invesco, said the overall picture pointed to a weaker dollar as the US began to retake the mantle of global growth driver from China through its expansionary politics."
"Cryptocurrencies continued to face considerable volatility, after Chinese regulators signalled a potential crackdown on Wednesday ahead of launching their own digital currency."
"Bitcoin, which soared past $60,000 last month, fell as much as 30 per cent to a low of $30,101 on Wednesday."
"By Thursday, the volatile currency was trading at $39,860 per coin."
"“Stocks and cryptocurrencies have been showing signs of froth over the past few months and were due for a pullback,” said Richard Saperstein, chief investment officer at Treasury Partners."
"“It’s sort of a transition of the seasons,” said Roger Lee, head of UK equity strategy at Investec, referring to the Fed minutes."
"“Clearly, there’s going to be a tighter policy outlook, but how that plays out in equities is quite difficult to predict.”"
"While index levels have not moved much, sectoral movement had been profound in the past six weeks, he said."
"The tech sector had been among the victims, as inflationary pressure in the US mounted."
"Lee added that tapering was unlikely to be immediate, referring to similar measures taken in 2013: “They first started talking about tapering in March; they didn’t start doing anything until December.”"
"The path forward could get bumpy, however, warned Matthew Hornbach, global head of macro strategy at Morgan Stanley, potentially affecting the timing of the taper talk."
"“If the economic data ends up rattling investors over the summer, it will be because the economic data disappoints expectations as opposed to delights expectations,” he said."
"“What we are seeing in the prices of risky assets, what we are seeing in the path for Fed policy and what we are seeing in the price for the path of inflation suggests that there is a tremendous amount of optimism with respect to the impact of the reopening already in the price.”"
"Brent crude dropped 2.2 per cent to $65.18 a barrel, having reached $70 on Tuesday, for only the third time since the start of the pandemic."
"Stocks on Wall Street slipped on Tuesday, with a slide in shares of oil majors and other energy groups weighing on a market that has drifted sideways since hitting a record earlier this month."
"The blue-chip S&P 500 index closed the trading day down 0.9 per cent, with energy and industrials booking the strongest declines, while the technology focused Nasdaq Composite lost 0.6 per cent."
Europe’s Stoxx 600 closed 0.2 per cent higher.
"Investors have over the past six months dramatically shifted their portfolios, buying up shares of hard-hit companies whose stocks are expected to benefit from an economic recovery in 2021."
"The S&P 500 has gained about 85 per cent since last March, boosted by the Federal Reserve’s $120bn of monthly asset purchases, trillions of dollars in government economic stimulus and large-scale rollout of coronavirus vaccines."
But that momentum has stalled in recent weeks.
"Francesco Sandrini, senior multi-asset strategist at Amundi, said investors were now struggling to assess whether the lengthy market rally had much further to run."
"“We are standing on a very foggy plateau and we cannot see if we can go up higher or we are coming to a descent,” Sandrini said."
"“But I am cautious that the cycle is changing,” he added, with the dominant narrative in US stock markets moving to one of a slowing recovery combined with higher inflation that would erode the real returns from stocks and bonds."
"Traders have been more actively buying options contracts, known as puts, that would protect them from a decline in the $48tn US equity market."
"The so-called put-call ratio, which measures the volume of the two derivatives contracts traded each day, lept last week and remains above its six-month average."
"The US Institute for Supply Management’s services activity index, which investors scrutinise for signs that economic growth is either accelerating or losing momentum, hit a record reading of 63.7 in March before moderating to 62.7 in April."
The S&P 500 has fallen 2.5 per cent since hitting a record this month.
"Professional forecasters surveyed by the Philadelphia Federal Reserve expect average consumer price inflation of 2.3 per cent in the US, above the central bank’s target, for the next 10 years."
US consumer price inflation jumped 4.2 per cent in April over the same month last year.
Fed officials have insisted that they remain focused on fixing weaknesses in the US labour market.
"Minutes of the central bank’s latest meeting, to be released on Wednesday, may provide clues as to whether its rate-setters plan to set the stage for a reduction of its asset purchases."
"Global benchmark Brent crude briefly rose above $70 a barrel on Tuesday, a rarity since the start of the pandemic as oil traders bought in to the economic recovery while financial investors diversified their holdings away from stocks and bonds."
"The commodity slid later in the US trading day, to $68.75, after the BBC tweeted that progress had been made on Iran nuclear talks."
"The spot gold price, meanwhile, hit $1,875 an ounce, its highest level since January, before retreating slightly to $1,870 in the afternoon in New York."
"“If you think the inflation regime will change more than markets expect, and you want to hedge this, the best way is to add cyclical commodities to your portfolio,” said Guilhem Savry, a strategist at asset manager Unigestion."
"The yield on the 10-year US Treasury bond, which moves inversely to its price, slid 0.09 percentage points on Tuesday, to 1.64 per cent."
The yield has risen from about 0.9 per cent at the start of the year.
"The dollar, as measured against a basket of trading partners’ currencies, sank 0.4 per cent."
"This lifted the euro 0.6 per cent against the dollar to $1.2224, while the pound rose as much as 0.6 per cent against the dollar to an intraday high of $1.4220, its strongest level since late February when sterling touched $1.4237."
"Technology stocks stabilised on Tuesday despite sharp declines more broadly across Wall Street, as investors weighed whether resurgent inflation could prompt central bankers to rethink current loose monetary policy."
The blue-chip S&P 500 index closed lower by 0.9 per cent.
"The Nasdaq Composite — whose largest constitute includes big tech groups Apple, Amazon, Facebook and Tesla — initially dropped 2 per cent before paring back most of those losses to end down 0.1 per cent as “buy the dip” investors re-emerged."
Asset manager Cathie Wood dismissed the prospect of a deeper bear market in technology shares at a monthly webinar with investors held on Tuesday.
"She said funds run by her firm, Ark Investment, which has become a bellwether for speculative tech stocks, had endured many big drops over the past five years."
"“Our long-term performance is determined by what we do in downturns,” she said."
“We average down and it has been a successful strategy.”
"Since its February peak, the value of Wood’s flagship Ark Innovation fund has tumbled by about a third, as the value of its shares in companies such as Tesla have fallen sharply."
"The prospect of higher interest rates, should inflation be sustained, threatens to undermine the valuations of fast-growing tech companies in particular, since more of their forecast profits lie further in the future."
"On Tuesday, Wood predicted that the recent surge in many commodities prices, which has jangled investors’ nerves for its impact on inflation, would give way to a “very serious correction”."
"Fed officials, meanwhile, have reassured investors that they would pursue a “patient” approach to adjusting their monetary policy in the face of higher inflation and job gains, a message echoed by Fed governor Lael Brainard on Tuesday, who said a “transitory surge” in inflation would abate when imbalances in the supply chain and labour market resolve themselves."
Data to be published on Wednesday are expected to show headline consumer prices in the US rose 3.6 per cent in April from the same month last year.
"“Inflation is creating a lot of fear among investors because of the possibility that the central banks are not ready to deal with it,” said Aneeka Gupta, research director at WisdomTree."
"The spectre of cost pressures was raised on Tuesday by data showing Chinese factory gate prices, an indicator of what domestic consumers and western importers will pay for goods, rose 6.8 per cent last month from the year before, the fastest pace in three years."
"Meanwhile, mentions of “inflation” among executives in Wall Street corporate earnings conference calls are near the record high struck a decade ago, with many companies saying they plan to pass on higher costs to consumers, according to Bank of America."
Price growth is being fuelled by a global computer chip shortage and a boom in commodities from lumber to steelmaking ingredient iron ore.
The yield on the benchmark 10-year US Treasury bond rose 0.02 percentage points to 1.62 per cent on Tuesday as prices of the debt weakened.
The 10-year yield has climbed from about 0.9 per cent at the start of the year as traders bet rising inflation would erode the returns on such fixed-income securities.
"“We have so many elements of a strong recovery,” said Kristina Hooper, chief global market strategist at Invesco."
"“We have elevated household savings, we have pent up demand, we have significant fiscal stimulus and very supportive monetary policy . . ."
I would expect the 10-year [yield] to go up.”
"Europe’s Stoxx 600 index closed down 2 per cent, as did the continent"
’s tech sub-index.
"That followed declines in Asia, where Tokyo’s Topix slid 2.4 per cent and Hong Kong’s Hang Seng dipped 2 per cent."
Wall Street’s S&P 500 followed European bourses higher as investors weighed surveys pointing to robust growth in the US and eurozone factory sectors and a blockbuster corporate earnings season.
The benchmark S&P 500 index closed up 0.3 per cent while the Dow Jones Industrial Average had risen 0.7 per cent.
"The technology heavy Nasdaq, meanwhile, had lost 0.5 per cent by the time the closing bell rang, dragged down by declines in some of Wall Street’s high-flying tech companies."
Both the Nasdaq and the S&P 500 had touched highs last week.
"The energy, materials and industrials sectors had among the strongest gains in the blue-chip index, as an Institute for Supply Management survey showed US factory-sector activity continued to rise at a swift pace in April even as the rate of growth slowed considerably from the previous month."
The gauge came in at 60.7 last month from a 37-year high of 64.7 in March — leaving it well above the 50 line separating expansion from contraction.
"April’s reading missed the Wall Street consensus forecast of 65 but showed “activity in the sector is still expanding at a solid pace”, according to Thomas Simons, economist at Jefferies."
"US government debt gained slightly in price after the ISM data came in below estimates, pushing the yield on the 10-year Treasury note down 0.02 percentage points to just above 1.6 per cent."
"“While the manufacturing sector isn’t expected to be a major driver of hiring during this next stage of the recovery, the perception that growth might have reached stall-speed for goods production is a marginal concern,” said Ian Lyngen, head of US rates strategy at BMO Capital Markets."
"Across the Atlantic, the IHS Markit PMI index for manufacturing activity in the eurozone registered 62.9 for the month, building on a reading of 62.5 in March, in a sign that economic strength in the bloc is improving."
"“Eurozone manufacturing is booming, with a new PMI record set for a second month running in April,” said Chris Williamson, chief business economist at IHS Markit."
"“The past two months have seen output and order books both improve at rates unsurpassed since the survey began in 1997, with surging demand boosted by economies opening up from Covid-19 lockdowns and brightening prospects for the year ahead.”"
Germany’s Xetra Dax and France
"’s CAC 40 indices closed up 0.7 per cent and 0.6 per cent respectively, taking their advances for the year to more than 11 per cent."
London’s markets were closed for a public holiday.
"Investor sentiment has also been buoyed by a strong revival in corporate earnings in the first three months of 2021 compared with the same quarter last year, when the coronavirus pandemic started to hit big companies."
"Groups listed on the S&P 500 that have disclosed quarterly figures so far have reported overall year-over-year growth of 53 per cent, according to FactSet data."
"Of the 306 groups that have published their figures, 268 have exceeded expectations."
"A similar situation has played out in Europe, where companies listed on the Stoxx 600 have reported profit growth of almost 75 per cent."
"Overall, average earnings for the benchmark have exceeded the consensus expectation of analysts by 15 per cent, the biggest “upside surprise” since the recovery from the global financial crisis more than a decade ago, according to Goldman Sachs."
"While individual stock reactions to upbeat earnings have been muted in the US and Europe, signs of a strong recovery for many big businesses have helped support stock prices, analysts say."
"“The effect of fiscal stimulus and the post-Covid-19 bounceback in consumer and business demand is leading to extraordinary levels of growth, particularly in the US, that are likely to persist for a number of months yet,” said Linda Mazziotta at UBS Wealth Management."
"“In turn, this supportive macro backdrop is feeding through into a stronger-than-expected recovery in corporate earnings.”"
"Another wave of results are due this week, with companies such as Volkswagen and Siemens in Germany, PayPal and AIG of the US, and Nintendo of Japan issuing financial reports."
Wall Street’s benchmark S&P 500 index recorded another all-time high and commodities rallied on Thursday after the US government reported the strongest rate of growth during the first three months of the year since 1984.
The 0.7 per cent increase in the S&P 500 share index took it above the record closing
"it achieved just two days ago, extending the year-long rally."
The strong US economic growth data also sent the cost of raw materials sharply higher.
"Copper traded on the London Metal Exchange above $10,000 a tonne, levels not seen since 2011."
"Brent crude, the international oil marker, gained 1.9 per cent to $68.56 a barrel."
"According to US commerce department data released on Thursday, the American economy grew at an annualised rate of 6.4 per cent in the first quarter, beating forecasts of economists polled by Reuters, who had predicted a 6.1 per cent gain."
"In addition to being the strongest first quarter in nearly 40 years, it was the second-fastest growth for any quarter in the US since 2003."
"The data showed the economy was helped by government action, boosted by trillions of dollars in federal stimulus spending and with the nation’s central bank continuing to signal it will maintain significant monetary policy support."
"The Federal Reserve on Wednesday said indicators of economic activity and employment had strengthened, but continued fragility in the labour market made it too early to withdraw its $120bn of monthly bond purchases that have boosted financial markets throughout the pandemic."
"Technology shares lagged other sectors, with the tech-heavy Nasdaq Composite index rising just 0.2 per cent and falling short of its record high, as rising Treasury yields took the heat out of growth companies’ valuations."
"The yield on the 10-year US Treasury climbed 0.03 percentage points to 1.64 per cent, as the price of the debt declined."
"Rapid economic growth in the US has fuelled bets of higher inflation, which erodes the returns from fixed interest securities."
"A higher 10-year yield also tends to punish long-term growth stocks, such as technology businesses, by raising the opportunity cost of holding shares in companies that do not pay generous dividends."
"Apple recorded double-digit quarterly sales growth in an earnings report released after the close of New York trade on Wednesday, while Facebook reported a surge in advertising revenues."
"Shamik Dhar, chief global economist at BNY Mellon, cautioned that although these first-quarter performances were strong he did not expect technology stocks to continue rallying as global economies reopened from lockdowns and investors rotated away from winners of the pandemic."
"“You might see tech indices supported for a while, but fundamentally the story is one that supports cyclical businesses,” Dhar said, referring to companies such as energy producers and manufacturers whose fortunes are pegged to economic growth."
"The dollar index, which measures the currency against those of trading partners, traded flat, hovering around its weakest since early March."
Sterling headed 0.1 per cent higher against the dollar to come within a whisker of the $1.40 level it last reached in early March.
"With the US recovery gaining speed, traders were looking ahead to economic progress driven by vaccine rollouts in regions that have been slower to emerge from the pandemic, such as Europe, said Kristen Macleod, co-head of global forex sales at Barclays."
"“The dollar tends to perform well when the US is by far and away the leader in global growth,” she said."
The euro was flat against the dollar on Thursday at $1.2128 but has gained 3.3 per cent against the greenback so far this month.
"“It is not that Europe is going to roar ahead but there has been a realisation that people had gotten too bearish,” Macleod said."
US government bonds edged slightly higher and stocks were muted on Wednesday after the Federal Reserve offered a brighter picture of the economic recovery while showing no signs of change in its monetary policy stance at the conclusion of its latest meeting.
"The yield on the 10-year US Treasury bond, which influences borrowing costs worldwide, fell to 1.61 per cent by the late afternoon after the US central bank announced its decision to keep interest rates on hold."
"Before the meeting ended, the yield on the benchmark note, which moves inversely to its price, was trading above 1.65 per cent."
"In his post-meeting press conference, Federal Reserve chair Jay Powell reiterated the need for supportive monetary policy until the US labour market recovers from the pandemic."
"“We’ve had one great jobs report, it’s not enough,” he said."
"In stock markets, the blue-chip S&P 500 index closed down 0.1 per cent, and the technology-focused Nasdaq Composite fell 0.3 per cent."
"Both Wall Street indices reached all-time highs in recent days, fuelled by a first-quarter earnings season that is shaping out to report the highest year-over-year growth in a decade."
"“People talk about a Goldilocks market, but a Goldilocks is not too hot, not too cold, and"
this . . . 
"thing is on fire,” said Jonathan Golub, chief US equity strategist for Credit Suisse, ahead of Powell’s press conference."
"He added that, in light of the economic boom, “what the Fed has been doing extremely effectively is to say, any inflation that comes our way is going to be temporary in nature, associated with the pandemic reopening process, and therefore . . ."
we’re not going to waver”.
"Europe’s Stoxx 600 index, which hit a record on April 19, closed flat."
"While investors herded out of US Treasuries in the first three months of this year, pulling the 10-year yield up from about 0.9 per cent at the start of 2021, the selling of European bonds during that period was more muted."
"But analysts at RBC said that, as the outlook for the global economy brightened, eurozone bonds could be harder hit this time."
"“The vaccination drive on the continent of Europe is gathering pace and thus a key component of worries for the economic opening is likely to fall by the wayside soon,” said Peter Schaffrik, global macro strategist at the Canadian bank."
"The Bund yield, which has been negative for almost two years, could be heading back to zero, Gavekal analysts Nick Andrews and Cedric Gemehl wrote in a research note."
"Some believe the European Central Bank, which has bought €1.9tn worth of eurozone government bonds to suppress borrowing costs, would not let this happen."
"“The ECB’s stance is clearly to limit rises in government bond yields and borrowing costs,” said Sophie Chardon, cross-asset strategist at Lombard Odier."
"Brent crude rose 1.2 per cent to $67.22 a barrel, helping the natural resources-heavy FTSE 100 to close 0.3 per cent higher."
"The dollar index, which tracks the greenback against a basket of trading partners’ currencies, dipped 0.1 per cent, remaining around its weakest point since early March."
"US equities paused near new all-time highs reached earlier this week, while government bonds sold off, amid a wave of closely watched quarterly earnings results and the Federal Reserve’s monetary policy meeting."
"The S&P 500 rally took a breather on Tuesday, slipping from the intraday high it hit on Monday that had been fuelled by optimism about a global recovery from the pandemic and strong corporate earnings."
The blue-chip index fell just 0.03 per cent for the day.
"The technology-focused Nasdaq Composite, having achieved its own record close on Monday, also closed lower by 0.3 per cent as results from Microsoft, Google parent Alphabet and Facebook trickled in."
"The yield on the 10-year US Treasury, which influences borrowing costs worldwide, ticked up more than 0.06 percentage points to 1.62 per cent, indicating a drop in price."
The sell-off accelerated in afternoon trading despite a decent auction of seven-year debt that saw solid demand.
"Analysts expect Fed chair Jay Powell, at his press conference on Wednesday, to repeat his long-held message that the central bank will prioritise economic recovery and a strengthening labour market over making any moves to tame rising inflation."
"“Powell is likely to emphasise that the labour market is still far from normal and that any pick-up in inflation that accompanies the recovery is likely to be transitory,” said Chris Scicluna, economist at Daiwa."
But investors are on alert for any hints that the Fed will consider reducing its $120bn monthly bond purchases in the months ahead.
Such concerns were heightened last week when the Bank of Canada became the first G7 central bank to scale back its pandemic-era purchases.
"Powell could start to “recalibrate his message” at Wednesday’s Fed press conference, said Bastien Drut, chief thematic macro strategist at CPR Asset Management."
"“The US economy is performing really well,” Drut said, referencing recent retail sales and employment data."
“I see the Fed getting ready to change its communications.”
Other analysts were less certain.
"“The Fed will be extremely careful; they know what impact even small changes in language can have,” said Andrew Patterson, senior international economist at Vanguard."
"“Remember the taper tantrum in 2013,” he added, referring to when former Fed chair Ben Bernanke sent markets into a tailspin by remarking that the US central bank’s third round of quantitative easing could slow in “the next few meetings”."
"The dollar index, which measures the currency against major trading peers, rose 0.1 per cent as cautious investors picked up the haven asset."
"This benchmark remains around its lowest level since early March, however, having declined as riskier assets such as stocks and metals rallied."
Foreign exchange traders had predicted a fall in the dollar of up to 20 per cent this year because of loose monetary conditions in the US.
Those bets were upended by the fast pace of the US recovery and speculation of Fed policy tightening.
"“Investors are approaching foreign exchange markets with an abundance of caution,” said Mimi Rushton, co-head of global forex sales at Barclays, with trading volumes “lower than the norm”."
"This was likely to continue until the Fed’s message changed and investors could “think more clearly about the next potential moves”, she added."
"In Europe, the region-wide Stoxx 600 equity index closed down 0.1 per cent, although it remained near its all-time high hit in mid-April."
’s FTSE 100 lost 0.3 per cent.
"Oil prices rose marginally on Tuesday with Brent crude adding almost 2 per cent to $66.74 a barrel, as Opec and its allies including Russia decided to stick with their plan of gradually tapering supply cuts between May and July."
"The group had been due to meet virtually on Wednesday but moved forward the decision given there was broad agreement that demand has continued to strengthen, despite some concerns about surging coronavirus cases in countries such as India."
Additional reporting by David Sheppard in London
"The technology-heavy Nasdaq Composite set a new closing record on Monday, its first since a Treasury market sell-off clobbered growth stocks in February, as investors looked ahead to a week expected to be dominated by strong results from corporate America."
"The index, which includes tech stalwarts such as Apple, Amazon and Microsoft, climbed 0.9 per cent."
"The advance outpaced the rise by the blue-chip S&P 500, which rose 0.2 per cent to also finish at a new record."
"The gains precede a busy week for first-quarter earnings reports, including results that will be delivered from the three aforementioned companies."
Earnings growth is expected to be the strongest since 2018.
"Many of the world’s largest companies, including General Electric and Facebook, report quarterly earnings in the coming days."
"A quarter of the constituents of the S&P 500 have already reported, with 84 per cent of this group beating analysts’ forecasts, according to the research house DataTrek."
"“It will be crucial to see whether companies will give strong enough guidance [on the next quarter] to sustain very high valuations,” said Gergely Majoros, portfolio adviser at Carmignac."
"“The evolution of the economic cycle next year could be a slowing of the recovery, and this would be a difficult transition for investors.”"
"The gains in global equity markets accompanied a slight sell-off in US government bond prices, which earlier this year proved a catalyst for a slide in US tech shares."
"However, while the yield on the benchmark US Treasury rose 0.01 percentage points to 1.57 per cent, its real-yield fell deeper into negative territory."
"Tom di Galoma, a managing director at Seaport Global Holdings, noted the drop in the real yield signalled that the threat of inflation was no longer “on the forefront of investors’ minds”."
"Negative real yields have helped to support the stock market rally over the past year, including the run-up in valuations on tech and other fast-growing companies."
"While investors will be focused on earnings, the week also includes the Federal Reserve’s latest policy setting meeting, which starts on Tuesday."
The US central bank has bought about $120bn of bonds a month since March last year to push down borrowing costs and support financial markets through the pandemic.
Gross domestic product data released later in the week is expected to confirm the US economy has rebounded strongly in recent months thanks to a rapid vaccine rollout and fiscal stimulus.
"Analysts do not widely expect the world’s most powerful central bank to discuss raising interest rates or reducing its asset purchases this month, even after US president Joe Biden unleashed $1.9tn of stimulus spending and announced plans to spend a further $2tn on infrastructure."
"But taper talk could begin as soon as June, according to some economists."
"Jay Powell, Fed chair, is likely to reiterate in his Wednesday press conference that raising the main US interest rate is “a long way off”"
", ANZ Bank economists Tom Kenny and Rini Sen wrote in a research note."
"“We anticipate that at the June meeting, should the economy continue to advance at a rapid clip, the Fed will be open to discussing tapering,” they said."
"Brent crude, the international oil benchmark, fell 0.7 per cent to $65.65 a barrel as commodities investors reacted negatively to India’s surge in coronavirus cases."
India is the world’s third-largest importer of oil.
"The dollar index, which measures the currency against a basket of those of significant trading partners, fell 0.1 per cent to hover near its weakest level since early March."
Wall Street stocks turned lower following reports that US president Joe Biden planned to raise capital gains tax for wealthy individuals.
"The S&P 500 index gave up morning increases and closed the trading day down 0.9 per cent following a Bloomberg report stating that people earning more than $1m would pay a capital gains rate of 39.6 per cent, up from 20 per cent."
"The tech-heavy Nasdaq Composite followed the blue-chip benchmark lower, falling 0.9 per cent."
"The trading day shaped out to the S&P 500’s worst session in about a month, reversing a markets rally that has prioritised euphoric economic data and strong earnings over other tax increases proposed by the Biden administration."
"“The [Federal Reserve] is very supportive, that’s true; the economy is accelerating, that’s also true,” said Matt Stucky, a portfolio manager at Northwestern Mutual."
"“But there are counterweights, and one of those is certainly policy.”"
"The proposed doubling of capital gains taxes, he added, “is certainly a pretty jarring headline to read”."
The yield on the US 10-year Treasury note fell 0.01 percentage points to 1.54 per cent after unemployment data showed the number of new claimants in the US fell to a pandemic-era low last week.
"The Cboe’s Vix index of US equity volatility, which is sometimes called Wall Street's fear gauge, jumped to its highest level this month after the report was released, briefly coming just shy of 20, before retreating to 18.8."
"Across the Atlantic, equities rose for a second session, with the pan-regional Stoxx Europe 600 index closing up 0.7 per cent."
"In the UK, London’s FTSE 100 added 0.6 per cent, while the FTSE 250, its mid-cap peer, climbed 1.3 per cent for its best daily performance since early March."
The Stoxx 600 is trading at 18 times forecast earnings compared with 23 times for the S&P 500 as Europe lags behind the US in the rollout of coronavirus vaccinations.
"Azad Zangana, senior European economist and strategist at Schroders, said this meant markets had more of a recovery trend to look forward to in Europe."
"“US assets are incredibly expensive now compared to their own history and the rest of the world, so it is very easy to find good arguments to be underweight"
"the US and overweight Europe,” he said."
The 10-year German Bund yield was little changed at minus 0.26 per cent after a European Central Bank meeting that signalled no change to its commitment to buying up vast quantities of bonds issued by the 19 nations in the eurozone.
"The global benchmark Brent crude fell 0.2 per cent to $65.19 a barrel after India, one of the world’s major oil importers, reported a record of 315,000 new daily infections, surpassing the US peak hit earlier this year."
"US stocks posted their biggest daily drop since late March on Monday, with Treasuries and the dollar also coming under pressure, as investor sentiment swung from cheering strong economic data to concern over the worsening global coronavirus situation."
"After hitting its latest record high last week, the S&P 500 slipped 0.5 per cent, the US blue-chip index’s biggest daily drop since late March."
"The technology-focused Nasdaq Composite fell almost 1 per cent, dragged lower by energy and basic materials stocks."
"The S&P 500 had risen for four consecutive weeks while Treasuries had rallied alongside stocks, as investors bought into an economic growth trend and banked on continued policy support from the Federal Reserve."
"Markets were now “positioned for a regime change”, said Francesco Sandrini, head of multi-asset investments at the fund manager Amundi."
"“The Covid-19 dynamics in the short term do not look easy to tackle,” he added — especially in larger emerging markets such as India and Brazil."
"This had made investors unsure whether the world would achieve “that really strong growth over the next six months that markets were pricing in, or something more anaemic”, he said."
"The dollar, as measured against a basket of currencies, weakened 0.5 per cent to hit a six-week low."
Demand for government debt also dropped on Monday.
"As prices dipped, the yield on the benchmark 10-year US Treasury note rose 0.02 percentage points to 1.6 per cent, while the yield on the equivalent German Bund increased by 0.03 percentage points to minus 0.23 per cent."
Data released last week showed US homebuilding surged to a near 15-year high in March while retail sales increased by the most in 10 months.
And Fed chair Jay Powell told the Economic Club of Washington DC that the US central bank would not taper its $120bn of monthly asset purchases until it saw “substantial further progress” towards full employment.
But over the weekend the number of deaths from the pandemic passed 3m globally and the UK registered new cases of a Covid-19 variant from India on top of another first discovered in South Africa.
"Yuko Takano, equities portfolio manager at Newton Investment Management, said that reopening trades that involved buying up shares in banking, industrial and consumer businesses whose fortunes were pegged to an economic rebound were “starting to fade”."
"Markets that had cheered a strong vaccine rollout in the US and President Joe Biden’s $1.9tn stimulus may have “crossed over into needing something new to look forward to”, she said."
"Multinationals including Procter & Gamble and American Express report quarterly earnings this week, which investors will scrutinise for clues about consumer spending in emerging markets and whether supply chain bottlenecks caused by the pandemic are damaging the bottom lines of businesses."
"Earlier on Monday Coca-Cola described its global markets as “asynchronous”, with demand improving in regions where vaccines had been deployed quickly while sales in other parts of the world were not expected to follow suit until normal mobility patterns resumed."
"After weeks of little action, the foreign exchange market sprang back into life on Monday as sterling jumped by roughly 1 per cent against the greenback to purchase $1.3987."
The euro gained 0.4 per cent to cross $1.20.
"In Europe, the pan-continental Stoxx 600 index closed down 0.1 per cent, having hit a fresh intraday high in the morning."
FTSE 100 benchmark slid 0.3 per cent while
Frankfurt’s Xetra Dax fell 0.6 per cent.
The global oil benchmark Brent crude added 0.4 per cent to $67.05 a barrel.
"Global equities hovered around record highs, with investors holding back from making big bets as US businesses began reporting first-quarter earnings and the coronavirus crisis worsened in several regions."
Wall Street’s S&P 500 index of blue-chip companies closed 0.4 per cent lower in New York after hitting a fresh high a day earlier.
"The tech-heavy Nasdaq Composite, more sensitive to economic growth pushing interest rates higher, slid almost 1 per cent."
The benchmark 10-year Treasury yield edged 0.02 percentage points higher to 1.63 per cent.
"Across the Atlantic, the region-wide Stoxx Europe 600 equity benchmark index closed up 0.2 per cent, inching back towards its record level achieved on Friday last week."
London’s FTSE 100 added 0.7 per cent but
Xetra Dax dipped 0.2 per cent.
"The moves came as JPMorgan, America’s largest bank by assets, reported a fivefold gain in profits because it did not have to use billions of dollars it had set aside for covering bad loans."
"Demand for new loans, however, remained weak, warned the bank."
Investors also kept their caution over the rollout of coronavirus vaccines after the drugmaker Johnson & Johnson on Tuesday said it would delay the distribution of its vaccine in Europe.
This came after US health agencies called for a pause of the jab
’s use on Americans while they investigated several rare incidents of blood clots.
"Infections are continuing to surge in Brazil and India, while cases of the Covid-19 variant first detected in South Africa have been found in the UK."
"“There is a bit of fear coming back,” said Paul Jackson, head of asset allocation research at fund manager Invesco."
"But with the returns on credit assets very weak, investors had few moneymaking opportunities beyond stocks, he said."
“All news is good news at the moment and everything is a pretext for equity indices to go up.”
"Real yields on US 10-year and 20-year Treasury bonds, which measure returns on government debt once inflation is taken into account, are below zero, pinned down by the US central bank buying about $120bn of the assets each month."
"“As investors sell debt securities to the Federal Reserve, they have to put the money into another asset,” said Jackson."
“So that is stocks or commodities.”
"Despite real yields remaining negative, nominal Treasury yields have risen rapidly from about 0.9 per cent for the 10-year note at the start of this year."
Investors sold off the debt in anticipation of a jolt of inflation from US president Joe Biden’s multitrillion dollar stimulus schemes.
"The Treasury market has steadied in recent weeks, however, as investors have accepted the view of Fed chair Jay Powell that surges in inflation would be temporary."
“Treasury markets are following chair
"Powell’s recommendation to treat the next few months of inflation data as throwaways — transient observations with little useful signal,” said Nicholas Colas of DataTrek Research."
"The dollar slid 0.2 per cent against a basket of currencies, while sterling and the euro both rose 0.2 per cent versus the greenback to $1.3783 and $1.1977, respectively."
"In Asia, Hong Kong’s Hang Seng index rose 1.4 per cent while the Shanghai Composite ended the day 0.6 per cent higher."
Tokyo’s Nikkei stock average was down 0.4 per cent while the S&P/ASX 200 in Sydney was up 0.7 per cent.
"A setback in the Covid-19 vaccine rollout has renewed demand for pandemic-era winners, helping to fuel gains in technology stocks and US government bonds."
Companies and asset classes that prospered in the past year as governments rolled out stay-at-home orders got an unexpected boost on Tuesday as US agencies called on distributors to cease using the Johnson & Johnson vaccine temporarily as it investigated incidents of severe side-effects.
"The Nasdaq Composite, which is stacked with technology and healthcare stocks, closed up 1.1 per cent."
"Ecommerce site Overstock.com posted gains of 7.6 per cent, while Zoom, the video conferencing platform, rose 6.6 per cent."
"The S&P 500, meanwhile, inched up 0.3 per cent to a record high, with large gains notched up by Apple, Etsy, Twitter and eBay."
"American Airlines took a hit, with the stock falling 1.5 per cent, while energy company Hess Corporation dropped 3.3 per cent."
"“For us, Covid always remained the most important risk for the recovery,” said Max Gokhman, head of asset allocation at Pacific Life Fund Advisors."
“Anything that offsets the recovery in any way is going to have a detrimental effect [on reopening plays].”
"US government bonds also rallied on Tuesday, despite a much-anticipated lurch higher in headline US inflation."
"The yield on the benchmark 10-year Treasury bond, which moves inversely to its price, fell 0.05 percentage points to 1.62 per cent after the “core” consumer price index excluding energy and food components rose 1.6 per cent."
The rise in core prices could have added fuel to a recent sell-off in Treasuries and the buying of financial and industrial businesses that stand to benefit from economies reopening.
"Instead, investors baulked at worsening coronavirus signs."
"The US yield on the 10-year note, which sets the tone for corporate and household borrowing costs worldwide, has climbed from about 0.9 per cent since the start of the year as traders bet that inflation sparked by US president Joe Biden’s multitrillion-dollar stimulus could prompt the Federal Reserve to rein in its ultra-supportive monetary policies."
"While inflation erodes the returns from fixed-interest securities such as government bonds, Federal Reserve officials have argued price rises will be temporary."
"Jay Powell, Fed chair, on Sunday described the US economy as being at an “inflection point” and cautioned new surges of Covid-19 could stall the recovery."
The Fed last year adopted a new strategy for accepting temporary increases in inflation above its 2 per cent target instead of reacting rapidly by tightening monetary policy.
"The central bank, which has purchased about $120bn a month of debt securities since March 2020 to support the economy through the pandemic, has also signalled it does not expect to raise interest rates until 2024."
"Stuart Rumble, multi-asset investment director at Fidelity International, said: “The market is giving the Fed more credibility right now.”"
"“We’ve probably seen the worst of the back-up in US Treasury yields, at least for a while.”"
"“If we have two more months of rising inflation, combined with a faster economic reopening and better employment data, it will become more difficult for the Fed to maintain its stance,” said Juliette Cohen, a strategist at Paris-based CPR Asset Management, For now"
"“I expect the market to give the Fed more credibility and more time,” added Cohen."
"In Europe, the region-wide Stoxx 600 share index closed up 0.1 per cent while London’s FTSE 100 was flat for the session."
"Brent crude, the international oil benchmark, rose 1 per cent to $64 a barrel."
"The dollar, as measured against a basket of currencies, slid 0.3 per cent."
A stock market rally that sent equities to record highs last week paused on Monday as investors refrained from placing big bets ahead of the start of earnings season in the US.
"The S&P 500, the blue-chip US share index, was less than 0.1 per cent lower, while the tech-heavy Nasdaq Composite slipped 0.4 per cent."
"In Europe, the Stoxx 600 equity benchmark closed down 0.5 per cent and the UK"
’s FTSE 100 fell 0.4 per cent.
"The Cboe’s Vix index of US equity volatility, often referred to as Wall Street’s fear gauge, hovered near a 13-month low and trading volumes were substantially lighter than seen over the past month, Bloomberg data showed."
The S&P 500 and the Stoxx 600 hit record highs on Friday ahead of US quarterly earnings reports that are expected to show the strongest profit growth in two-and-a-half years as the economic recovery accelerates from the affects of the coronavirus.
"US banks JPMorgan, Goldman Sachs and Wells Fargo are scheduled to report earnings this week."
Analysts estimate overall earnings for the broad-based S&P 500 index of big US companies will rise 25 per cent in the first quarter compared with the same period last year.
"This would mark the biggest increase in profits since the third quarter of 2018, according to analysis by Credit Suisse."
"Investors, however, remain wary."
"Companies’ outlook statements will be under scrutiny for clues about whether coronavirus curbs, a computer chip shortage and other supply chain logjams will hinder future earnings growth."
"The corporate tax rises that US president Joe Biden was lobbying for might also add pressure to record high valuations, analysts said."
"“While policymakers have provided tremendous support for the economy with both monetary accommodation and fiscal stimulus, the lockdowns have reduced supply, destroying it in some cases,” said Mike Wilson, chief US equity strategist for Morgan Stanley."
"“Earnings season may bring bad news on costs and margins,” he added, particularly with respect to outlooks for the second quarter."
"“Valuations are definitely a bit of a headwind,” said Supriya Menon, senior multi-asset strategist at Pictet."
"“The market for the rest of the year will definitely be driven by earnings growth rather than a rise in multiples sustained by liquidity,” she added."
“And focus is turning to anticipated tax hikes and what they will mean for earnings for 2022 onwards.”
"In fixed income, the US government bond market cleared two hurdles on Monday, following a $58bn sale of three-year Treasury notes and another $38bn auction of 10-year securities."
"The first saw solid demand, with the Treasury offloading the shorter-dated debt at a yield of 0.376 per cent."
"Demand for the longer-dated benchmark bonds was more tepid, with investors demanding a slightly higher yield than prior to the sale, at 1.68 per cent."
"The yield on the 10-year Treasury, which moves inversely to its price, was little changed following the auction."
"For the day, it was up 0.01 percentage points to 1.67 per cent from the close of trade on Friday."
"The US government is set to sell $370bn of the debt this week, including the sales on Monday."
Treasury yields have risen sharply during 2021 as investors are poised for a jolt of inflation from Biden’s stimulus proposals.
"However, concerns about a ramp-up in bond sales were balanced by comments from Federal Reserve chair Jay Powell over the weekend that signalled no change to the central bank’s supportive monetary policies."
"“Rising rates over time are generally not great for stocks,” said Mitch Rubin, the chief investment officer of RiverPark Funds."
"“But if the economy is strong and earnings are growth is fast, than that earnings growth may be more valuable to investors.”"
"The dollar, as measured against a basket of big currencies, slipped 0.1 per cent."
"Sterling rose 0.2 per cent against the dollar to purchase $1.374, while the euro was only marginally higher."
"Brent crude, the international oil benchmark, settled 0.5 per cent higher at $63.28 a barrel."
Additional reporting by Colby Smith
"Global stocks rallied on Thursday, pushing further into record territory, after the US Federal Reserve underscored its commitment to support the recovery in the world’s largest economy."
"Technology was the leading sector within the benchmark S&P 500, helping the blue-chip index close 0.4 per cent higher in New York, adding to the record high set a day earlier."
"Wall Street’s tech-heavy Nasdaq Composite, which is full of growth stocks whose valuations are flattered by lower interest rates, climbed 1 per cent."
"Investors looked past an increase in new US jobless claims that came in higher than anticipated, marking the second consecutive week of rising figures."
"The weekly data highlighted the uneven path to recovery in the labour market after non-farm payrolls last week showed the US economy added 916,000 jobs in March, exceeding economists’ expectations."
"Charles Hepworth, investment director at Gam Investments, said markets were likely to become less focused on jobless claims “as the vaccine rollout continues at pace and"
the expectation is that companies will rehire lost labour as the economy becomes less constricted by virus restrictions”.
"GameStop shares whipsawed after the US retailer named Ryan Cohen, its largest shareholder who is popular among the company’s fans on Reddit, as its next chair."
The shares popped at the opening bell but then dropped to trade 4.3 per cent lower for the day.
Thursday’s rise in tech stocks follows a modest rally in US Treasuries that has taken the yield on the 10-year note from a 14-month high of 1.77 per cent in March to about 1.62 per cent.
"It has stalled the heavy selling in recent months as investors worried that the Fed’s ultra-loose monetary policy, alongside $1.9tn of fiscal stimulus, would supercharge the economic recovery from the pandemic and unleash inflation."
"Minutes from the central bank’s policy meeting, released on Wednesday, showed Fed policymakers were largely sanguine about the chances of a sustained rebound in inflation and committed to keep policy easy until employment recovered from its pandemic hit."
"“Those big mental readjustments by the market contemplating the growth outlook and what that would mean for inflation have been fully digested,” said April LaRusse, head of investment specialists at Insight Investment."
"Europe’s Stoxx 600 index closed up 0.6 per cent, pushing it above the record set on Tuesday that wiped out its pandemic losses."
"The UK’s mid-cap FTSE 250 index hit its second high this week, climbing 0.4 per cent, while its larger peer, the FTSE 100, ended the session up 0.8 per cent."
"Gold climbed more than 1 per cent to $1,756 per troy ounce, a one-month peak, while the US dollar dipped 0.5 per cent against a basket of big currencies."
Stock traders were unmoved by news of a sweeping reform to international corporate taxation proposed by the US administration that could lead to hefty tax bills for some multinationals.
"Samy Chaar, chief economist at Lombard Odier, said the squeeze on earnings from tax rises would be counterbalanced by the high level of stimulus boosting demand."
"“If what happens on the tax front results in more spending, it will be seen as a net positive in the end,” he added."
Asian bourses closed largely in positive territory on Thursday.
"Hang Seng added 1.2 per cent, Australia’s S&P ASX 200 climbed 1 per cent and China’s CSI 300 advanced 0.2 per cent."
Topix shed 0.8 per cent.
"A rally in stocks, fuelled by hopes of a rapid rebound in global economic growth, paused on Wednesday a day after Europe’s benchmark index erased its pandemic losses."
"Wall Street’s blue-chip S&P 500 index rose 0.2 per cent to close at a new record high, while the Nasdaq Composite slid 0.1 per cent."
"The yield on 10-year US Treasuries, an important benchmark for global borrowing, rose 0.01 percentage points to roughly 1.67 per cent after details of the Federal Reserve’s"
most recent monetary policy meeting showed policymakers had mostly dismissed concerns that inflation would roar ahead.
"The Fed’s commitment to supporting the economy until the recovery has gathered steam, alongside US president Joe’s Biden’s multitrillion-dollar stimulus plans, have boosted investor hopes on the pace of the rebound but also set off jitters about a possible jolt of inflation."
Policymakers at the US central bank signalled they would continue with asset purchases until the labour market had more fully healed from the pandemic.
"“We appreciate their desire to see realised improvement in actual economic data instead of pre-emptively adjusting policy based upon better forecasts, but the unwillingness to acknowledge the degree of improvement looks increasingly challenged,” said Bob Miller, the head of fundamental fixed income in the Americas for BlackRock."
Some market measures have shown that investors are nonetheless pricing in interest rate rises sooner than officials have signalled.
"“The market is in wait-and-see mode,” said Emmanuel Cau, head of European equity strategy at Barclays, as traders weigh a substantial stock rally during the first quarter."
“The bar for positive surprises is going higher because people are positioned for good news.”
The continent-wide Stoxx Europe 600 index closed down 0.2 per cent after surpassing its February 2020 high and wiping out its pandemic losses a day earlier.
"Beyond UK bourses, stocks across the region broadly finished lower for the day."
"FTSE 100 rose 0.9 per cent while the mid-cap FTSE 250, which is more focused on domestic companies, climbed 0.8 per cent to a record high."
"“The FTSE 250 is riding an optimism-fuelled wave as the UK gears up for life after lockdown,” said Danni Hewson, financial analyst at AJ Bell."
"The country’s vaccine rollout coupled with its road map out of lockdown was “fostering belief that the recovery is sustainable this time”, Hewson added."
"Equities in Europe have also been lifted by a rotation into value stocks, which are well represented in the continent’s main indices."
"But while so-called value investments have outpaced faster growing companies this year, the gap between the two has narrowed in recent days."
"Diane Jaffee, a portfolio manager with the asset manager TCW, noted that the recent trading debacle surrounding Archegos Capital Management had pushed some investors away from the value names that had rallied sharply this year."
"Archegos used large amounts of leverage to trade in companies such as ViacomCBS and Discovery, supercharging the shares for a time before they ultimately collapsed in late March."
"“That uncertainty is creating a little bit of momentum towards the tried and true and growth,” she said."
“I think that investors got a little nervous with all the blurring with what was real or what was leveraged and have decided to hunker back down to the traditional growth stocks until they can really taste what is happening with a company’s earnings.”
"Shares in Microsoft, Amazon and Google-owner Alphabet are all up more than 5 per cent since the start of the month."
"Markets in Asia had a mixed session, with Japan’s Topix and Australia"
’s S&P/ASX 200
"adding 0.7 per cent and 0.6 per cent, respectively."
Shanghai composite shed 0.7 per cent while Hong Kong’s Hang Seng dropped 0.9 per cent.
US stocks reached new heights on Monday after a report showed activity in America
services sector accelerated last month at the fastest pace on record.
"The blue-chip S&P 500 index rose 1.4 per cent to end the trading session at a record 4,078."
"The technology-heavy Nasdaq Composite gained 1.7 per cent to trade at 13,706, still shy of the all-time high above 14,000 it struck in February."
"The advance was broad, with most of the big S&P 500 sectors rising, led by technology stocks."
Monday’s gains accelerated after data from the Institute for Supply Management showed activity in the services sector rose at a rapid clip in March.
"The gauge, one of the most timely and closely tracked proxies for economic output, rose to 63.7 in March from 55.3 the month before."
Economists polled by Bloomberg forecast a rise to 59.
The reading suggested the rate of growth in the industry that accounts for the bulk of gross domestic product surged to an all-time high last month.
"All 18 services industries reported growth, the report stated."
"The strong reading, which is based on a survey of industry executives, follows similarly buoyant data released last week on the manufacturing sector."
"“Respondents’ comments indicate that the lifting of coronavirus pandemic-related restrictions has released pent-up demand for many of their respective companies’ services,” said Anthony Nieves, chair of ISM’s business survey committee."
"Marvin Loh, senior global macro strategist at State Street, said against this backdrop of strong economic data and a Federal Reserve that was committed to its ultra-loose monetary policy stance, the “path of least resistance” for stocks was higher."
“A lot of the good news is built in . . .
"but I do see the potential for [investors] to continue to bid up risky assets, just because there is so much liquidity and it remains a supportive environment,” he added."
"The report also comes after data released on Friday, while Wall Street equities were closed, showed the US economy added 916,000 jobs in March, a figure that exceeded economists’ expectations and provided the latest indication the labour market was recovering."
"“The remarkable March payroll gain is the leading edge of the coming hiring boom,” said Lydia Boussour, lead US economist at Oxford Economics."
"“While employment remains 8.4m lower than pre-Covid [levels], it is poised for an impressive run in the coming months as the combination of expanding vaccine distribution and generous fiscal stimulus leads to a hiring spurt.”"
"She forecasts 7.5m jobs will be added this year, with the unemployment rate eventually falling to 4.3 per cent from 6 per cent in March."
Investors and analysts have said the Biden administration’s
$1.9tn fiscal stimulus programme has added fuel to the powerful Wall Street equities rally that followed the coronavirus-triggered stock market lows last March.
"US government bonds, which unlike equities were open on Friday, came under pressure at the end of last week as investors continued to amplify their expectations for a vigorous economic recovery."
"The benchmark 10-year yield ended the week at 1.72 per cent, not far from a recent high above 1.77 per cent."
The yield slipped roughly 0.01 percentage points on Monday to trade at about 1.7 per cent.
Investors are now looking forward to a huge infrastructure spending scheme pitched last week by Joe Biden.
"The president has indicated that this round will be partially funded by increased taxes on US corporations, something expected to place downward pressure on profits."
"In commodities markets, oil prices declined."
"Brent, the international benchmark, fell around 4 per cent to $62 a barrel, while US marker West Texas Intermediate slipped by about the same margin to $58.77."
"Elsewhere, Japan’s Topix index rose 0.5 per cent while South Korea"
Kospi advanced 0.3 per cent.
"Markets in China, Hong Kong, the UK and most of Europe were closed for holidays."
"Wall Street touched a record high, powered by technology stocks, as the White House released details of President Joe Biden’s multitrillion-dollar US stimulus plan that aims to boost funding for scientific research and broadband as well as infrastructure and healthcare."
"The S&P 500 index closed up 0.4 per cent on Wednesday, after briefly touching an all-time high earlier in the day, with the tech sector topping the blue-chip index’s leaderboard."
"The tech-focused Nasdaq Composite, which has been hit by rising bond yields this quarter, had added 1.5 per cent by the closing bell."
"A summary of the $2tn plan released ahead of Biden’s speech in Pittsburgh later on Wednesday pledged to “advance US leadership in critical technologies and upgrade America’s research infrastructure”, address a “stark digital divide” and “build high-speed broadband infrastructure to reach 100 per cent coverage”."
"Along with the infrastructure package, Biden has proposed various corporate tax increases to foot the bill, which will hit companies’ earnings."
But analysts say the prospect of another round of government spending should outweigh its costs.
"“The willingness of the market to look through these tax increases is very rational,” said Nancy Prial, a senior portfolio manager at Essex Investment Management."
"“The markets are looking at the amount of stimulus spending that is being proposed,"
which . . 
is the kind of spending that will lead to really strong economic growth.”
"But investors raised doubts over whether Biden’s plan would survive weeks of delicate negotiations with Republicans, seeing that the Democratic party holds razor-thin majorities in both chambers of Congress."
"“The key question is how easily will this new plan be passed,” said Kevin Thozet, a member of the investment committee at the French asset manager Carmignac."
"Brian Gardner of Stifel said: “Although we think there is a reasonable chance that Congress will pass some form of the Biden plan, it will be tougher to pass this plan than it was to pass the Covid relief bill."
"“Some divisions are already apparent among Democrats,” he added."
"The yield on the benchmark 10-year Treasury note, which sets the tone for borrowing costs worldwide, rose 3 basis points to 1.73 per cent as investors awaited details on how the latest stimulus would end up being funded."
This follows a quarter of heavy selling that sent the yield on the 10-year note racing up from about 0.9 per cent at the start of the year.
"“What we are all waiting to find out is how it will be paid for,” said Remi Olu-Pitan, multi-asset fund manager at Schroders."
"A bias towards borrowing over taxation could cause further volatility in US bond markets, she added, in a trend shaking up the traditional use of Treasuries as low-risk assets that cushion portfolios from stock market shocks."
"“Government bonds have moved from being the risk-free and stable-return asset to one that is return-free and risky,” she said."
"“With fiscal stimulus being used increasingly to heal the effects of the pandemic, I think this could be the theme for the next decade.”"
"In Europe, the Stoxx 600 index closed down 0.2 per cent but remained near pre-pandemic highs."
"The region-wide benchmark rose more than 7 per cent this quarter, pushed higher by banks and industrial businesses that will benefit from a global economic recovery."
’s FTSE 100
fell 0.9 per cent.
"In Asia, both the Shanghai Composite and Hong Kong’s Hang Seng index ended the day lower, by 0.4 per cent and 0.7 per cent respectively, while the Nikkei in Tokyo fell 0.9 per cent."
Sydney’s S&P/ASX 200 was up 0.8 per cent.
"In currencies, the dollar sild 0.1 per cent against a basket of its peers, while the euro added 0.1 per cent to purchase $1.17 and sterling gained 0.3 per cent to just under $1.38."
Bank shares dropped on Monday after a fire sale of equities by a US investment group led to loss warnings from two big investment banks and left traders bracing for further repercussions.
Credit Suisse shares plunged almost 14 per cent after the bank said it faced large losses when its client Archegos Capital Management was forced into a huge unwinding of assets.
"Japanese bank Nomura also warned of a significant blow related to the fund, sending its stock down 16 per cent in the biggest sell-off for the company on record."
"This followed a $20bn fire sale on Friday triggered by Archegos, a private investment company founded by former hedge fund manager Bill Hwang."
"Shares in top US banks underperformed, with Morgan Stanley closing 2.6 per cent lower and Citigroup dropping 2 per cent."
European peer Deutsche Bank sank 3.3 per cent.
"Matt Stucky, equities portfolio manager at Northwestern Mutual, said however that bank stocks were unlikely to see long-term damage from the Archegos fallout, despite “isolated volatility” in the sector Monday."
"“The broader themes are still fully intact — that’s reopening, that’s reserve releases,” he said."
“There’s a huge tailwind to the financials sector which is why things have accelerated so quickly there from summer 2020 . . . 
"to where we are today, where there’s reason to be optimistic.”"
"ViacomCBS, in which Archegos had a large position, tumbled as much as 9 per cent in the morning, even after losing half of its market value last week."
"Discovery, another stock linked to Hwang’s fund, fell as much as 5 per cent."
"Both stocks later recovered slightly, with Viacom down nearly 7 per cent and Discovery nearly 2 per cent lower."
"The morning moves pushed big US indices down at the beginning of the trading day, before they began clawing back losses."
"The blue-chip S&P 500 index slipped 0.1 per cent on the day, while the technology-focused Nasdaq Composite fell 0.6 per cent."
"Tom Holland, of research house Gavekal, warned that brokers might have acted swiftly to reduce exposure to Archegos because they were fearful of “other deleveraging episodes”."
"The haste with which banks reduced their exposure to Archegos “suggests Friday’s deleveraging may not be a one-off, but part of a developing pattern”, Holland said."
But others argued the fallout could have been worse and that the signs of contagion remained limited.
"“Given the broad market reaction, I think we can agree that contagion risk is manageable, which is something I always worry about when a large market participant is in distress,” said Anik Sen, global head of equities at PineBridge Investments."
"“The macro and liquidity backdrops are solid right now,” he added, alluding to the enormous amount of fiscal stimulus filtering through the economy and the loose monetary policy being followed by the US Federal Reserve."
"In Europe, the Stoxx 600 equity benchmark closed up 0.2 per cent and the UK"
’s FTSE 100 slipped 0.1 per cent.
Government bonds also dropped in price as ongoing concerns about US inflation weighed on appetite for the fixed-interest securities.
"The yield on the 10-year US Treasury, which moves inversely to its price, rose 0.03 percentage points to 1.7 per cent."
Germany’s equivalent Bund yield rose 0.04 percentage points to minus 0.32 per cent.
"The dollar, as measured against a basket of currencies, climbed 0.2 per cent to trade at around its highest level since late November, before retreating slightly."
"Gold fell roughly 1 per cent on Monday to $1,711 a troy ounce, as traders anticipated a recovery in the US economy from President Joe Biden’s infrastructure spending package, which is due to be unveiled on Wednesday."
The precious metal has fallen 8 per cent this year due to a stronger dollar and rising US bond yields.
"Gold provides no yield, meaning it tends to suffer in a rising yield environment."
A recovery in the global equity markets has also limited gold’s appeal.
"Silver also fell nearly 2 per cent to $25 an ounce, while palladium was down almost 6 per cent at $2,535 an ounce."
"Brent crude, the international oil benchmark, rose 0.7 per cent to $65 a barrel after the Ever Given, the container ship blocking the Suez Canal, was refloated."
US equities ended the week higher and global bond markets weakened on Friday as investors grappled with a tepid Treasury auction result and data showing a rush to cash after weeks of volatile trading.
"At the market close, the blue-chip S&P 500 index had climbed to 1.7 per cent, while the technology-focused Nasdaq Composite ended up 1.2 per cent to reverse post-lunchtime losses."
"Yields on the US 10-year note gained 0.04 percentage points to 1.67 per cent, the highest mark since Monday, as investors sold the debt."
The move higher in yields began late on Thursday after the US Treasury department struggled to sell $62bn worth of seven-year securities.
"“The weak seven-year auction is a timely reminder that the backdrop points to higher rates,” ING analysts said."
"Investors have been wary of the inflation risk that comes with holding government bonds, as President Joe Biden’s"
vast stimulus plan raises expectations that the US economy will run hot.
"Blake Gwinn, head of US rates strategy at NatWest Markets, said the auction was “not a good sign for demand”, but compared with the “disaster” of the previous seven-year auction in February, which rekindled fears about the health of the $21tn US government bond market, it was something of a “relief” for investors."
"Ian Lyngen, head of US rates strategy at BMO Capital Markets, characterised demand as “uninspired but not horrific”, adding that the sale “provided little definitive evidence of either flagging sponsorship for Treasuries or an indisputable vote of confidence”."
"Traders ploughed $45.6bn into cash funds in the week to Wednesday, the largest flow since April last year, according to Bank of America research based on EPFR data."
"The report also showed $1.8bn flowing into Treasury Inflation-Protected Securities, the third-largest influx on record, as investors continued to position for higher US price growth."
"European government bonds weakened, with yields on the German and UK 10-year securities both rising about 0.03 percentage points."
"Elsewhere on the continent, stocks climbed."
The region-wide Stoxx Europe 600 closed up 0.9 per cent and the UK
FTSE 100 was 1 per cent higher.
"“I think what’s interesting in Europe is the contrast between equity markets and health woes,” said Sebastian Mackay, multi-asset fund manager at Invesco, adding that recent economic data suggested that Europe’s economies continued to grow despite faltering rollouts of Covid-19 vaccinations."
"“We’re probably in a cyclical upswing for equities,” said Mackay."
"“The rise has been fuelled by the prospect of the reopening of the global economy, but valuations are already quite stretched.”"
Oil markets remained unsettled as efforts to unblock the Suez Canal and restore global trade routes continued to face difficulties.
"Paola Rodríguez-Masiu, senior oil market analyst at Rystad Energy, said traders took the view that the canal blockage was “becoming more significant for oil flows and supply deliveries than they previously concluded”."
"Brent crude, the international benchmark, rose 4.2 per cent to $64.49 a barrel, while West Texas Intermediate, the US marker, climbed by a similar margin to $60.99 a barrel."
Stocks on Wall Street rose and US government bonds stabilised on Monday after the longest losing streak since 2018 for Treasuries.
"The tech-heavy Nasdaq Composite gained 1.2 per cent by the market close in New York, rebounding from another turbulent week."
The blue-chip S&P 500 ended 0.7 per cent higher.
"Last week, both indices sold off sharply on Thursday as yields on the benchmark US 10-year note jumped past another milestone to briefly trade above 1.75 per cent."
"The yield-induced stock market volatility was particularly pronounced among big tech shares, which often have a low-rate environment heavily baked into their high valuations."
"On Monday, US Treasuries pared back some of last week’s losses, with the yield on the 10-year note falling 0.04 percentage points to 1.68 per cent."
"“It does seem axiomatic that the Nasdaq is inversely correlated with Treasury yields at this point,” said Bruce Monrad, a portfolio manager at Northeast Investors Trust."
“That particular paradigm seems to be intact today.”
The calm start to the bond market’s trading week follows almost two months of rising yields and comes despite the US Federal Reserve announcing on Friday that it would not extend a loosening of bank capital requirements that had previously supported the market.
The Fed also reiterated last week its intention to keep stimulus flowing even in the event of a pick-up in inflation.
“The markets are digesting what the Fed said . . . 
The Treasury yield is elevated from where it has been in the past
"but it’s not the near-vertical climb that we have seen recently,” said Dean Cheeseman, portfolio manager at Janus Henderson."
"In Europe, the region-wide Stoxx 600 closed up 0.2 per cent, while Frankfurt’s Xetra Dax and London’s FTSE 100 both climbed 0.3 per cent."
Europe’s rollout of Covid-19 vaccines hit a roadblock last week following wrangling among the continent’s leaders over the efficacy and availability of the Oxford/AstraZeneca jab.
France recently imposed a four-week lockdown in Paris and Italy announced stricter curbs over Easter.
"The rising cases in Europe have led to doubts over the viability of this summer’s holiday season, sending airline and other travel shares tumbling on Monday."
A 5.4 per cent fall in budget airline easyJet helped drag the region’s travel and leisure stocks 0.7 per cent lower.
"“The only way to get a handle on these more virulent strains is to do a lockdown and that has a knock-on effect on the economy,” said Cheeseman, adding that impediments to the rollout of Covid-19 vaccines would be particularly detrimental to tourism-dependent nations in southern Europe."
Turkish markets took a heavy blow on Monday after the country’s president fired its central bank governor.
"Per Hammarlund, chief emerging market strategist at Swedish bank SEB, said Turkey’s central bank “will be left with two choices: either pledge to use interest rates to stabilise markets, or to impose capital controls”."
Oil remained volatile after suffering from its biggest weekly fall since October on demand worries.
"Brent crude, the international benchmark, fell 0.3 per cent to $64.35 a barrel on Monday and West Texas Intermediate, the US benchmark, rose 0.2 per cent, to $61.55 a barrel."
"In Asia, China’s CSI 300 closed 1 per cent higher, South Korea"
Kospi lost 0.1 per cent and Hong Kong’s Hang Seng fell 0.4 per cent.
Wall Street wavered on Friday as bank stocks fell and technology shares rebounded from sharp losses the day before.
"The blue-chip S&P 500 index fell 0.1 per cent, reversing course after breaking into positive territory in afternoon trading."
"The Nasdaq Composite advanced 0.8 per cent, having tumbled 3 per cent on Thursday, when the yield on the 10-year US Treasury note briefly topped 1.75 per cent."
"For the week, the S&P 500 and Nasdaq Composite posted declines of 0.8 per cent apiece."
"Friday’s choppy trade came on what is known as “quadruple witching” — a day that brings the simultaneous expiration of stock index futures, stock index options, stock options and single stock futures and drives high volumes that can sharply move markets in the final hour of trade."
"More than 16.9bn shares traded across US exchanges, including the New York Stock Exchange and Nasdaq, more than 41 per cent higher than the average daily volume over the past year."
"Peter Boockvar, chief investment officer at Bleakley Advisory Group, attributed the moves to “expiration noise”, but added that “the buying-on-the-dip mentality doesn’t die easily notwithstanding the sharp rise in longer-term interest rates over the past few months”."
"Meanwhile, the yield on the 10-year Treasury ticked down 0.001 percentage points to 1.728 per cent."
US Treasuries had initially sold off again on Friday after the Federal Reserve said it would not extend a loosening of bank capital requirements that it introduced in March last year to help soothe the bond market at the peak of the Covid-19 crisis.
"The decision weighed on bank stocks, with the S&P 500 financials sector down 1.2 per cent."
"Still, the Fed’s promise to explore a more permanent overhaul to the supplementary leverage ratio rules to prevent strains in the Treasury market and broader financial system could “soften the adverse impact” on yields, said Kathy Bostjancic, economist at Oxford Economics."
"In Europe, the region-wide Stoxx 600 index lost 0.8 per cent and Germany’s"
"Xetra Dax dropped 1.1 per cent, while the UK"
’s FTSE 100
fell 0.9 per cent.
"Declines across stock markets in Europe and Asia were spurred by this week’s rise in US Treasury yields, which borrowing costs in many financial markets are benchmarked against."
"Rising yields, which reflect falling demand for bonds, have forced investors to reprice the value of high-growth shares to reflect changes in future earnings expectations."
"This sell-off in sovereign debt was also “spilling into wider markets”, said Robert Carnell, head of Asia-Pacific research at ING, pointing to declines in the price of gold and oil."
Since the start of this year the price of the precious metal is down more than 8 per cent.
"However, the price of oil fluctuated on Friday and rose towards the end of European trading."
"Brent crude, the international benchmark, rose 2 per cent to $64.53 a barrel after dropping 7.6 per cent overnight."
"West Texas Intermediate gained 2.4 per cent to $61.42 a barrel after closing down 7.1 per cent on Thursday, the US marker’s biggest one-day fall in six months."
"In Asia, China’s CSI 300 index of Shanghai and Shenzhen-listed stocks closed down 2.6 per cent, while Hong Kong’s Hang Seng dropped 1.4 per cent and South Korea’s"
Kospi index lost almost 1 per cent.
"In Japan, the benchmark Nikkei 225 fell 1.4 per cent while the Topix, another share index, gained 0.2 per cent."
The moves came as the central bank scrapped its pledge to buy an average of ¥6tn ($55.2bn) a year in equities following its biggest policy review since 2016.
The divergence between the two indices followed the Bank of Japan
’s announcement that it would concentrate its exchange traded fund purchases solely on those that track the Topix.
"The Nikkei 225 was led lower by Fast Retailing, the parent of the clothing chain Uniqlo, which has a large weighting in that index."
Additional reporting by Leo Lewis in Tokyo
"A rally in US stocks lost steam on Tuesday, while Treasury yields steadied, as investors digested a large influx of new government debt supply with ease."
"The S&P 500 snapped a five-day winning streak to close lower by 0.2 per cent, while the Nasdaq Composite eked out a small gain."
It rose by 0.1 per cent.
"Long-dated US government bonds, meanwhile, pared back earlier losses in afternoon trading in New York following a $24bn auction of 20-year bonds that saw strong demand — the debt was offloaded at a yield of 2.29 per cent."
Investors have been paying keen attention to US Treasury auctions following a poor sale late last month that prompted heavy selling and hectic price moves in the world’s largest bond market.
"The yield on the 30-year bond, which falls as prices rise, was roughly 0.01 percentage point higher for the day, at 2.37 per cent, having previously traded above 2.39 per cent."
The 10-year Treasury note was steady at 1.61 per cent.
"Traders are in a bit of a holding pattern ahead of the Federal Reserve’s policy gathering, which ends on Wednesday."
"Brian O’Reilly, head of market strategy at Mediolanum Asset Management, said the meeting would be the central focus for investors this week."
"“There’s a delicate balancing act between the recovering US economy and rising inflation,” he added."
“But we don’t expect a significant policy change from [Fed chairman Jay Powell].”
"Investors are also keeping a close eye on the broader implications of President Joe Biden’s $1.9tn stimulus bill, which passed through Congress last week and is expected to inject an additional wave of liquidity into the US equity market."
"“It is an extraordinary amount of stimulus,” said Chris Dyer, director of global equity at Eaton Vance, a US fund manager."
“High-profile technology is likely to be a beneficiary.”
"The Vix — an index that tracks expected volatility in US equities — fell to a 12-month low, returning to its long-run average of about 20."
"“Volatility is continuing to come down,” Dyer said."
"“This could be an indication of greater confidence, but also complacency.”"
"In Europe, the region-wide Stoxx 600 closed up 0.9 per cent and Germany’s"
Xetra Dax added 0.7 per cent.
’s FTSE 100 gained 0.8 per cent.
"“We’re at the start of a multiyear period of outperformance of international equities,” said Dyer, adding that the recovery favoured value stocks — such as equities in the finance and energy sectors — which have a heavier weighting in European and Asian indices."
"In commodities, the price for palladium, a precious metal used in catalytic converters, jumped more than 4 per cent on Tuesday to $2,507 an ounce, its highest level since February last year."
The leap in price comes after the Russian miner Norilsk Nickel cut its forecast for output following flooding at two of its mines.
"Norilsk, the world’s largest producer of palladium, said the company’s Oktyabrsky and Taimyrsky mines in the Russian Arctic would take three to four months to return to full capacity."
"As a result, its production of platinum group metals — palladium, platinum and rhodium — would fall by 710,000 ounces, which equates to about 8 per cent of global palladium supplies, according to analysts at RBC."
"Oil slipped on Tuesday, bringing it down modestly from one-year peaks"
reached earlier this month.
"The US marker West Texas Intermediate fell 1.1 per cent to $64.66 a barrel, while the international benchmark Brent dropped 0.9 per cent to $68.24 a barrel."
"In Asia, China’s CSI 300 index closed 0.9 per cent higher, Hong Kong"
Hang Seng gained 0.7 per cent and South Korea’s
Kospi added 0.7 per cent.
Stocks on Wall Street climbed to a new record and US bond yields slid on Monday as investors looked ahead to a key Federal Reserve meeting later this week.
"The blue-chip S&P 500 index rose 0.6 per cent, led by shares of utilities and real estate groups as well as big technology companies such as Apple."
The tech-heavy Nasdaq Composite rose just over 1 per cent.
"The firmer stock action came as US Treasuries, which had sold off sharply last week, recovered modestly on Monday."
"The yield on the 10-year note slid 0.02 percentage points to 1.6 per cent, having hit a 13-month peak above 1.64 per cent on Friday, while the yield on the 30-year US bond dipped by the similar same margin to 2.35 per cent."
"The higher yields have already taken some of the shine off high-growth tech stocks, given their valuations have been underpinned by low interest rates."
"And while the Nasdaq advanced on Monday, with strong gains by unprofitable tech companies, it has not yet reclaimed a new high like the benchmark S&P 500."
"A two-day meeting of the Fed’s policy-setting panel, which ends on Wednesday, will attract particularly close scrutiny from global traders after the recent sharp retreat in the Treasury market."
"While rates remain low by historic standards, the quick rise in Treasury yields has unsettled investors and prompted debate over the US central bank’s policies."
"This week’s meeting of the Federal Open Market Committee “will likely dictate where yields and risk trade for days, if not weeks ahead”, said Jim Reid, research strategist at Deutsche Bank."
"“Chair [Jay] Powell is likely to emphasise that significant uncertainties remain and that the recovery has a long way to go, particularly the labour market,” he added."
"Melissa Davies, chief economist at the broker Redburn, said there were two divergent forces at play."
"“There’s the concern over inflation, which is pushing up yields, and there’s the stimulus, but I think we’re in more of a bullish environment in the short term,” she said."
"After President Joe Biden signed into law a $1.9tn relief package last week, which included direct payments to most Americans, Davies said some people would use the cheques to pay for necessities and others would invest the money or pay down debt."
"“I would think that some of it will go into tech stocks,” she added."
"According to a Deutsche Bank survey of their online brokerage account users, investors plan to use 37 per cent of their $1,400 stimulus cheques in the stock market, with the figure varying by age and income level."
"In Europe, the region-wide Stoxx 600 index closed flat, while Germany’s Xetra Dax lost 0.3 per cent and the UK"
’s FTSE 100 dropped 0.2 per cent.
"In Asia, China’s CSI 300 index closed down 2.2 per cent, Hong Kong"
Hang Seng gained 0.3 per cent and South Korea’s
Kospi slipped 0.3 per cent.
The drop in China’s market follows a series of pullbacks that have come amid rising concern the country will tighten fiscal and monetary policy in the face of what a senior official described recently as “bubble” risks.
Oil prices hovered close to 13-month highs as the prospect of economic normalisation and curbs on supply pushed prices higher.
"Brent crude, the international benchmark, settled 0.5 per cent lower at $68.88 a barrel while the US marker West Texas Intermediate dipped 0.3 per cent to $65.39 a barrel."
"“We’ve seen the Opec+ [producing countries] maintaining their limit on oil supply and we’re seeing more economies reopening, which means there’ll be more of a demand on oil,” said Sophie Chardon, cross-asset strategist at the Swiss bank Lombard Odier, pointing to the decision earlier this month by the Opec cartel and its allies such as Russia to refrain from a big supply boost."
"Government bond markets suffered a fresh bout of selling on Friday, halting a rally in tech stocks, after President Joe Biden said the US aimed to make vaccinations available to every adult by the start of May."
"The yield on 10-year US Treasuries jumped to 1.62 per cent, breaking through the 13-month high struck during a choppy session a week ago."
"Markets were experiencing “powerful cross-currents”, said Lauren Goodwin, economist and multi-asset portfolio strategist at New York Life Investments."
"As Biden’s $1.9tn stimulus bill leads to growth, inflation and yield expectations, she says, speculation surrounding an interest rate decision next week by the Federal Reserve has also fuelled volatility."
"Following the bond sell-off, Wall Street’s Nasdaq Composite retreated 0.6 per cent by the market close as the tech rally that had powered US indices to record highs this week careened off course."
The blue-chip S&P 500 rose 0.1 per cent.
"Large-cap tech led the losses, with Apple and Amazon both falling 0.8 per cent, while Alphabet, the parent company of Google, slid 2.4 per cent."
"The stimulus bill and the European Central Bank’s pledge to increase the pace of its bond-buying programme have launched “a wall of money coming like we haven’t seen since the second world war”, said Didier Rabattu, head of equities at Lombard Odier Investment Management."
"“The Nasdaq is made of growth companies, it’s a pretty volatile index."
"In this environment, when rates go up, investors reprice the value of growth.”"
"In Europe, the region-wide Stoxx 600 slid 0.3 per cent in the afternoon, while London’s FTSE 100 rose 0.3 per cent and Frankfurt’s"
Xetra Dax dropped 0.5 per cent.
"On the continent, yields on the UK’s 10-year gilt also leapt near a one-year high, trading at 0.83 per cent, but the sell-off in German debt was less severe, with the yield on the equivalent Bund up 0.04 percentage points at minus 0.29 per cent."
"The latest jolt of market jitters came after Biden said every US adult would be eligible for a Covid-19 vaccination by May 1, and touted “some real progress” in America’s fight against the pandemic in a televised address."
The US president set the July 4 Independence Day holiday as a new target for a return to some normality.
"Bond markets have been volatile in recent weeks over the prospect that a swift US economic recovery would stoke inflation, which erodes the value of bonds’ interest payments."
"In Asia, China’s CSI 300 index closed up 0.4 per cent, Hong Kong"
Hang Seng fell 2.2 per cent and South Korea’s
Kospi gained 1.4 per cent.
"Stocks declined on Monday as Treasury yields neared a one-year high, with shares of big technology companies and beneficiaries of the pandemic leading Wall Street lower."
"The benchmark S&P 500 slid 0.5 per cent, as declines by mega-cap tech groups like Apple, Netflix and Amazon offset gains by more than 340 companies in the index."
"The technology-heavy Nasdaq Composite dropped 2.4 per cent, pushing it into a technical correction — indicating that it has fallen more than 10 per cent from a peak it hit last month."
"The tech declines have been spurred by the rise in long-term interest rates, as investors pencilled in a faster economic recovery."
"That view in markets was buttressed by the Senate passage of US president Joe Biden’s $1.9tn stimulus bill, which includes $1,400 payments to many Americans."
"“If it does make it through the House relatively unscathed then you may see another round of US growth upgrades and probably more concerns about yields and inflation,” said Jim Reid, research strategist at Deutsche Bank."
“The battle royale will continue.”
"Selling of US sovereign debt continued on Monday, with the yield on the benchmark 10-year Treasury rising 0.03 percentage points to 1.6 per cent — close to its highest level in a year, after starting 2021 near 0.9 per cent."
"Higher borrowing costs have been seen as harmful to expensive portions of the stock market, as they reduce the value of future cash flows that highly valued companies are expected to generate."
"The real yield on the 10-year Treasury, which strips out the effect of inflation, rose markedly on Monday, although it remains in negative territory."
This has had a particularly sharp effect on the biggest gainers since the market trough last March as many high-growth stocks now trade at elevated levels compared with their earnings and revenues expectations.
Investors in the $44tn US equity market have instead favoured shares of many of the hardest hit companies as they reposition portfolios for the recovery.
"Airline, resort and bank stocks all gained on Monday, and the Russell 2000 index of small-cap companies rose 0.5 per cent."
"In Europe, the region-wide Stoxx 600 index closed up 2.1 per cent, London’s"
FTSE 100 added 1.3 per cent and Frankfurt’s
Xetra Dax climbed 3.3 per cent to a record high.
"But stocks in China tumbled, pushing the CSI 300 into “correction” territory — defined as a 10 per cent fall from recent highs —"
after the index of Shanghai and Shenzhen-listed shares closed down 3.5 per cent.
Hong Kong’s Hang Seng sank 1.9 per cent.
Closely watched data from the European Central Bank showed it had added €11.9bn of bonds to its holdings under the pandemic emergency purchase programme in the week to last Wednesday — down from €12bn the previous week and below the €18.1bn weekly average since the programme started last March.
"Antoine Bouvet, senior rates strategist at ING, said the data would “come as another disappointment to the market”, which has been looking for signs that the ECB would take action to combat rising bond yields."
"The low headline figure, coupled with an ECB statement about the report’s artificially small number owing to temporary factors, would “confuse the market over the degree of urgency” from policymakers, he added."
Market reaction to the PEPP data was muted as traders awaited more details on the ECB’s stance at Thursday’s monetary policy meeting.
The yield on the benchmark 10-year German Bund rose 0.03 percentage points to minus 0.28 per cent.
"US stocks recovered on Friday after an earlier sell-off, while Treasuries swung in a wide range after figures showing job growth running far ahead of forecast strengthened expectations for a rapid rebound in the world’s biggest economy."
"The blue-chip S&P 500 index closed 2 per cent higher by the market close, after falling as low as 0.5 per cent earlier in the day."
"The technology-focused Nasdaq also reversed course, up 1.6 per cent after sliding 1.5 per cent in the morning."
Friday’s turnround follows a rocky week for tech stocks — the Nasdaq has dropped 10 per cent over the past two weeks in the sharpest pullback since the market ructions following the start of the pandemic last March.
"The choppy trading came after Thursday’s losses, which began after Jay Powell, Federal Reserve chairman, provided scant detail on how he would address recent bond market tumult."
"Meanwhile, the benchmark 10-year Treasury yield, a vital benchmark for global debt markets, climbed as much as 0.08 percentage points to 1.62 per cent, the highest level in a year."
"It later receded to 1.56 per cent, leaving the gauge roughly flat on the day."
"“We are not looking for rates to shoot dramatically higher from current levels,” said Nancy Vanden Houten at Oxford Economics."
“But the risks for interest rates are on the high side.”
"The US added 379,000 jobs in February, according to data from the labour department, considerably more than the 200,000 economists polled by Bloomberg predicted."
The fresh sign of a strong economic recovery reignited investor jitters that resurgent inflation would hit returns on their bond holdings.
"Bond prices have been sliding in the opening weeks of this year, in a move that has accelerated in the past two weeks."
"Some analysts and investors had expected Powell to use his slot at an event hosted by The Wall Street Journal on Thursday to lend some support to the market, perhaps even signalling a willingness to formally hold yields down."
"Instead, while he said the recent pick-up in yields — the flipside of falling prices — was “notable”, and that the US central bank would be “patient” in the face of a temporary rise in inflation, he gave no sense of immediate alarm."
"The only sector where 10-year corporate spreads widened, albeit modestly, was information technology, said Vuk Magdelinic, Overbond chief executive."
“This could be the fundamental driver of tech [volatility] versus other sectors.”
Some analysts expect bond prices to continue falling unless Powell intervenes.
"“With the Fed, crucially, not yet showing signs of being intimidated by the bond market, the sell-off in rates risks extending,” said Ralf Preusser, global head of rates research at Bank of America."
"“It looks like words are not enough,” added Joost van Leenders, senior investment strategist at Kempen Capital Management."
“There’s still a lot of unrest with rising yields . . . 
"historically rising yields aren’t bad for equities, the reason why it’s different"
"this time is a lot of equities have high valuations, which are justified by low yields.”"
"In Europe, the region-wide Stoxx 600 index fell 0.8 per cent, while London’s FTSE 100 benchmark dropped 0.3 per cent and Frankfurt’s"
Xetra Dax lost 1 per cent.
"In Asia, China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks dropped as much as 2 per cent during its session, before closing down 0.3 per cent after Beijing set a target of “above 6 per cent” for economic growth in 2021."
Analysts pointed to the markedly lower growth target relative to recent years.
"“This makes me feel uneasy as I don’t know what exactly the government wants to tell us about the recovery path it expects,” said Iris Pang, chief economist for Greater China at ING, who estimated growth would be 7 per cent this year."
"Brent crude, the international benchmark, rose nearly 3 per cent to $69.57 a barrel, a day after Opec and its allies decided against introducing large increases to their output."
"“The strong performance in commodities suggests that it is one asset class where investors have moved,” said van Leenders at Kempen."
"Government bond prices sustained a further blow on Thursday, prompting benchmark stocks to wipe out close to all gains for the year, after comments from Federal Reserve chairman Jay Powell failed to reassure investors."
"With prices falling, the yield on the 10-year US Treasury note climbed to 1.53 per cent, up 0.05 percentage points from the previous day and continuing a sharp rise that has spread to debt issued by other nations."
"In stocks, the benchmark S&P 500 index extended recent losses, briefly wiping out its gains for the year with a fall of as much as 1.7 per cent."
"The index later clawed back some of its losses, and closed down 1.3 per cent."
"The technology-focused Nasdaq Composite finished 2.1 per cent lower, turning negative for the year."
"“When yields go up — and we had pretty high valuations of the overall markets — the market rerates,” said Shana Sissel, chief investment officer at Spotlight Asset Group."
"“I look at this sell-off as the market taking a breather, it was very very hot, and you could argue overbought.”"
"A jump in yields dents the worth of companies’ future cash flows, which presents a special threat to Wall Street high-flyers and tech darlings, whose lofty valuations have in many cases been propped up by the low interest-rate environment."
Investors had been waiting to see if the Fed would react to the broad sell-off in government bonds in recent weeks with a stronger message or hints of fresh intervention to calm the market.
"At an event hosted by The Wall Street Journal, Powell said he would be “concerned” by consistent tightening of financial conditions and that the central bank would be “patient” in the face of a temporary rise in inflation."
"“Today was a really interesting day because the market was really firm, a little tentative but firm, and then Powell spoke,” said George Cipolloni, a portfolio manager at Penn Mutual Asset Management."
"“He really didn’t say anything dramatically different, other than that they’re not at their target yet . . . "
which is rattling markets.”
"The yield on the 10-year Treasury, which acts as a benchmark for borrowing costs and asset prices worldwide, has risen rapidly from about 0.9 per cent at the start of the year."
"Long-term Treasury prices have tumbled about 10 per cent so far this year, according to a Bloomberg Barclays index."
"Goldman Sachs revised higher their 10-year Treasury forecast on Thursday, pencilling in the benchmark note to trade at 1.9 per cent by year-end."
"In November, they predicted yields would hover at about 1.3 per cent."
"In currencies, the dollar jumped 0.7 per cent against a basket of half a dozen big currencies on Thursday, tracking the rise in Treasury yields."
"Investors have offloaded the Treasuries as President Joe Biden pushes his $1.9tn coronavirus relief package through the US legislature, raising expectations that the heavy stimulus spending will create strong economic growth and feed inflation."
"A measure of medium-term inflation expectations, known as the five-year break-even rate, touched 2.51 per cent on Thursday, the highest level since 2008."
"The Fed continues to buy at least $120bn of financial assets each month to add liquidity to financial markets, as part of its emergency response to the pandemic that has helped drive global stock markets to record highs."
"In Europe, the Stoxx 600 equity index and the FTSE 100 both ended the day down 0.4 per cent."
"Brent crude, the oil benchmark, gained 5 per cent to just under $67 a barrel after Opec and its allies refrained from making large increases to their production."
"Global stocks bounced back and government debt rallied on Monday after last week’s turbulent trading, triggered by worries over the possibility of a breakneck economic expansion and the possibility of central banks tightening monetary policies."
"Wall Street’s blue-chip S&P 500 index rose 2.4 per cent, its biggest one-day gain in almost nine months and enough to erase almost the entirety of last week’s declines."
The technology-focused Nasdaq Composite climbed 3 per cent.
"Small-cap stocks advanced even further, with the Russell 2000 up 3.4 per cent — on track for its best daily performance since early January."
"In Europe, the region-wide Stoxx 600 closed up 1.8 per cent, while both London’s FTSE 100 and Frankfurt"
Xetra Dax indices ended the session 1.6 per cent higher.
The gains for global equities came as core government debt on both sides of the Atlantic rallied.
"The yield on the 5-year US Treasury, which was at the centre of the market tumult last week, fell 0.03 percentage points to 0.70 per cent on Monday, while the yield on Germany’s 10-year Bund slid 0.07 percentage points to minus 0.34 per cent."
"There was less enthusiasm for the benchmark 10-year US Treasury note, which had rallied sharply on Friday."
"The yield rose 0.03 percentage points to 1.43 per cent, although well below the 12-month high of 1.61 per cent reached last week."
"“It’s all about bonds,” said Willem Sels, chief investment officer at HSBC’s private bank, who said expectations for a continuation of “ample” stimulus measures from global central banks provided a “powerful” boost for risk assets."
"That thesis came into play on Monday when Australia’s central bank said it would purchase A$4bn ($3bn) in long-term bonds, double the usual amount, as it attempted to ease a heavy sell-off that had hit its markets."
The Reserve Bank of Australia had sharply increased its purchases of short-term bonds last week as Australian sovereign debt endured successive waves of intense selling.
"The Australian 10-year yield tumbled roughly 0.25 percentage points on Monday to 1.67 per cent, according to Bloomberg."
It marked the biggest rally since a period of turbulent trading in global financial markets in March last year.
"Elsewhere in the region, Japan’s Topix index closed up 2 per cent, while Australia’s benchmark S&P/ASX 200 climbed 1.7 per cent."
China’s CSI 300 index of Shanghai and Shenzhen-listed stocks ended the session 1.5 per cent higher and Hong Kong’s Hang Seng added 1.6 per cent.
"Volatility in global debt and equity markets has been stoked by widening concerns that a broad economic recovery from the pandemic could spur inflation, prompting central banks to withdraw unprecedented monetary policy support."
"“Global real yields could rise further,” said Robert Buckland, chief global equity strategist at Citigroup."
"“This is bad for equity markets, especially those tilted towards highly rated growth stocks.”"
"He said this was particularly so in the US, where the valuations of big tech companies had been buoyed by low interest rates."
"While low rates increase the current value of tech groups’ future cash flows, the present value of future earnings falls if rates rise."
"Inflation expectations were heightened at the weekend when the US House of Representatives passed President Joe Biden’s $1.9tn coronavirus stimulus package, months after earlier support measures expired."
"“Last week was an excellent reminder of a very important lesson — the bond market matters,” said Gregory Perdon, co-chief investment officer at Arbuthnot Latham."
"“But if stimulus cheques get into the hands of Americans fast enough, maybe we will be able to kick the can a little bit further down the road.”"
"Prices on US Treasuries rallied on Friday, following the most turbulent day for the world’s biggest bond market since the height of coronavirus-induced ructions in March last year."
"The yield on five-year Treasuries, which were at the centre of a fierce rout in US government debt on Thursday, fell back to 0.73 per cent."
"When bond prices rise, yields fall."
"Meanwhile, the yield on the 10-year note slid 0.1 percentage points on Friday to 1.4 per cent, having leapt to a fresh 12-month high of 1.6140 per cent on Thursday."
"Technology stocks, which were at the centre of a brutal equity sell-off on Thursday, rebounded, too."
"The Nasdaq Composite index closed the week up 0.6 per cent, bouncing back on Friday from a 3.5 per cent tumble the day before — the tech-heavy benchmark’s worst fall since October."
"Wall Street’s blue-chip S&P 500 index, however, was down 0.5 per cent at the closing bell, falling back from gains earlier in the day."
An increase in interest rates poses a particular threat to big tech and other Wall Street high-flyers that have dragged up stock markets throughout the recovery.
"Those companies’ sky-high valuations have been propped up by the low-rates environment, which raises the present value of their future cash flows."
"But if rates go up, the present value of future earnings falls."
"“Suddenly, things that are far away, they start to go down in value quickly."
"That’s what people are concerned about,” said Kathryn Kaminski, a portfolio manager at AlphaSimplex Group."
"“But the Nasdaq has recovered more, that’s a positive sign,” she added."
"Stocks in Europe ended the week lower, with the region-wide Stoxx 600 index closing down 1.6 per cent, taking its losses since Monday to 2.4 per cent."
FTSE 100 benchmark shed 2.5 per cent on Friday and Frankfurt
’s Xetra Dax slipped 0.7 per cent.
Bond market nerves were also visible in Asia-Pacific’s equity markets.
"Topix index closed down 3.2 per cent, while the S&P/ASX 200 benchmark of Australia’s blue-chip shares dropped 2.4 per cent."
Hang Seng index shed 3.6 per cent and mainland China’s CSI 300 lost 2.4 per cent.
"The equity volatility came as larger concerns grew among investors that the worldwide economic recovery from the pandemic could generate inflationary pressures, causing the US and other central banks to tighten monetary policies."
"“With the US economic outlook boosted by pandemic improvement, vaccine distribution and the prospects of President [Joe] Biden’s fiscal package getting through the Congress, investors are now fixated on the risk of inflation and economic overheating,” said Tai Hui, chief Asia market strategist at JPMorgan Asset Management."
Investors’ focus is turning to how central banks will react to surging bond yields and concerns over asset price bubbles.
The Reserve Bank of Australia announced on Friday that it would make an unscheduled A$3bn ($2.3bn) purchase of three-year government bonds to defend its yield target at that maturity.
Government bond yields rose sharply in Australia this week while its currency is trading at a three-year high against the dollar as the country’s economic recovery from Covid-19 has gained momentum.
Traders in Tokyo also speculated that ructions in global markets could push the Bank of Japan to step into bond and stock markets to prevent yields on the 10-year Japanese government bond from rising above 0.2 per cent and to support the Topix.
Selling early in the session in Tokyo had sent yields on Japan’s benchmark 10-year government bond to 0.178 per cent — the highest level since the BoJ announced it would introduce a negative interest rate policy in early 2016.
The yield later stabilised at 0.165 per cent.
"Investors have come to believe that the BoJ will act to prevent 10-year JGBs from moving outside a range of roughly 0.20 percentage points on either side of zero, analysts said."
"Takeo Kamai, head of execution services at the brokerage CLSA in Tokyo, said the drop in the Topix meant it was all but certain that the BoJ would make a big purchase of exchange traded funds for the first time since January 28."
"“They will do it, but it won’t make that much difference."
"Really, people are just following what the long and short-dated US Treasuries are doing,” said Kamai, adding that the recent surge in Japanese equities that took the Nikkei 225 index to 30-year highs had never been driven by a strong domestic catalyst."
"“Japan was just part of the global euphoria, so when [stocks] fall down, they fall down quickly,” he said."
US stocks clawed back losses to end a wild trading day higher after Federal Reserve chairman Jay Powell signalled he had no immediate plans to change monetary policy despite the rising growth and inflation expectations that have been roiling markets.
"The benchmark S&P 500 gained 0.1 per cent, reversing losses that had pushed the index 1.8 per cent lower earlier on Tuesday."
"The technology-focused Nasdaq Composite went on an even wilder ride, sliding as much as 3.9 per cent in early trading before recovering to end down just 0.5 per cent."
Tech stocks have sold off sharply since last week as investors tried to price in the risk that faster inflation and rising long-term interest rates could pose to record-high equity market valuations.
"At the end of Tuesday’s session, some tech darlings had bounced back, with Amazon and Google-parent Alphabet ending the day in positive territory."
"High-flyers such as Tesla and Square still closed lower, however, and the rotation away from faster-growing companies weighed on many stocks that had benefited as consumers stayed at home during the pandemic."
"Shares of Zoom Video Communications, the videoconferencing company, and Teladoc Health, a provider of virtual doctor’s visits, declined on Tuesday."
Goldman’s “US stay-at-home index” slid 0.8 per cent.
Tesla’s 2 per cent decline was enough to erase the remainder of the electric car maker’s gains since the start of the year.
Powell told the US Senate there was “hope for a return to more normal conditions” as the pandemic eases
but he also signalled no change to the central bank’s easy monetary policies.
"“He’s very dovish, and he does not see inflation or employment near target,” said Saira Malik, head of global equities at Nuveen."
The US Treasury market stabilised on Tuesday as Powell spoke.
The yield on the benchmark 10-year bond fell 0.01 percentage points to 1.35 per cent.
Improving economic prospects and rising inflation expectations has sparked a sell-off in government bonds from New York to London and Sydney.
"Analysts have said the resulting higher yields could dent the appeal of quickly growing companies, given that they reduce the present value of future profits."
"“Yesterday’s sell-off is just [the] market adjusting for a possible pick-up in inflation and higher rates,” said Artur Baluszynski, managing director at Henderson Rowe."
"“Growth stocks, which are now largely concentrated in the tech sector, tend to be more sensitive to interest rate movement than, for example, value stocks."
"Try to increase the discount rate, and the valuation adjustment could be quite brutal, especially for narrative-driven stocks with negative cash flows,” he said."
European bonds had weakened ahead of Powell’s appearance.
"Germany’s 10-year debt yield rose another 0.02 percentage points on Tuesday to minus 0.32 per cent, as investors sold out of the debt."
The 10-year yield on UK government debt pushed up 0.04 percentage points to 0.72 per cent.
That is about 0.5 percentage points higher than at the start of the year.
London’s energy-biased FTSE 100 benchmark eked out a small 0.2 per cent gain as oil prices and other commodities hovered near recent highs.
"Brent crude, the global benchmark, settled 0.2 per cent higher at $65.37 a barrel."
"Germany’s Xetra Dax, meanwhile, was off 0.6 per cent."
"Despite Monday’s release of a road map out of England’s lockdown, the slower rollout of Covid-19 vaccines on the continent continued to cloud market sentiment, said strategists."
"China’s CSI 300 index of Shanghai and Shenzhen-listed stocks lost another 0.3 per cent, a day after the benchmark suffered its biggest one-day drop in more than six months."
The sell-off was prompted by concerns that the country’s rapid economic recovery from the Covid-19 pandemic could bring on the removal of policy support for asset prices.
Government bond yields steepened on Thursday after the head of the US central bank stressed no rapid changes would be made to monetary policy for the world’s largest economy.
"Speaking at the Economic Club of New York on Wednesday afternoon, Jay Powell, the Federal Reserve chairman, underscored the importance of “patiently accommodative” monetary policy to boost the pandemic-ridden US labour market."
"The yield on the two-year US Treasury bond briefly slipped below 0.1 per cent for the first time on Thursday, according to Bloomberg data, before steadying at about 0.11 per cent."
"Further stimulus, rollout of Covid-19 vaccines and continued Fed support have raised the prospects for a strong economic rebound this year and stoked expectations of higher inflation."
In turn it has led to fears of the Fed dialling back its $120bn-plus of monthly asset purchases before the economy overheats.
This monetary stimulus has supported global financial markets throughout the pandemic by flooding the system with cash that institutional investors have then spent on corporate bonds and stocks.
"The benchmark yield on the 10-year Treasury note rose 2 basis points to 1.16 per cent on Thursday, steepening the slope of Treasury yields of different maturities."
"In a further sign of inflationary pressure, the 10-year break-even rate, a measure of US inflation expectations derived from the prices of inflation-protected bonds, inched higher to about 2.2 per cent."
But Powell moved to damp down inflation expectations on Wednesday by saying that any rise in prices would be transient and unlikely to affect monetary policy while the labour market remained “very far” from being strong.
"“This is the Fed signalling they will keep things the same until unemployment gets back to pre-Covid levels,” said Remi Olu-Pitan, multi-asset fund manager at Schroders."
"“Despite fears of inflation, they are using the labour market to justify very loose policy.”"
Market forecasts of US inflation remain elevated as President Joe Biden’s
$1.9tn stimulus bill is debated in Congress.
"The gold price, at $1,826 a troy ounce on Thursday, has risen about 2 per cent in the past week as investors bought the metal as a hedge against inflationary pressures."
"“Markets have been worried about inflation but what we now have from the Fed is that this is not their primary concern,” Olu-Pitan said."
"On Wall Street, the S&P 500 index erased earlier losses and closed 0.2 per cent higher, while the tech-focused Nasdaq Composite rose 0.4 per cent."
This followed earlier data showing a firming labour market adding to inflation expectation.
"New unemployment claims in the US fell slightly to 793,000 last week, from 812,000 the week before."
"Still, roughly 10m fewer Americans are employed compared to a year ago."
"In Europe the Stoxx 600 benchmark closed up 0.5 per cent, while London’s FTSE 100 rose 0.1 per cent and Frankfurt’s"
Xetra Dax climbed 0.8 per cent.
"The dollar, as measured against a basket of currencies, traded flat."
"Brent crude, the international oil marker, slid in afternoon trading, falling 1 per cent to below $61 a barrel after the latest industry data showed falling inventories as oil producers looked to clear the surplus built up during the pandemic."
"Oil prices have been on a strong run through the turn of the year, while the prices of industrial metals have also firmed."
"Nadège Dufossé, head of cross-asset strategy at fund manager Candriam, said she was adding commodities to her portfolios in case the end of coronavirus lockdowns created a “demand shock” that drove inflation expectations higher and caused a sell-off of bonds and equities."
"“To protect your portfolio from this, you really want to be in assets that would definitely benefit from a surge in consumer demand,” she said."
US and global stocks hit record highs on Monday as Joe Biden
’s administration kept the pressure on Congress over his plan for $1.9tn in stimulus.
"Wall Street’s S&P 500 index rose 0.7 per cent to close at a record high of 3,915.59 as equities rallied into the close."
The blue-chip index notched its sixth consecutive gain and its longest winning streak since August.
"The tech-heavy Nasdaq Composite rose 1 per cent to a record high of 13,987."
"The FTSE All-World indices also hit a fresh peak, rising 0.6 per cent."
"Over the weekend, Janet Yellen, US Treasury secretary, urged lawmakers to pass the fiscal stimulus package."
"Responding to claims that its scale could fuel inflation, she argued that the biggest economic risk was not doing enough to help small businesses and the unemployed."
"The size of the proposed package had been criticised by Lawrence Summers, who served as Treasury secretary under Bill Clinton and was Barack Obama’s top economic adviser."
"Summers warned that President Biden’s plan might trigger “inflationary pressures of a kind we have not seen in a generation, with consequences for the value of the dollar and financial stability”."
"“With this tsunami of liquidity coming into the system, we’re likely to see higher inflation ahead, and the market is starting to actually price that in,” said Jimmy Chang, chief investment officer of the Rockefeller Global Family Office."
“We’re seeing that in the rising break-even rate.”
"The 10-year break-even rate, a market measure of investors’ inflation expectations, climbed to 2.2 per cent on Monday, its highest level since 2014."
"Still, for stock investors, the prospect of increased stimulus continues to outweigh the economic damage caused by the pandemic."
"“Last week we had a pretty bad jobs report in the US, but it’s one of those cases of ‘bad news is good news’, at least as far as the markets is concerned, as it increases the chance of a large package,” said Hani Redha, portfolio manager at PineBridge Investments."
“That will have a spillover effect in European markets.”
"Investors also welcomed news that coronavirus infections are trending lower after the US on Sunday reported fewer than 100,000 new cases for the first time in more than three months."
The region-wide Stoxx Europe 600 index closed up 0.3 per cent and London’s
FTSE 100 benchmark gained 0.5 per cent.
"In Italy, Mario Draghi’s hopes of forming a government received a boost over the weekend after the anti-establishment Five Star Movement and the Eurosceptic League offered conditional backing."
"“It looks like Draghi has the support to form a government, and that will be welcomed by the markets,” said Redha."
Milan’s FTSE MIB index climbed 1.5 per cent after adding 7 per cent last week.
The inflation talk encouraged a further sell-off in US Treasuries.
"The yield on the 10-year note rose as much as 0.03 percentage points to 1.20 per cent, before easing back to 1.17 per cent."
"The yield on the equivalent 30-year Treasury, meanwhile, topped 2 per cent for the first time in a year, before sliding slightly to 1.96 per cent."
"Elsewhere in markets, Bitcoin climbed to a record high after Elon Musk’s electric carmaker Tesla bought $1.5bn of the cryptocurrency."
"Brent crude rose more than 1 per cent, crossing above $60 a barrel for the first time since January 2020, as traders bet that the market is rapidly tightening because of Saudi Arabia-led supply cuts and a sharp drop in investment in the industry."
"The US marker, West Texas Intermediate, climbed by a similar margin to above $58 a barrel."
"In Asia, China’s CSI 300 index closed up 1.5 per cent, and Japan’s Topix rose 1.8 per cent to reach its highest level since 1991."
Additional reporting by David Sheppard
"US stocks hit new records on Thursday, rising for the fourth consecutive day, as investors shifted their attention to Washington and looked for signs of progress on stimulus from the administration of Joe Biden."
"The blue-chip S&P 500 index closed 1.1 per cent higher, and the tech-heavy Nasdaq Composite finished up 1.2 per cent, extending a rally after data showed new US unemployment claims fell to their lowest level since November."
"Shares of small-cap companies, whose prospects are closely linked to the broader US economy, also shot higher."
"The Russell 2000 closed 2 per cent higher on Thursday, lifting its rise for the year to 11.5 per cent."
"“The US equity bull market remains on solid footing,” said David Lefkowitz, the head of equities in the Americas for UBS Global Wealth Management."
"“As the pandemic recedes, economic activity should surge thanks to aggressive government support and significant pent-up demand from consumers.”"
"The prospect of aid added to the pressure on sovereign bond prices, investors said."
"The yield on the 30-year Treasury rose 0.01 percentage points to 1.932 per cent, its highest level since last February."
"The closely watched yield curve also continued to steepen, with the gap between two-year and 10-year yields widening to 1.02 percentage points on Thursday, the largest difference since 2017."
"The dollar, measured against a basket of currencies, gained 0.4 per cent."
"In the UK, the pound rose as the Bank of England’s"
unchanged interest key interest rate prompted traders to shunt back their predictions for negative rates.
The central bank’s Monetary Policy Committee voted unanimously to keep its policy rate at 0.1 per cent and not increase the size of its bond-buying programme.
"Following a survey of commercial lenders regarding the feasibility of negative interest rates, the bank said it would prepare contingency plans for such a move — but added this would take six months."
"The committee was “clear that it did not wish to send any signal that it intended to set a negative bank rate at some point in the future”, said Andrew Bailey, the BoE’s governor."
"Money markets suggested traders were not pricing in a move to negative rates, even two years into the future."
"The pound, which had started the London session about 0.6 per cent lower on fears over sub-zero rates, was 0.2 per cent higher for the day at $1.3674."
Sterling also strengthened 0.8 per cent against the euro.
"The UK currency rallied through the turn of the year as coronavirus vaccine rollouts and the country’s Brexit trade deal with the EU fed optimism, pushing the pound near a three-year high."
"But that progress has stalled in recent days, as a third Covid-19 lockdown drags on."
Business activity in January was at its weakest in eight months.
"Government bonds sold off following the BoE meeting, as bets that negative rates would be deployed unwound."
"The UK 10-year gilt yield rose 0.07 percentage points to 0.44 per cent, the highest level since late March."
"It made little sense for the BoE to push benchmark borrowing costs down to negative levels during national lockdowns, said Hetal Mehta, European economist at Legal & General Investment Management."
"“There is no point telling people their incentive to save has now fallen when they are not even allowed to go out and spend,” she said."
"A reopened economy in the summer, Ms Mehta added, “would lead to very strong [consumption] growth anyway”."
"The UK’s FTSE 100 share index, which is stacked with companies that earn dollar revenues, closed down 0.1 per cent."
"However, the UK benchmark has still risen about 16 per cent since the start of November as investors have bet that the “old economy” companies that dominate the index, such as oil producers and banks, will benefit from a vaccine-led global economic recovery."
Europe’s continent-wide Stoxx 600 benchmark closed 0.6 per cent higher.
Germany’s Xetra Dax rose 0.9 per cent and the CAC 40 in Paris climbed 0.8 per cent.
"US equities notched their biggest gain in more than two months on Monday, regaining lost ground after the struggle between Reddit’s day traders and Wall Street institutions helped to send stocks to their worst week since October."
"The blue-chip S&P 500 index closed higher by 1.6 per cent, while the tech-heavy Nasdaq Composite rose more than 2.6 per cent, boosted by rallies in tech giants such as Alphabet and Amazon, which are due to report earnings this week."
Equities bounced back as investors looked past the trading tussle to focus instead on promising vaccine news on both sides of the Atlantic.
"“The improvement of the health situation in the US [continues] to lift the market sentiment as the number of people currently hospitalised because of Covid is falling rapidly,” said Bastien Drut, senior strategist at CPR Asset Management, adding that “the US is one of the countries where the vaccine rollout is the quickest”."
The prospect of a bipartisan relief package also raised hopes of a targeted US response to the pandemic.
"“You’ve got 10 Republican senators heading off to the White House today, so there could be good news on the relief,” said Greg Swenson, founding partner of investment bank Brigg Macadam."
Further progress was being made in Europe in a dispute between the EU and AstraZeneca over the terms of a supply deal for Covid-19 vaccines.
The drugmaker agreed to provide the bloc with 9m more jabs by March.
"The region-wide Stoxx Europe 600 index closed up 1.2 per cent, having fallen more than 3 per cent last week, while London’s FTSE 100 climbed 0.9 per cent and Frankfurt’s"
Xetra Dax rose 1.4 per cent.
But investors remain braced for further hectic trading that led to day-trader favourites such as GameStop and AMC rallying last week.
"The Vix — an index that tracks expected volatility in US equities — was still elevated at 30, against its long-run average of about 20."
"A dramatic battle between retail investors on the Reddit message board and hedge fund short sellers spread to the silver market on Monday, with users in the website"
’s r/WallStreetBets forum urging investors to bet on a popular silver-backed exchange traded fund.
"Prices for silver rose almost 10 per cent at one point on Monday to more than $30 a troy ounce, following a 6 per cent climb last week."
"Silver miners also prospered, with New York-listed First Majestic — another company identified by Redditors — rising almost 30 per cent during the week."
"However, Joost van Leenders, senior investment strategist at Kempen Capital Management, said the mobilisation of scores of Reddit investors was not “a threat to the market at this point”."
"“I don’t think the scale of money is large enough to drive the market,” he said, although “if the bubble of one of these stocks burst, it might make investors more cautious and cause some individual pain”."
"In Asia, China’s CSI 300 index rose 1.2 per cent, Hong Kong"
Hang Seng gained 2.2 per cent and South Korea’s
Kospi advanced 2.7 per cent.
"Shares on Wall Street followed European bourses lower on Friday, as an intensifying battle between retail traders and brokers over a handful of closely followed stocks drove up market measures of volatility."
"The S&P 500 was down 1.9 per cent at the closing bell in New York, ending the blue-chip benchmark’s worst week since October."
The tech-heavy Nasdaq Composite sank 2 per cent.
"A rise in volatility typically encourages investors to reduce risk, helping to explain the decline from record highs earlier in January."
"The Cboe Vix — a measure of expected volatility known as Wall Street’s “fear gauge” — ended at 32.4, well above its long-term average of just below 20, as another hectic session propelled recent day-trader favourites such as GameStop and AMC Entertainment higher."
"Robinhood, which was among the US brokers on Thursday to restrict trading in companies such as GameStop, eased its curbs on some of these securities on Friday."
The online broker raised $1bn from investors and tapped credit lines to meet its capital and clearing requirements.
"Pressured to respond by frustrated retail investors and lawmakers, the US Securities and Exchange Commission said on Friday that it would review the trading restrictions imposed by Robinhood and others."
"“It probably did come down to a technical factor where they needed to have sufficient reserves in place,” said Mona Mahajan, US investment strategist and portfolio manager at Allianz Global Investors, on Robinhood’s temporary trading freeze."
"“But that being said, I think it’s interesting to see the rise of the retail investor and what a driving force"
it’s been . . . 
"the new Robinhood crowd — they’ve only seen a one way market to some extent, so they’ve been emboldened,” she added."
"“The retail horde are not going anywhere, and may have no day jobs,” said Michael Every, a global strategist at Rabobank, an investment bank."
"They “can pile into any stock or asset they choose, forcing brokers or regulators to shut down trading”."
"Europe’s benchmark Stoxx 600 index closed 1.9 per cent lower, while London’s FTSE 100 benchmark slid 1.8 per cent and Frankfurt"
Xetra Dax sank 1.7 per cent.
The uptick in volatility triggered by the trading tussle added to worries among European investors about the economic damage being caused by the pandemic and shortages in some vaccines whose rollout is deemed crucial to a recovery from the crisis.
"“I think the volatility in the US will have some effect on European markets,” said Arnab Das, global market strategist at Invesco."
"“But the bigger picture here is still monetary policy, fiscal policy and the pandemic.”"
"The Vstoxx index, the European gauge of market volatility, climbed to its highest level since early November."
Asia’s big stock markets closed down across the board as investor jitters grew.
"Topix fell 1.6 per cent, South Korea"
"Kospi dropped 3 per cent, and the Hang Seng in Hong Kong ended its session 0.9 per cent lower."
China’s CSI 300 index of Shanghai and Shenzhen-listed shares fell 0.5 per cent.
"The day-trading frenzy spread to Malaysia, where the Kuala Lumpur-listed Top Glove, the world’s biggest maker of rubber gloves, jumped as much as 14 per cent on Friday after Reddit users called on retail investors to buy the stock."
"The “BursaBets” subreddit has signed up more than 6,000 members since it was set up on Thursday."
Top Glove has been targeted by short sellers who profit when a company’s share price falls.
Additional reporting by Stefania Palma in Singapore
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’s impact on Wall Street?
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US stocks fell for the second consecutive day on Friday as oil prices dropped in a gloomy end to the week after disappointing US retail sales data underscored the severe strains faced by the world’s biggest economy.
"The benchmark S&P 500 index closed 0.7 per cent lower, while the tech-heavy Nasdaq Composite was down 0.9 per cent."
The wobble in market sentiment came after a round of data released by the US commerce department on Friday showed that retail sales dropped 0.7 per cent in December from November.
Economists had expected no change.
"“The retail sales report indicates lower consumption growth in the fourth quarter than we had previously assumed,” said Jan Hatzius, chief economist at Goldman Sachs, who added the data were “well below consensus expectations”."
Retail sales are closely watched in the US since consumer spending makes up about two-thirds of the country’s economic output.
Oil prices were under pressure on both sides of the Atlantic while investors shifted into perceived havens such as government debt and the dollar.
"Brent crude, the international standard, was down 2.7 per cent at $54.90 a barrel."
The US benchmark West Texas Intermediate decreased by about the same margin to $52.17 a barrel.
Shares in ExxonMobil slid more than 5 per cent by the closing bell after a report that regulators launched an investigation into a whistleblower accusation that the US oil group had overvalued one of its largest assets.
Shares in Halliburton and EOG Resources also dropped by roughly 5 per cent.
"“It’s rare that commodities can have a sustainable advance,” said Jurrien Timmer, director of global macro at Fidelity, adding that the oil sector moves were “a minor rotation on the back of a rising dollar . "
I wouldn’t read much more into it than that”.
The dollar rose 0.6 per cent against a basket of half a dozen developed market currencies.
"Meanwhile, the yield on 10-year US government debt slipped 0.32 percentage points to 1.09 per cent."
"Despite today’s setback, oil has “basically tracked the market since early November and the vaccine news”, said Russ Koesterich, portfolio manager of the BlackRock global allocation fund."
"“As investors have become more optimistic about a vaccine, they’ve become more optimistic about the economy, mobility and cyclical assets such as oil.”"
"Bank shares also took a hit on Friday, denting a recent rally, as three of America’s biggest lenders reported their quarterly results."
"JPMorgan Chase, Citigroup and Wells Fargo released a total of more than $5bn of pandemic-era loan loss reserves, in a sign of their optimism that defaults will be lower than previously feared."
"But Jamie Dimon, JPMorgan’s chief executive, highlighted the risks to the world economy posed by coronavirus, noting that “our credit reserves of over $30bn continue to reflect significant near-term economic uncertainty”."
"Wells Fargo, which tends to be more sensitive to the domestic economy than its big bank rivals, which have larger Wall Street businesses, was the steepest faller in New York on Friday, sliding 7 per cent."
"The downbeat economic data also came as investors examined the early detail of Joe Biden’s economic rescue plan, in which the US president-elect pledged an additional $1.9tn in fiscal stimulus."
"Mr Biden’s package, which includes further direct payments to Americans and money for local governments, is intended to help resuscitate a struggling US recovery from the pandemic."
It follows $900bn of aid agreed by lawmakers last month.
"The second stage of Mr Biden’s economic plan, set to be announced next month, is expected to include longer-term spending plans in areas such as infrastructure."
"In a speech on Thursday, Mr Biden outlined his incoming administration’s response to the coronavirus pandemic and called on wealthy individuals and corporations to pay their “fair share”."
"“The bit that’s really taken the market by surprise is the taxation that was mentioned,” said Justin Onuekwusi, fund manager at Legal & General Investment Management."
"“The market always believed that a tax rise would come, but we didn’t expect to hear about it so early.”"
"In Europe, the continent-wide Stoxx 600 and London’s FTSE 100 both closed down 1 per cent, while Frankfurt’s Xetra Dax fell 1.4 per cent."
"Global stocks slid on Monday after their best week since November, while the US dollar regained lost ground as the global coronavirus pandemic worsened."
"Wall Street’s benchmark S&P 500 index slid 0.7 per cent, while the tech-heavy Nasdaq Composite declined 1.3 per cent."
"Treasuries also weakened, with the yield on the 10-year note rising for the fifth consecutive day to 1.14 per cent, the highest level since March 2020."
"The declines in the US were led by stocks sensitive to interest rates, including utilities and real estate groups, as well as technology companies that had moved over the weekend to ban or suspend US president Donald Trump from their platforms."
Twitter shares fell 6.4 per cent while Facebook declined 4 per cent.
European indices snapped last week’s winning streak to post losses across the board as the deteriorating health crisis drew investors’ attention.
"The region’s benchmark Stoxx 600 index closed down 0.7 per cent, London’s FTSE 100 shed 1.1 per cent and Frankfurt’s"
Xetra Dax lost 0.8 per cent.
"“The first quarter of the year will be worse than expected because of [renewed European] lockdowns everywhere,” said Jean-François Robin, head of global markets research at Natixis."
“We were expecting a bit [of a] better start to the year.”
"The FTSE All World index was 0.8 per cent lower, its worst day in three weeks."
Monday’s losses came after a strong start to 2021 for global equities when the prospect of further fiscal stimulus in the US has added to optimism about Covid-19 vaccines and hopes of a rebound in the global economy.
"But Richard Saperstein, chief investment officer at Treasury Partners, said that “if we start seeing further surges in hospitalisations and Covid-related deaths, I am concerned that market enthusiasm will turn in the short term”."
"“In the near term, there’s a very real and present danger that the US could double dip in the first quarter,” he added."
“We saw the first signs of that with the jobs report last week.”
"Salman Baig, multi-asset investment manager at Unigestion, pointed out that equity valuations remained elevated, with a large degree of optimism already priced in."
"“Earnings season is going to kick off in the next few weeks; depending on the tone set by some of these firms, that could be challenging, given where valuations are,” he said."
"The dollar, as measured against a basket of peers, was up 0.5 per cent, taking it 0.6 per cent higher for the year."
The US currency has been lifted along with Treasury yields on a bet that Democratic control of Congress will mean more stimulus for the US economy.
"The dollar lost about 7 per cent last year after interest rate cuts by the Federal Reserve reduced the appeal of dollar assets and encouraged investors to bet on riskier currencies, such as China’s renminbi."
"Some analysts expect the rebound to be shortlived, with inflation expectations rising while interest rates are set to remain low for the foreseeable future."
"Lee Hardman, a currency analyst at MUFG, said rising US yields were “triggering a temporary shake out of elevated short US dollar positions”, which had increased significantly over the past month."
"The euro, which has rallied strongly in recent months, slipped 0.5 per cent against the dollar on Monday to $1.2153, while Britain’s pound fell 0.4 per cent to $1.3518."
"In Asia, China’s CSI 300 index slipped 1 per cent as banks and exchanges moved to adhere to the US president’s"
executive order banning investment in companies with alleged links to China’s military.
US stocks rallied for the second consecutive day as investors looked past the violent clashes in Washington and focused instead on the prospect of government spending being ramped up.
"On Wall Street all three leading benchmarks had hit record highs by lunchtime in New York, with the S&P 500 eventually closing 1.5 per cent higher, the tech-focused Nasdaq Composite climbing 2.6 per cent — its largest upward move in two months — and the Dow Jones Industrial Average up 0.7 per cent."
"On Wednesday angry mobs of Donald Trump supporters interrupted the certification of Joe Biden’s election victory in Congress, forcing legislators to abandon the US Capitol building before reconvening in the evening."
"“I don’t know what was more astonishing, the scenes on my TV or the fact that equities weren’t heading south,” said Dickie Hodges, a bond fund manager at Nomura Asset Management."
"“But it just shows you the sheer weight of money coming into markets, and the fact that everyone is focused on this optimistic narrative,” he added."
“No one was actually willing to press the panic button.”
"Investors remained focused on the spending plans of Mr Biden, after Democratic victories in Georgia’s run-off elections gave the party control of both houses of Congress in what has been called a “blue wave”."
"The sweep of the legislature “has really increased the appetite for risk”, said Natasha Ebtehadj, portfolio manager at Columbia Threadneedle."
"Equity markets were pricing in better corporate earnings due to the expected economic boost from further fiscal measures, she added."
"Mr Biden is expected to expand a $900bn economic stimulus agreed by US lawmakers to help the economy through the pandemic, and push for extra spending on infrastructure, clean energy and education."
"“The markets are looking through these dramatic events,” said Andrea Iannelli, investment director at Fidelity International, of the scenes on Capitol Hill."
“The assumption is that democratic processes are holding up and that a transition is going to take place.”
The prospect of more stimulus has prompted investors to bet on the Biden administration generating not only economic growth but also inflation.
The yields on US government bonds — which this week breached 1 per cent for the first time since the start of the coronavirus crisis — rose 0.04 percentage points to 1.07 per cent.
"In another sign investors were looking beyond the threat of a peaceful transfer of power in Washington, the price of gold — a commonly used haven asset — fell 0.2 per cent to $1,914 a troy ounce."
"The dollar, as measured against a basket of currencies, rose 0.3 per cent."
"It remains around its lowest level since April 2018, having been suppressed by ultra-loose monetary policy since the coronavirus crisis began."
"Brent crude, the international oil benchmark, was 0.4 per cent higher at $54.52 a barrel."
"Stock markets “have been given this quite impressive cocktail of good news about [coronavirus] vaccines, the idea that there will be more fiscal stimulus and continued support from central banks”, said Didier Saint-Georges, managing director of French fund manager Carmignac."
"But this bright outlook was “quite extreme”, he added, and ran the “risk that markets are running ahead of themselves”."
"Value and small-cap stocks lead a Wall Street rally after a Democratic party win in a key US Senate race, although turmoil in Washington during the certification of Joe Biden’s election win tempered off investors’ enthusiasm."
"New York closed the session with the benchmark S&P 500 up 0.6 per cent, while the Nasdaq 100, which tracks the largest stocks on the technology-focused index, was off 0.6 per cent."
Both indices were off their intraday
highs following chaos in Washington sparked by Donald Trump’s supporters claiming that Mr Biden’s victory was not legitimate.
"US government bonds sold off sharply, with the yield on the benchmark 10-year Treasury climbing 0.07 percentage points to breach 1 per cent, its highest level since March."
"Banks, materials and energy shares led gains on the S&P 500 as investors switched into these long-unloved “value” sectors that are sensitive to economic growth prospects."
"“The market consensus is that Democratic control of both houses [of Congress] means stimulus and infrastructure spending, so in the near term that means more economic growth,” said Ben Laidler of Tower Hudson Research."
"“The stocks that are most driven by this are companies in cyclical industries and small-caps, where earnings have been more depressed.”"
"“The market expectation in the longer term, sometime later this year, is for an infrastructure bill with a price tag in the trillions” of dollars over a 10-year period, said Brad Neuman, director of market strategy at Alger."
"The market is looking at a package of between $1tn and $3tn, Mr Neuman said."
Hopes that an infrastructure plan will move higher up in president-elect Joe Biden
"’s agenda helped to boost sentiment in stocks bound to benefit from additional government spending such as Vulcan Materials and Martin Marietta, which ended the session up 9 cent and 7.7 per cent, respectively, in the material sector."
"In industrials, Caterpillar was in demand with a 5.6 per cent gain."
"The small-cap Russell 2000 index, which has a high weighting of stocks in economically sensitive industries such as finance and manufacturing, rose 3.7 per cent."
"London’s FTSE 100, which is skewed towards the energy, banking, materials and industrials sectors, closed up 3.5 per cent."
"“We came into this year thinking that the market rally would continue to broaden up and that [the] tech sector would remain strong but the ‘light blue wave’ is incrementally negative for tech,” said Saira Malik, head of global equities at Nuveen."
"Tech companies were “really sensitive” to the corporate tax increases that could be pushed by the Democrats if they control Congress, Ms Malik said, adding she was less concerned about a regulatory crackdown on the sector."
"In a crucial Senate race in Georgia, the Associated Press declared a win for Democratic challenger Raphael Warnock in the early hours of Wednesday."
Just after the stock markets closed his fellow Democrat Jon Ossoff was declared by AP as the narrow winner of the second Georgia contest.
A Democratic party victory in both run-off elections will result in a 50-50 split of the upper house of Congress with incoming US vice-president elect Kamala Harris able to break the tie in significant votes such as budget resolutions.
Goldman Sachs analysts forecast a Georgia win would enable the Democrats to add $600bn of stimulus spending to the $900bn already agreed by lawmakers late last year.
"The Nasdaq 100 gained almost 48 per cent in 2020, as the pandemic boosted tech businesses and lower bond yields prompted investors to place higher valuations on growth companies."
"In Europe, the continent-wide Stoxx 600 index ended the session 1.4 per cent higher, buoyed by shares in the energy and financial services sectors."
"Oil prices rose, with global benchmark Brent crude up 0.9 per cent to $54.09 a barrel, its highest level since February."
Prices were boosted after Saudi Arabia pledged to cut output in a deal reached on Tuesday evening with fellow producers in the Opec+ group.
"Copper climbed to its highest level since 2013, above $8,000 a tonne, boosted by hopes that Mr Biden’s plans for a green stimulus would increase its use in electric vehicle charging and wind turbines."
"“Democrats controlling both houses would mean that they could pass through larger fiscal packages, but with filibuster rules, co-operation is still necessary,” said Sebastien Galy, senior macro strategist at Nordea Asset Management."
“Such [a] boost to the economy is . . . 
the logical move to avoid an economy being stuck in a low-growth environment quite quickly.”
Additional reporting by Henry Sanderson
Sterling traded just below its 2020 peak against the US dollar after Brexit negotiators reached a historic UK-EU trade pact.
"The pound was up 0.3 per cent to $1.3535 in New York dealings, leaving it close to the 2020 high of $1.3624 struck this month."
"Britain’s currency also advanced against the euro, gaining 0.4 per cent to €1.1121."
"Kit Juckes, strategist at Société Générale, said the Christmas Eve deal resolved one of the major risks hanging over the currency."
"A no-deal outcome would have been “catastrophic” for the economy, he added."
"“The worst case is avoided,” Mr Juckes said."
"“The next big move sterling will make is up, not down,” with the pound potentially advancing towards $1.40 in coming weeks, he added."
"Negotiators reached the economic and security agreement, which guarantees tariff-free trade on most goods and creates a platform for future co-operation on issues such as data sharing, after months of talks that reached a climax this week."
The deal comes into force after the end of the Brexit transition period on January 1.
"In equities, London’s benchmark FTSE 100 closed up 0.1 per cent, with Lloyds Banking Group leading the pack with a gain of 4 per cent."
"The FTSE 250, which is more sensitive to the outlook for the economy because of its heavier weighting towards domestic-focused groups, rose 1.2 per cent."
"The mid-cap index has gained more than 18 per cent during the final three months of the year, leaving it on track for its best quarter since 2009."
"Investors felt “an element of relief that one of the main uncertainties for 2021 is clearing”, said Cristina Matti, head of European small and mid-cap equities and country strategies at Amundi."
“Investors feel more confident we can get back to our normal job of forecasting companies’ prospects in a more stable environment.”
"The brighter outlook also rippled into the UK government debt market, where yields have been suppressed by the prospect of the Bank of England lowering interest rates, possibly into negative territory, to ease no-deal disruption to the nation’s economy and financial markets."
Mr Juckes said the Brexit agreement means the odds of the BoE pushing rates into negative territory had declined markedly.
"Markets have largely priced out negative rates being implemented over the next year, according to trading in the overnight index swap market."
"As it became clear a deal was imminent on Wednesday afternoon, the yield on the 10-year gilt, which moves inversely to the price of the securities, rose by a tenth of a percentage point to 0.29 per cent, in its biggest increase since March."
"On Thursday, the yield slipped lower to 0.25 per cent."
"Oliver Blackbourn, portfolio manager at Janus Henderson, cautioned, however, that “it is important to remember that this is a narrow deal on trade, focused on goods sectors that make up a much smaller proportion of the UK’s economy than services”."
"“While the impact is likely to be masked by the hoped-for recovery from the pandemic in 2021, many companies will still be impacted by the changing terms of trade,” he said."
The UK’s departure from the EU has been the defining theme for the currency since the referendum of June 2016.
"In the immediate run-up to the announcement that UK voters had opted to leave the bloc, the pound was trading at about $1.50 against the dollar."
"The currency staged one of its most violent falls on record in the aftermath of the referendum result, tumbling to just over $1.32."
"A scorching rally in the dollar during the market tumult of March 2020 sent the pound spiralling to about $1.14, but generally sterling has oscillated around $1.30 since the Brexit vote, jolted higher and lower by the vagaries of the trade talks."
Stocks on Wall Street climbed and Treasuries slid on Wednesday as investors weighed up the prospects that a stimulus plan of about $900bn could be derailed by President Donald Trump at the eleventh hour.
"The benchmark S&P 500 closed higher for the first time in four days, rising 0.1 per cent in relatively light volume to put its year-to-date gains at 14 per cent."
The technology-heavy Nasdaq Composite slipped 0.3 per cent.
"The gains were broad, with shares of banks climbing as the price of US Treasuries slipped."
The yield on the 10-year Treasury note climbed 0.03 percentage points to 0.94 per cent.
"It briefly hit 0.97 per cent, close to the highest level since the market turmoil in March."
"Shares of JPMorgan Chase and Bank of America rose roughly 3 per cent, while Wells Fargo closed nearly 5 per cent higher."
Hard-hit energy companies also advanced in tandem with a rise in oil prices.
"Garrett Melson, a portfolio strategist at Natixis Advisors, said that investors were largely looking through the last-minute “twist” from Mr Trump."
The US president late on Tuesday evening called the stimulus package a “disgrace” and said he would ask Congress to “amend” the terms.
"He said that Congress should increase the size of cheques being paid out to eligible Americans to $2,000 per person, far above the level his Republican party has been willing to agree to."
"“We either get the original package now, or we get another package next month with [Joe] Biden’s signature on it,” Mr Melson said."
Additional fiscal support is seen as critical to keep the economic recovery from faltering as coronavirus cases rise and cities consider new shutdowns.
"Consumer spending has flagged, and labour market gains have begun to stall."
"While the number of Americans applying for unemployment benefits declined last week, it still remains elevated compared with pre-Covid levels."
Activity in options markets also suggested a relatively sanguine response from investors to Mr Trump’s comments.
"The so-called put/call ratio, which measures the volume of the two options contracts traded each day, was almost unchanged from Tuesday at 0.5."
An uptick in put contracts would have indicated investors had moved to take out protection against a drop in US stocks in the future.
The weakness in Treasuries accompanied a sell-off in sovereign bond markets in Europe as the UK and EU worked towards a trade deal.
"The yield on the 10-year UK gilt rose 0.10 percentage points to 0.28 per cent, while 10-year German Bund yields increased 0.05 percentage points to minus 0.55 per cent."
Yields rise when bond prices fall.
"Andrew Brenner, the head of international fixed income at National Alliance Securities, said he did not expect the decline in Treasuries to accelerate."
"“Treasuries are getting hit hard on low volumes,” he said."
"“While we did not expect this sell-off today, it is happening."
"We think rates will not break, but as we said this [morning], if someone wanted to push markets hard, they would find little resistance.”"
"The dollar weakened against a basket of currencies, falling roughly 1 per cent against the British pound and 0.3 per cent compared to the euro."
"European stocks advanced on Wednesday, with the continent-wide Stoxx 600 index rising 1.1 per cent."
Stock prices rose and Treasury yields eased after Federal Reserve chairman Jay Powell bolstered the US central bank’s message that it will not curtail its bond-buying programme until “substantial further progress” is made towards full employment and higher inflation.
In the immediate aftermath of the Fed’s announcement on Wednesday afternoon stocks slipped and longer-dated Treasury yields rose as the central bank fell short of investor
’s hopes that it would increase its support for financial markets.
The S&P 500 erased its small gains from earlier in the day and the 10-year Treasury yield climbed sharply by 0.04 percentage points to 0.95 per cent.
"However, assurances from Mr Powell quickly reversed the moves."
"In a press conference following the Fed’s announcement, he said that “monetary policy will continue to deliver powerful support to the economy until the recovery is complete”."
"Seth Carpenter, chief US economist at UBS, said Mr Powell had “spent some time emphasising that if things are softer, [the central bank] would do more”."
"“I think that was helpful,” he added."
"Stocks had posted mixed results before the Fed announcement, as wrangling among politicians continued over proposed fiscal stimulus plans."
"Tech shares rose 0.7 per cent buoyed by the news that congressional leaders might be close to a compromise on a new relief package, while more defensive sectors such as utility companies sunk lower."
"The S&P 500 index closed 0.2 per cent higher, while the tech-heavy Nasdaq Composite rose 0.5 per cent."
The 10-year Treasury yield ended 0.01pp higher at 0.92 per cent.
Europe’s benchmark Stoxx 600 closed 0.8 per cent higher while London’s FTSE 100 gained 0.9 per cent and Germany’s
Xetra Dax added 1.5 per cent.
"In Asia, Japan’s Topix index finished 0.3 per cent higher and Hong Kong’s Hang Seng climbed 1 per cent."
"Much of the global exuberance is tied to “vaccine hopes”, said Andrew Pease, global head of investment strategy at Russell Investments."
“Markets have taken the view that economies can survive until vaccines are widely available.”
"Despite the worsening pandemic, investors were cheered by the continued rollout of Covid-19 vaccines."
"The US health regulator said it had found Moderna’s jab to be safe and “highly effective”, paving the way for a second vaccine after the one from Pfizer and BioNTech to receive emergency approval."
"Optimism helped send the US dollar, a currency often viewed as a haven asset, to a two-year low against a basket of its peers, before it pared its weakening to 0.2 per cent lower for the day."
Adding to bearishness for the buck were supportive headlines for the euro and sterling.
"Economic data from Germany and France indicated stronger than expected business activity in December, despite lockdown measures."
"That lifted the single currency 0.3 per cent to about $1.22, its highest level since April 2018."
"In the UK, MPs were on standby for an extended House of Commons sitting as hopes grew that a post-Brexit trade agreement with the EU might be ready for approval before Christmas."
"The pound strengthened 0.3 per cent to cross $1.35, hitting its highest point since May 2018, before sinking back to $1.3490."
It comes after the currency surged almost 1 per cent against the dollar on Tuesday on reports of progress on a deal.
Eurozone bond yields hovered around all-time lows and the euro rallied on Thursday after the European Central Bank held interest rates steady and announced further asset purchases.
"The euro climbed 0.5 per cent to $1.2143, close to its high of the year, after the ECB said it would expand its €1.35tn emergency bond-buying programme by another €500bn and extend it to March 2022, broadly in line with consensus expectations."
The bank also kept its deposit rate unchanged at minus 0.5 per cent.
"Italian, Spanish and Portuguese 10-year yields had fallen to their lowest levels on record ahead of the central bank’s meeting, but rose modestly after Christine Lagarde, the ECB chief, said the full bond-buying facility did not have to be used."
"The ECB “broadly delivered what was very close to market expectations, which is which is why you’re not seeing much more than an initial knee-jerk reaction”, said Francesca Fornasari, head of currency solutions at Insight Investment."
Ms Lagarde said on Thursday that not all of the increased sum available under the bond-buying programme needed to be used “if favourable financing conditions can be maintained”.
"The amount could be “recalibrated” if necessary, she added."
"Eurozone yields were unlikely to rise much from here given the ECB is in effect promising investors it will do as much, or as little, bond buying as is necessary to hold down borrowing costs, said Lyn Graham-Taylor, strategist at Rabobank."
"“This has most of the characteristics of yield curve control,” he said."
"“There’s no set amount of monthly purchases, just a promise to keep financing costs down."
The only thing that’s missing is a formal target.”
The ECB’s purchases have helped to ignite a record-breaking rally in eurozone debt.
"Spain issued fresh 10-year debt at a negative yield for the first time on Thursday, with an auction of €920m of bonds maturing in October 2030 priced at a yield of minus 0.03 per cent."
It joins a club of eurozone nations being effectively paid by investors to borrow over a decade.
Portugal’s 10-year yield turned negative two weeks ago.
On Wall Street the large-cap S&P 500 slipped 0.1 per cent after new data showed a sharp rise in first-time jobless claims last week.
"The tech-heavy Nasdaq Composite, meanwhile, closed higher by 0.5 per cent."
"Initial applications for US unemployment benefits accelerated to 853,000 last week, up from 716,000 the previous week, after a fresh surge in coronavirus cases spurred a new round of shutdowns that has stymied the labour market’s recovery."
Optimism surrounding the rollout of Covid-19 vaccines also helped to lift oil prices.
"Brent crude, the international benchmark, climbed 4.1 per cent to $50.87 a barrel at one point, its highest level since early March."
"The pound extended its falls against the euro, sliding 1.3 per cent to €1.0953 as the deadline for a UK-EU trade deal approached with no agreement secured."
"London’s FTSE 100 closed up 0.5 per cent, the region-wide Stoxx Europe 600 index fell 0.4 per cent and Frankfurt"
’s Xetra Dax slipped 0.3 per cent.
The main US benchmarks hit new record highs on Tuesday as global stock markets had mixed results after losing ground in the previous session.
"On Wall Street the S&P 500 index passed the 3,700 points mark to end the day 0.3 per cent higher."
"Meanwhile, the tech-heavy Nasdaq Composite gained 0.5 per cent and the Dow Jones Industrial Average was 0.4 per cent higher."
Europe’s Stoxx 600 rose 0.2 per cent and the FTSE 100 index finished the day less than 0.1 per cent higher.
"In Asia, though, the Nikkei 225 in Tokyo and Hong Kong’s Hang Seng index both fell, by 0.3 per cent and 0.8 per cent respectively."
"Meanwhile, the pound slipped on Tuesday as investors weighed up Britain’s chances of striking a post-Brexit trade deal with the EU in make-or-break talks this week."
"The currency weakened to a low of $1.329 after British officials reported “no tangible progress” in UK-EU trade talks, but regained some ground when the UK said it would ditch parts of a controversial bill that breached Britain’s EU withdrawal treaty."
By the evening it was down 0.2 per cent against the dollar at $1.335.
The move by Boris Johnson’s government on the previously agreed treaty was seen as a gesture that boosted chances of the two sides sealing a deal.
"Sterling has risen steadily against the dollar since mid-September, boosted by expectations that some form of agreement could be reached, although it has been more volatile in recent months than the dollar and the euro."
"This week one-month implied volatility for sterling, a measure of expected price swings over the period, has hit its highest level since the first days of April, following a coronavirus-induced sell-off of global assets in March."
"“This doesn’t tell you markets are pricing in no deal,” said Trevor Greetham, investment strategist at Royal London Asset Management."
“But it tells you market participants are anxious.”
"Brexit talks were driving swings in the currency, said Christopher Jeffery, investment strategist at Legal & General Investment Management, because a no-deal outcome could deepen Britain’s economic contraction and prompt the Bank of England to introduce negative UK interest rates for the first time."
Investors had unwound earlier bets
the BoE would make such a move.
"“People are once again making the link that if we do make a no-deal outcome we will have the negative rates debate back on the table,” Mr Jeffery added."
"The oil price, which was buoyed last week by the Opec+ group agreeing to curtail planned increases in production, drifted."
"Brent crude, the international benchmark, settled 0.1 per cent higher to $48.84 a barrel."
"WTI, its US counterpart, was down 0.3 per cent at $45.60."
"The Treasury yield curve flattened marginally, as longer-dated Treasuries advanced."
"The difference in yields between the two and 10-year Treasury fell 0.01 percentage points to 77 basis points, marking a retreat from a three-year high hit last Friday."
"“Markets are consolidating,” said Ben Laidler, chief executive of Tower Hudson Research, after global stocks, as measured by the FTSE All-World index, climbed more than 12 per cent in November and continued rallying in the first few days of this month."
"“You’ve had two big themes: coronavirus vaccines and the possibility of US [economic] stimulus,” he added."
“But investors are concerned about markets getting too far ahead of the current macroeconomic situation.”
"Oil prices rose to a nine-month high and energy shares helped push the US stock market to a new record, after an agreement between Opec and Russia eased fears of oversupply."
"Brent crude, the international benchmark, rose 0.6 per cent to $49.03 a barrel, having hit a high of $49.87 earlier in the day."
US marker West Texas Intermediate climbed 0.85 per cent to $46.03.
"On Thursday evening, Russia and Opec agreed to boost oil supply by 500,000 barrels a day from January, a figure that was a quarter of what they had planned previously."
"The oil price was being supported by the supply agreement and a weaker US dollar, said Monica Defend, head of research at fund manager Amundi."
"“Developed markets remain in the grip of the second wave of the pandemic, and this is reflected in poor demand for travel,” she said."
"“We do not expect to see oil at $55 until the second half of next year, on the basis that [coronavirus] vaccines can be widely distributed and aeroplanes are back in the sky.”"
A weaker dollar boosts crude prices because it makes it cheaper for holders of other currencies to purchase the commodity.
"But expectations of an oil price recovery after the pandemic vary widely, with Opec bullish on consumption while forecasts from oil producers and airlines suggest a peak in demand is close."
"The dollar index, which measures the greenback against trading partners’ currencies, was unchanged at the end of trading hours on Wall Street, hovering around a two-and-a-half-year low."
"On Wall Street, the S&P 500 index closed the session up 0.9 per cent at an all-time high, led by energy shares including ConocoPhillips and Occidental Petroleum."
"The technology-focused Nasdaq Composite rose 0.7 per cent, also to a record close."
"The yield on 10-year US Treasuries, which has climbed quickly in recent weeks as the positive mood on markets prompted investors to sell off the haven asset, rose 0.05 percentage points to 0.97 per cent, equalling November’s"
"A month ago, the yield was below 0.8 per cent."
"Also on Friday, one portion of the yield curve, which tracks the difference between 2-year and 10-year Treasury yields, widened to its largest gap since 2017, at 0.82 percentage points."
"Data from Bureau of Labor Statistics showed the US added 245,000 jobs in November, far below the 469,000 expected by economists polled by Reuters."
"The weaker than expected payroll number would usually jolt markets, said Emiel van den Heiligenberg, head of asset allocation at Legal & General Investment Management, except investors were looking beyond the current economic data."
"“People are already very, very optimistic and when there is weakness, the market will look through that because they are thinking about the vaccine and economic normalisation,” he said."
Lifting market sentiment were also signs of progress in talks between US lawmakers about a second stimulus package for the world’s largest economy.
"On Friday, Nancy Pelosi, the Speaker of the House, said there was “momentum” towards a deal."
"In Europe, London’s FTSE 100 index, which has heavy weightings of oil producers, miners and commodities traders, closed 0.9 per cent higher."
The region-wide Stoxx Europe 600 benchmark added 0.6 per cent while Germany’s Xetra Dax gained 0.4 per cent.
Global stock markets rallied while the dollar and US government bond prices fell after encouraging Chinese factory data raised further hopes for the global economic recovery.
"The S&P 500 index rose 1.1 per cent to a record high, building on a global rally spurred by coronavirus vaccines that pushed the US blue-chip index up almost 11 per cent in November."
"The technology focused Nasdaq Composite also hit an all-time high, closing with a 1.3 per cent gain."
"Treasuries and the dollar weakened, meanwhile, as the upbeat mood put haven assets out of favour."
"The yield on 10-year Treasury notes, which moves inversely to the price of the securities, rose 0.08 percentage points to 0.92 per cent."
"The yield on 20- and 30-year Treasuries also climbed, while the dollar, as measured against a basket of other big currencies, slipped 0.9 per cent and brought the euro to its strongest level since mid-2018."
The move in Treasuries likely caught some hedge funds by surprise.
"Leveraged funds had unwound a significant portion of their short bets on longer-dated Treasury futures in the week to November 24, according to data published by the Commodity Futures Trading Commission on Monday."
Short positions are a means to profit if the price of the Treasury futures contract falls in value.
The resumption of the bullish tone in equity markets came after a survey run by Chinese publication Caixin found industrial activity in the world’s second-largest economy was accelerating at its fastest pace in a decade in November.
"“This validates the idea that when you get the pandemic under control and you really manage to keep it low, economies can catch up extremely rapidly,” said Samy Chaar, chief economist at Lombard Odier."
"In Europe, the Stoxx Europe 600 rose 0.7 per cent, having gained almost 14 per cent in November, in a record month for the regional equity benchmark."
"The UK’s FTSE 100, which just achieved its best month since 1989, climbed 1.9 per cent."
Dax added 0.7 per cent.
"The FTSE 100 has been has been one of the worst-performing big stock markets during 2020, falling almost 16 per cent."
But the UK large-cap index has a large concentration of commodities and metals producers whose fortunes are pinned to Chinese demand.
"Value stocks — unloved companies in economically sensitive sectors that often do well as recessions come to an end — also make up more than a third of the index, according to Goldman Sachs."
"“We believe the key factors driving FTSE 100 remain commodity prices and value versus growth,”"
Goldman’s strategists wrote in a research note.
"On Tuesday the price of copper, the world’s most important industrial metal, hit $7,719 a tonne, its highest point since March 2013."
"The Cboe Vix, which measures investors’ expectations of share price volatility on the S&P 500, rose marginally to 20.8."
"Last month was among the strongest on record for bourses across the globe, but investors should not expect gains “in a straight line from here”, warned Yuko Takano, equities portfolio manager at Newton Investment Management."
"Even if Covid-19 vaccines are approved swiftly, governments still face the task of administering the jabs, said Ms Takano, and"
"“it is winter,"
"it’s getting cold, [so] we’re going to see an ugly next wave of the virus hitting a lot of developed countries”."
"Financial markets “were going to still be working under a lot of uncertainty” and would face significant volatility “for the next month of the next quarter”, she added."
Additional reporting by Matthew Rocco and Eric Platt in New York
"Investors on Monday took some of their profits from the best month for stocks in decades, in which Covid-19 vaccine breakthroughs lifted economically sensitive sectors such as energy and financials."
"The FTSE All-World was down 1 per cent in the final trading session of November, but the index has climbed more than 12 per cent this month, its best since at least 1994."
"The UK’s FTSE 100 share index, which closed down 1.6 per cent on Monday, was still 12 per cent higher for November, in its best performance since 1989."
Wall Street’s leading benchmarks reached record levels in previous sessions and have posted double-digit gains for the month.
"Despite the 0.5 per cent fall by the S&P 500, the index finished 10.8 per cent higher for November."
The Nasdaq Composite has gained 11.8 per cent for the month.
Both indices notched their best performances since April.
"The performance of US small-cap companies as measured by the Russell 2000 has been particularly buoyant, reflecting their sensitivity to the US economy."
"That index was up 18.3 per cent this month, the largest gain in the index’s 41-year history."
"The outperformance of “small vs big” was an indicator of investors’ optimism going into 2021, said Timothy Holland, global investment strategist at Brinker Capital."
"This has been the month that a string of Covid vaccine trials produced positive results, and Pfizer and Moderna submitted their products for approval, raising the prospect vaccinations could begin very soon and ramp up quickly next year."
"Small-caps “tend to be more volatile, more dependent on capital and more economically sensitive, and their performance shows that investors are pricing in better economic times”, Mr Holland said."
Europe’s benchmark Stoxx 600 index closed the day down 1 per cent to end November with a 13.7 per cent gain.
"The UK FTSE 100 has benefited from its relatively high concentration of economically-sensitive cyclical stocks, which have been popular since markets began looking ahead to economies reopening."
"“Time to turn positive on the UK,” said Sebastien Galy, macro strategist at Nordea Asset Management, noting that the country’s stocks were lagging expected earnings and that weakness in the pound against the euro should provide support."
"Shares in natural resources, financial services and household goods companies make up almost half of the FTSE by weighting — a sharp contrast to the US S&P 500, which is dominated by the technology sector."
"“The news on vaccines came out and you then saw this strong outperformance of cyclical stocks,” said Yuko Takano, equities portfolio manager at Newton Investment Management."
"Markets were “taking a breather” on Monday “after a hard and fast rally showed some signals that equities were becoming overbought”, said Supriya Menon, senior multi-asset strategist at Pictet Asset Management."
"Such signs, Ms Menon said, included the breakneck pace of investment flows into equity funds — amounting to a record $89bn across three weeks this month, according to Bank of America data."
"But there might be more to come, she added."
"Pictet calculates that about $1.2tn rushed into the relative safety of money market funds between March and May, as the virus spread across the globe."
"About 75 per cent of that was still sitting in the low-risk funds, the manager calculates."
"Dialled back expectations for a large fiscal stimulus in the US have helped keep yields on the 10-year US Treasury in check, said Tim Murray, capital markets strategist at T Rowe Price."
"The note yielded 0.844 per cent on Monday, marginally below the 0.874 per cent it yielded at the end of October."
Other haven assets continued to fall out of favour on Monday.
"Gold fell another 0.6 per cent to $1,776 per troy ounce."
"The metal has lost almost 6 per cent of its value in November, heading for its worst month in four years."
The dollar rose 0.2 per cent to 91.98 against a basket of other currencies.
"Brent crude, the international oil benchmark, fell 1.2 per cent to $47.59 a barrel after big oil-producing nations failed to agree on whether to delay a planned supply increase ahead of a crucial two-day Opec meeting starting on Monday."
"Global stocks are on track for their best month on record, propelled by a series of Covid-19 vaccine breakthroughs and optimism over Joe Biden’s victory in the US presidential election."
"The rally reflects investors’ growing eagerness to buy into risky assets, encouraged by progress in the development of Covid-19 vaccines at pharmaceutical groups Pfizer-BioNTech, Moderna and AstraZeneca."
"MSCI’s index of developed and emerging markets has risen 12.78 per cent this month and set another all-time high on Friday, rising 0.1 per cent in US holiday-thinned trading."
"The hunger for stocks has been reflected in investment flows, with $89bn flooding into equity funds over three weeks in November, a record haul, according to analysts at Bank of America."
"“It’s incredible, absolutely stunning,” said Fahad Kamal, chief market strategist at Kleinwort Hambros."
The month’s gains are “all linked back to one crucial factor and that’s the vaccine”.
"Wall Street closed a truncated session, in which US markets were open just half a day, with the tech-heavy Nasdaq Composite up 0.9 per cent to a fresh closing high."
The S&P 500 rose 0.2 per cent.
"“The US election coupled with the vaccine [news] has removed two quite significant tail risks from the market,” said Maya Bhandari, fund manager at Columbia Threadneedle Investments."
“There does still appear to be room to add further [to the gains].”
"The Stoxx Europe 600 share index closed up 0.4 per cent, keeping the region-wide benchmark on track for a record monthly gain of more than 14 per cent."
"But despite November’s advances, the Stoxx 600 is still 5 per cent lower than when it started the year, while London’s FTSE 100 is down 15 per cent."
"Paul Dales, chief UK economist at Capital Economics, said encouraging vaccine news meant that “by the middle of the decade the economy won’t be much smaller than if the Covid-19 crisis had never happened”."
"Doubts have, however, been raised about AstraZeneca’s vaccine candidate, which had been hailed as cheaper and an easier jab to store than the alternatives, following a mix-up in the dosages given and muddled communication about the results."
AstraZeneca inched up 1 per cent in morning US trading while rival Moderna leapt 12 per cent.
Optimism has also been tempered to some extent by the surge in coronavirus cases in the US and tightening restrictions in Europe.
"Investors were grappling “with the likely spread in the pandemic over the colder winter months ahead as well as potential disruption with AstraZeneca’s vaccine rollout”, said Jim Reid, a strategist at Deutsche Bank."
"The rise in market sentiment led to a modest sell-off in haven assets, taking the price of gold down as much as 2 per cent to $1,787 a troy ounce, its lowest level since July."
"Brent crude, the international benchmark, rose 0.7 per cent to just above $48 a barrel."
"Oil prices have tracked stocks higher this month on hopes of a rebound in fuel demand once a vaccine is rolled out, taking the market back to levels not seen since the early stage of the pandemic."
"In Asia-Pacific, China’s CSI 300 index climbed 1.2 per cent, following the release of upbeat economic data."
Topix closed up 0.5 per cent while Hong Kong’s Hang Seng gained 0.3 per cent.
"US stocks surged to new highs on Tuesday, alongside global equities, as the path for a smooth transition of power in the US cleared and investors weighed the likely arrival of measures to bolster the world’s biggest economy."
"The Dow Jones Industrial Average climbed 1.5 per cent higher, pushing one of Wall Street’s oldest stock market indices beyond 30,000 for the first time."
"The wider S&P 500 gained 1.6 per cent to close at a new record peak of 3,635."
"A rotation into industries that are set to benefit most from an economic recovery propelled indices higher worldwide, with the energy and financials sectors leading gains."
The move marked an acceleration of a trend that began in the wake of Joe Biden’s election win earlier this month and has gained traction following a series of positive results from trials of Covid-19 vaccines.
"“The market is focusing beyond the next few weeks and is pricing in a recovery as 2021 progresses,” said Brian Levitt, global market strategist at Invesco."
“What you’ll end up having is an environment that over the next couple of years should be good for risk assets.”
"“As long as the path to reopening [virus-hit economies] remains unchanged, then short-term weakness, while it can hurt . . ."
"will take a back seat,” added Greg Boutle, BNP Paribas’ head of US equity and derivative strategy."
Donald Trump’s decision to allow the presidential transition to begin after weeks of delay boosted sentiment across trading desks.
"Indications that Mr Biden will seek to appoint Janet Yellen, the former Federal Reserve chief who is widely respected for her experience in labour economics, as his Treasury secretary added to the upbeat mood."
Analysts at Deutsche Bank said Ms Yellen would be “likely to try to closely align fiscal and monetary policy” and could quickly reverse the Treasury’s recent refusal to extend the Fed’s emergency lending facilities.
"“Yellen as Treasury secretary is a huge plus for markets,” said Dan Scott, chief investment officer at Vontobel Wealth Management."
"“She’s highly competent and she has a long history in basically understanding what monetary policy can do for the recovery, and the limitations of monetary policy,” which should pave the way for further fiscal stimulus, he added."
"Chris Ralph, chief global strategist at SJP, said Ms Yellen “will be seen as a very safe pair of hands”, with Republicans more likely to be constructive in discussions about a stimulus deal, while David Kelly, chief global strategist at JPMorgan Asset Management, said she has the “institutional knowledge to hit the ground running”."
"Mr Trump said late on Monday that the General Services Administration, which provides transition resources for incoming administrations, should “do what needs to be done with regard to initial protocols”."
"The move, while short of a full concession 20 days after the November 3 election, marked the first break in an unprecedented effort by the White House to overturn the results."
"“If they were unable to transition through the end of this year then the policy vacuum we would’ve entered into could’ve been all the more damaging to the US economy,” said Robert Rennie, global head of market strategy for Westpac."
"In a brief press conference on Tuesday, Mr Trump hailed the Dow’s performance."
"“The stock market’s just broken 30,000,” he said, “never been broken, that number."
"That’s a sacred number, 30,000."
Nobody thought they’d ever see it.”
"Brent crude, the international oil benchmark, jumped 3.8 per cent to its highest point since March, at $47.79 a barrel, on hopes that a coronavirus vaccine might mean a gradual return to normality and rising demand."
"Gold, which investors often turn to in times of uncertainty, fell 1.8 per cent to $1,804 per troy ounce."
"The dollar, another haven asset, slipped 0.3 per cent as measured against a basket of its peers."
"In Europe, the region-wide Stoxx 600 closed up 0.9 per cent, while London’s FTSE 100 rose 1.6 per cent and German’s"
Xetra Dax climbed 1.3 per cent.
"In China, the CSI 300 index of Shanghai and Shenzhen-listed shares closed down 0.6 per cent, while Japan’s Topix rose to its highest level in two years, climbing 2 per cent, after traders returned from a long weekend."
US equities slipped on Tuesday after disappointing consumer spending data added to worries about rising coronavirus infections.
"The S&P 500 declined 0.5 per cent, a day after optimism about the prospect of a Covid-19 vaccine drove the benchmark to a closing high."
"Almost two-thirds of the stocks within the index fell, led by a drop in the shares of utilities and healthcare stocks."
"The tech-heavy Nasdaq Composite was 0.2 per cent lower, while tech giants such as Amazon and Tesla gained ground, as investors looked to a sector that has been among the few resilient pockets of the stock market throughout the crisis."
"The moves followed the release of data showing that US retail sales grew at a much slower pace than expected in October, as Americans grappled with a resurgence in coronavirus cases."
"Retail sales rose 0.3 per cent, undershooting analysts’ expectations for a 0.5 per cent gain."
"“There are warning signs that November and December will be tougher periods for US businesses,” said James Knightley, chief international economist at ING."
"“Covid-19 concerns, squeezed incomes and restricted mobility point to weaker consumer activity.”"
"Despite the mild declines, US stocks remained near their most expensive level since the dotcom boom and bust."
The S&P 500 on Tuesday traded at 21.2 times the expected 2021 earnings of the 500 companies that make up the index.
"Anxiety about the slowing economic recovery comes against the backdrop of fading fiscal support, since US lawmakers had been unable to agree on a renewed rescue package before November’s presidential election."
"The price of government debt rose after the release of the retail data, taking the yield on the 10-year US Treasury down 0.04 percentage points to 0.87 per cent."
"In Europe, equity markets also moved into the red as investor optimism about a potential Covid-19 vaccine ran up against the latest surge in infections."
The region-wide benchmark Stoxx 600 index closed down 0.2 per cent while London’s FTSE 100 slipped 0.9 per cent.
Despite encouraging news on Monday about the efficacy of Moderna’s vaccine candidate — which followed a similar announcement last week from Pfizer and BioNTech — analysts warned it would be some time before a vaccine was widely available.
"Given the logistical and regulatory hurdles drugs must clear, “the reality obviously is there’s still quite a long way to go before"
"any of these [vaccines] are actually in a position where they’re going to be able to make a meaningful difference”, said Matthew Merritt, fund manager at Insight Investment."
"Coronavirus infections have continued to rise globally, prompting the renewed imposition of lockdown measures that hit economies during the first wave."
"New restrictions will be implemented in Sweden next week, while a senior public official in the UK hinted that post-lockdown curbs in England might have to be stricter than anticipated."
"Padhraic Garvey, regional head of research, Americas, at ING, said the “muted reaction” of currencies to the Moderna news “confirmed something we have suspected: the novelty is fading fast and investors likely have already included prospects of a vaccine in their economic outlook”."
"Early gains for oil faded in the afternoon in London, with global benchmark Brent crude ultimately settling down 0.2 per cent to $43.75 a barrel."
"The price of oil has rallied this month on hopes of a rebound in global consumption, but some analysts have warned the boost will take time to come through."
"In the near term, the vaccine breakthroughs change little for oil, said Warren Patterson, head of commodities strategy at ING, adding that there was “still plenty of concern over the demand impact from the latest wave of Covid-19”."
Equities trading in Asia was muted.
Topix index rose 0.2 per cent while Australia’s S&P/ASX 200 added 0.2 per cent as trading resumed after an outage on Monday.
"In China, where coronavirus infections have been largely contained, the onshore version of the renminbi strengthened 0.5 per cent against the dollar to Rmb6.5515, a level it had not reached since mid-2018."
US stocks set a record close on Monday after biotech group Moderna lifted global markets with trial data that showed its coronavirus vaccine was highly effective.
Wall Street’s benchmark S&P 500 index ended the day up 1.2 per cent while the Russell 2000 of US small-cap stocks — seen as a barometer of the domestic economy — also closed at a record.
The tech-heavy US Nasdaq Composite advanced a more modest 0.8 per cent.
"Hopes that a successful vaccine could be deployed to slow the spread of coronavirus in as little as a few months triggered a powerful rotation into economically sensitive sectors that began last week, as investors moved away from groups perceived as beneficiaries of the pandemic."
"“That’s a reflection of increased likelihood of and visibility into the normalisation of corporate profits and lifestyles in 2021,” said Dan Suzuki, deputy chief investment officer at Richard Bernstein Advisors."
The announcement that Moderna’s vaccine was 94.5 per cent effective in preventing the disease for participants in a late-stage trial followed a similar result for a similar product from Pfizer and BioNTech a week earlier.
"The stock market rotation continued on Monday, with energy and financial stocks leading gains on both sides of the Atlantic."
"Travel stocks also benefited with shares in the biggest US airlines up between 4 and 5 per cent, and cruise lines gaining even more."
"“Visibility towards a return to normality is increasing, and this should provide more fuel to the reflation rally, with small-caps, value and cyclicals clear beneficiaries,” said Seema Shah, chief strategist at Principal Global Investors."
"Hani Redha, a portfolio manager at PineBridge Investments, said money that investors had left on the sidelines — while they awaited greater certainty over issues such as the pandemic and the US election — was likely to flow into sectors that would benefit most from the recovery, but added that he did not expect to see “a sell-off in the other sectors”."
"“Any selling of any particular sector — let alone tech, which has such strength behind it — is going to be very shortlived . . . "
"The broader tech sector is not beholden to lockdown versus no lockdown,” he added."
"“The Pfizer news was the big step-change but this clearly helps,” said Chris Jeffery, a fixed-income strategist at Legal & General Investment Management."
"“The more vaccines that get over the line, the faster the rollout in aggregate is going to be in the first few months of next year.”"
"Moderna said its vaccine would remain stable once thawed for 30 days when refrigerated at between 2C and 8C for 30 days, longer than the BioNTech-Pfizer shot, which can survive in a normal fridge for only up to five days and must otherwise be stored at minus 75C."
"Moderna shares were up 11 per cent, while Pfizer fell 4 per cent."
"In Europe, the Stoxx 600 index closed 1.2 per cent higher, while London’s FTSE 100 rose 1.7 per cent."
"A rally in oil prices was also extended by the Moderna news, with international standard Brent crude up 2.5 per cent at $43.90 a barrel, although off the day’s highs."
"West Texas Intermediate, the US marker, was up 3 per cent at $41.39 a barrel."
US government bonds declined in price as investors placed their bets instead on more solid growth and inflation on the horizon.
The 10-year Treasury yield was up 0.016 percentage points at 0.909 per cent.
"Markets were also boosted on Monday after 15 nations, including China, Japan, Australia and Malaysia, signed one of the biggest trade agreements in history."
"MSCI’s index of Asia-Pacific shares, excluding Japan, rose more than 1 per cent to a record high, while Japan’s"
Topix advanced 1.7 per cent and
China’s CSI 300 climbed 1 per cent.
"Economic data showed that Japan’s economic output had rebounded more than expected in the third quarter, while China’s retail sales rose at the fastest pace in 2020, to above pre-pandemic levels."
"“The upshot is that the negative shock to [China’s] labour market and service sector from Covid-19 now appears to have fully reversed,” said Julian Evans-Pritchard, senior China economist at Capital Economics."
“We expect a period of above-trend economic growth in the coming quarters.”
"Wall Street stocks rallied for the second day and the dollar weakened as election results released so far reshaped predictions about the US economy, regulation and interest rates."
The Nasdaq Composite index gained 2.6 per cent after the tech-heavy index rose 3.9 per cent on Wednesday.
The blue-chip S&P 500 ended the day 1.9 per cent higher.
Both indices were on track for their best week since April.
"Thursday’s rally was broad, with all industry sectors of the S&P 500 rising, contrasting with Wednesday’s advance that was led by technology groups."
"The S&P 500 banks sector, which fell 4 per cent in the previous session, recouped almost all of those losses on Thursday."
Industrials rose 2.6 per cent.
"The dollar index, which measures the buck’s performance against six trading partners’ currencies, fell 0.8 per cent."
This marked a widening of a trend that started as election results began rolling in on Tuesday evening.
A stronger-than-expected performance by Donald Trump in the presidential race and fading expectations Joe Biden
’s Democrats will turn over the Senate upended Wall Street expectations of a “blue wave” that could have ushered in $2tn of economic stimulus.
"Investors viewed this forecast spending spree as a long-awaited catalyst for a repricing of assets across the world, with a rebound in US growth supporting higher inflation and bond yields and a stronger dollar."
"“Coming into this election, you had a market that was itching to rotate out of tech and low-yielding government bonds,” said Johanna Kyrklund, chief investment officer of Schroders."
“But now it’s looking like more of the same.”
"The Nasdaq has risen by almost a third during 2020, while Treasury yields have largely returned to pre-election levels."
"With the presidential race too tight to call and expectations building for a divided Congress, investors on Thursday were also repositioning portfolios to reflect expectations of slower growth, more stimulus measures from the Federal Reserve and less likelihood of major changes to business regulation and taxation."
The Fed left US interest rates and its bond-buying programme unchanged after its policy meeting this week and on Thursday described the rising number of coronavirus cases in the US and around the world as “particularly concerning”.
"It is “fairly clear” that if Mr Biden wins “he’ll face Congressional resistance on anything transformational, whether on the budgetary or regulatory front”, said JPMorgan strategist John Normand."
“That is great news for those who think that government inaction is generally good for asset prices over the medium term.”
"The Vix, an index of expected volatility on the S&P 500 that is dubbed Wall Street’s “fear gauge”, dropped almost 2 points to a reading of 27.8, its lowest level since mid-October, although above its long-run average of 20."
"Eric Stein, chief investment officer for fixed income at Eaton Vance, said investors were “looking through” the period of uncertainty."
"“The market appears to be saying it could get messy, but it isn’t something that will be as material of a risk as people were worried about before,” he said."
"Meanwhile, investors continued to buy longer-term US government debt, pushing yields lower."
"The 10-year yield was recently down 0.01 percentage points at 0.775 per cent, having jumped above 0.9 per cent on Tuesday before polls closed in some key states."
"Some eurozone bonds also rallied, with the yield on Italy’s five-year bond turning negative for the first time."
Additional reporting by Hudson Lockett and Thomas Hale in Hong Kong
"The absence of a decisive US presidential election win for Joe Biden boosted government bonds and the shares of big US tech stocks on Wednesday, as investors cut back trades that had assumed a “blue wave” Democratic sweep of the White House and Congress."
"The S&P 500 advanced 2.2 per cent, led by technology stocks rather than the economy-sensitive shares that had been favoured to climb in a “blue wave” scenario."
It was the best day for the benchmark index since June.
"The tech-heavy Nasdaq Composite, which has far outpaced the wider S&P 500 this year, snapped nearly 4 per cent higher."
"Facebook and Alphabet were among the biggest gainers, up 8 per cent and 6 per cent, respectively."
Apple climbed 4 per cent.
Investors also rushed into US government bonds as expectations for a big infrastructure spending splurge dimmed.
"The yield on the benchmark 10-year US Treasury slid 0.13 percentage points to 0.77 per cent, its biggest decline since April."
Yields fall as a bond’s price rises.
Opinion polls had led investors to bet that decisive Democratic victories would spark another round of stimulus for the pandemic-stricken US economy.
Those hopes are now fading.
"Mr Biden may still clinch the presidency in an unexpectedly tight race, but the Republicans’ strong showing in several battleground states, and seemingly tight grip on the Senate, have prompted money managers to prepare for the prospect that the US could be left with a divided government, complicating the investment outlook."
"“The ‘blue wave’ trade has been going on since the summer and has built up more recently, and I would expect it to unravel now,” said Fabiana Fedeli, global head of fundamental equities at Robeco."
"Economic stimulus and the path of the pandemic were much more significant drivers for markets than the outcome of the election alone, she said."
"The yield on the 10-year Treasury had briefly eclipsed 0.9 per cent on Tuesday evening — hitting the highest level since June — in anticipation that a big Democratic win could fire up government spending, and potentially inflation."
"In turn, that was expected to place more downward pressure on longer-term bond prices, and send yields rising."
"But yields dropped as results poured in, reflecting how some fund managers had been caught out."
"“Markets need to have a serious look at their systems,” said Didier Saint-Georges, member of the strategic investment committee at French investment house Carmignac."
“Now we are back to where we were before the ‘blue wave’ trade.
We are back to fundamentals.”
"Jim Leaviss, chief investment officer of public fixed income at M&G, said that the slim chance of the Democrats taking the Senate meant that additional heavy-hitting fiscal stimulus was less likely to emerge."
“[That] means that in the event that the US economy slows again — and a winter Covid wave is likely — then it will be down to monetary policy to provide support once more.”
"The unravelling of that blue wave trade, which had been spurred in part by $2tn of infrastructure and green energy spending promised by Mr Biden, sent shares of would-be beneficiaries in the construction and industrials goods sector like Caterpillar lower on Wednesday."
"The potential for a divided government also propelled healthcare stocks, with insurers Cigna and Anthem rising more than 10 per cent as investors wagered industry-wide reform was ultimately unlikely."
"US president Donald Trump injected another source of nervousness early on Wednesday, after he vowed to go to the Supreme Court to halt the counting of votes as he prematurely claimed victory in the White House race."
"“In the next few days, there is going to be very messy news flow,” said Mr Saint-Georges at Carmignac."
That kind of rhetoric may also be helping to boost government bonds.
"“Some people are using bonds as a safe haven, reflecting the risk of a contested election with bad outcomes,” said Toby Nangle, global head of asset allocation at Columbia Threadneedle."
"“But right now, I see it as a reduction in the likelihood of very substantial stimulus.”"
"European markets closed higher on Wednesday, with the Stoxx 600 index up 2.1 per cent."
Additional reporting by Laurence Fletcher in London and Leo Lewis in Tokyo
"US stocks rallied and the yield on long-term Treasuries hit the highest level since June as Americans headed to the polls on Tuesday, with investors placing bets on post-election economic stimulus."
"Election day kicked off with Democratic challenger Joe Biden leading Republican incumbent Donald Trump in national polls, but with tight races expected in battleground states."
"Markets have positioned in anticipation of a victory by Mr Biden and potentially a “blue wave” in which Democrats also take control of both the Senate and House of Representatives, investors and traders said."
"“The equity market appears to be pricing in the increased odds of a Biden win and a blue wave,” said Hong Li, head of US equity quantitative strategy at Citigroup."
“Timely and clear election results will remove one of the two major risks for the equity market and may bring a clearer picture of the potential stimulus package.”
"The blue-chip S&P 500 share index closed 1.8 per cent higher in New York, having been up by as much as 2.4 per cent earlier following gains across Europe and Asia."
The Nasdaq Composite rose 1.9 per cent.
Investors said a blue wave could be a boon to stock markets since it would clear the path for Mr Biden to fulfil a campaign pledge to launch a huge infrastructure spending programme to counteract the blow to the world’s biggest economy from the coronavirus pandemic.
"Economically sensitive sectors including financials, industrials and consumer discretionary stocks were the biggest gainers on Wall Street."
"Tuesday’s rally was broad, with 90 per cent of the stocks listed on the S&P 500 in positive territory, according to Bloomberg data."
"The spectre of a government spending splurge has also put pressure on the price of long-term US government debt, a trend that accelerated on Tuesday."
"The benchmark 10-year Treasury yield rose 0.04 percentage points to 0.882 per cent, after earlier touching 0.896, the highest level since early June, according to Bloomberg."
"At the start of October, it hovered below 0.7 per cent."
The 30-year Treasury yield advanced by a similar margin to 1.656 per cent.
"The dollar had its worst day since August, weakening 0.6 per cent against a basket of peer currencies."
"Many hedge funds have been betting on the Biden trade in recent days, wagering on US equities rebounding after Wall Street"
last week suffered its heaviest sell-off since the March ructions.
"Net long positions held by funds — bets on rising prices minus bets on falling prices — were close to their highest level in almost three years, according to Goldman Sachs."
"Still, there were signs that traders were cautious, especially after polls in 2016 failed to predict Mr Trump’s election win and the results of the UK’s referendum over EU membership."
Both events caused significant market ructions.
"Wall Street’s Vix index, one of the most closely watched measures of expected US equities volatility, traded at 34 on Tuesday, still far higher than its long-term average."
A similar measure called the Move index that tracks expectations for Treasuries tumult was also elevated.
"Investors had a “healthy degree of nervousness” about the prospect of a disputed election result, said Paul Leech, co-head of global equities at Barclays."
"“If we do get a contested outcome, then uncertainty is the worst thing for markets,” said Tihana Ibrahimpasic, a multi-asset analyst at fund manager Janus Henderson, predicting a rush to haven assets in that scenario that would push Treasury yields lower."
"Reporting by Colby Smith and Richard Henderson in New York, Naomi Rovnick, Adam Samson and Laurence Fletcher in London and Hudson Lockett in Hong Kong"
"Global stock markets snapped a three-session losing streak, lifted by upbeat earnings results that helped to offset concerns over a surge in coronavirus cases in Europe and the US."
"Wall Street’s S&P 500 benchmark ended the day with a fractional gain as US states including Wisconsin, Ohio and North Carolina recorded record jumps in Covid-19 cases."
"Heavy selling in the final hour of trading wiped out most of the day’s gains and weighed on the tech-heavy Nasdaq Composite, which dropped 0.4 per cent."
Europe’s Stoxx 600 posted a loss for the week despite rallying as much as 1.4 per cent on Friday.
The index slumped 2.1 per cent in the previous session after France imposed evening curfews on its biggest cities and Londoners faced new limits on socialising indoors.
"The region’s automobiles and parts sector closed up 3.6 per cent after Germany’s Daimler beat market expectations to post a pre-tax profit of €3.1bn, while France’s LVMH, the world’s biggest luxury goods maker, delivered double-digit sales growth in its fashion and leather goods unit in the third quarter."
"The stock sell-off earlier this week reflected the belief that “the easy phase of the recovery has now passed” and that the growth outlook for the final quarter was “tilted to the downside”, said Hugh Gimber, global market strategist at JPMorgan Asset Management."
"Risks for the fourth quarter were “becoming more exaggerated”, he added, although there was a chance of positive vaccine news."
“The market is weighing those two factors at the moment and struggling for direction.”
General Electric shares advanced more than 6 per cent after Europe’s leading aviation watchdog indicated that the Boeing 737 Max would be soon cleared to fly again after widespread groundings.
GE supplies the engines for the aircraft.
Boeing stock gained nearly 2 per cent.
Shares in Pfizer rose almost 4 per cent after the US drug group said it would apply for emergency US approval of the Covid-19 vaccine it is developing with Germany’s BioNTech.
US markets were buoyed by retail sales data that showed spending increased faster than expected in September.
The increase sets a new record for monthly retail spending in the US and comes despite the expiration at the end of July of extra $600 a week payments for people receiving unemployment benefits.
"Donald Trump has signed an executive order extending those additional benefits, albeit at a lower level."
"The acceleration in retail sales was “not sustainable given employment gains are plateauing and unemployment benefit incomes are being tapered”, said James Knightley, chief international economist at ING."
“The uncertain outlook for Covid-19 continues to provide downside risk.”
Other US data was less rosy.
US industrial production fell 0.6 per cent in September compared to expectations for a 0.5 per cent rise.
"Manufacturing output also contracted 0.3 per cent, shy of expectations it would expand 0.7 per cent."
The yield on the US 10-year Treasury bond fell 1 basis point to 0.744 per cent.
"The dollar index, which measures the currency against a basket of peers, weakened 0.2 per cent to 93.704."
"Sterling briefly slipped 0.2 per cent against the dollar to below $1.29, near its low of the week, after UK prime minister Boris Johnson said it was time to prepare for a no-deal Brexit."
The pound later pared back losses to be flat for the day.
"The outcome of Brexit negotiations will have implications for the Bank of England’s rate-setting policy, said James Smith, developed markets economist at ING."
"Negative rates were “possible in the UK next year if Brexit goes badly or if Covid-19 gets worse”, he added."
"In the Asia-Pacific region, shares were mixed."
Topix was down 0.9 per cent and China
’s CSI 300 fell 0.2 per cent.
"However, Hong Kong’s Hang Seng rose 0.9 per cent."
"“We believe Asia will continue to lead the global economic recovery, particularly led by China and the north Asian region,” said Fan Cheuk Wan, chief market strategist for Asia at HSBC Private Banking."
"Even if a vaccine is developed, the recovery will remain “divergent and gradual” since distributing it around the world will take time, she added."
"US and European stocks fell on signs that the spread of coronavirus is gathering pace, while a rally in German debt pushed yields on the regional haven to the lowest level since the market tumult in March."
The benchmark S&P 500 fell 0.2 per cent while the technology-heavy Nasdaq Composite ended 0.5 per cent lower.
"The declines were far greater in Europe, where the region-wide Stoxx 600 slid 2.1 per cent."
"Stocks trading in Frankfurt and Paris both dropped more than 2 per cent, while London’s FTSE 100 declined 1.7 per cent."
"France and the UK announced new restrictions in an attempt to slow the spread of the virus, which is accelerating across Europe."
"The US reported 57,000 new cases on Wednesday, as a record number of states registered daily increases of more than 1,000 new infections, while the Trump administration worried some scientists by appearing to champion a controversial herd immunity strategy."
"“Markets have been surprised by the progress of the virus in the second wave,” said John Roe, strategist at Legal & General Investment Management."
"A rally in German 10-year debt pushed yields down 0.03 percentage points to minus 0.613 per cent, the lowest since Italy implemented a national lockdown in mid-March."
"US Treasuries, by contrast, weakened."
The yield on the 10-year note rose 0.01 percentage points to 0.73 per cent.
Junk corporate debt also slipped in value.
"A popular exchange traded fund that invests in high-yield debt, known by its ticker HYG, slipped for its third consecutive day."
"The dollar, as measured against a basket of trading partners’ currencies, rose 0.4 per cent."
"Brent crude, the international oil benchmark, settled 0.4 per cent lower at $43.16 a barrel."
Mr Roe said economists and investors had not expected governments to allow the virus to reach the point it has now.
"Across the western world, governments had prioritised social wellbeing, for example, by allowing schools and places of worship to reopen, he said."
"“The best of the recovery is now behind us,” added Sophie Chardon, strategist at Lombard Odier."
"In a sign of the fragility of the global economy, data released on Thursday showed 898,000 Americans filed for first-time jobless benefits last week."
"Meanwhile, airline Ryanair sharply cut its winter flight schedule, citing increased government restrictions across Europe."
Ms Chardon said investors should brace themselves for “more volatility” in share prices.
The Vix index of expected volatility on the S&P 500 rose half a point to 26.9.
The so-called fear gauge’s long-run average is about 20.
A similar index forecasting eurozone stock market volatility also rose.
"On Wednesday evening, French president Emmanuel Macron declared a public health emergency and imposed a 9pm to 6am curfew on Paris and eight other big French cities."
German chancellor Angela Merkel warned that cases of Covid-19 were in an “exponential growth” phase and limited private gatherings to 10 people from two households.
"In Britain, households in London will be banned from mixing in any indoor setting from Friday evening."
The map in this story has been amended to correct an erroneous data-point on the spread of coronavirus in Île-de-France due to an error in an external data set.
Additional reporting by Harry Dempsey in London and Eric Platt and Peter Wells in New York
US stocks ended the day lower after Treasury secretary Steven Mnuchin cast doubt on securing a fiscal stimulus deal before the presidential election next month.
"The S&P 500 dropped 0.7 per cent, erasing earlier gains, while the tech-heavy Nasdaq Composite fell 0.8 per cent."
"Amazon and Netflix fell more than 2 per cent, while Facebook and Adobe dropped more than 1 per cent."
Mr Mnuchin said that despite progress in talks with Democrats the two sides remained “far apart” on certain elements of a deal.
His comments came during a Milken Institute conference on Wednesday.
"The prospects of securing a deal before the November poll have slowly eroded over the past few weeks despite ongoing negotiations between Mr Mnuchin and Nancy Pelosi, the Democratic speaker of the House of Representatives."
"“We continue to make progress on certain issues,” Mr Mnuchin said."
“On certain issues we continue to be far apart.”
Bank stocks fell despite encouraging signs from third-quarter earnings.
"The KBW bank index dropped nearly 2 per cent, dragged down by Bank of America, which lost more than 5 per cent, and Wells Fargo, which fell 6 per cent."
"The decline for the S&P 500 came after the large-cap index gained almost 4 per cent last week, as polls forecast a decisive November election victory for Joe Biden, President Donald Trump’s Democratic challenger."
A win by the former vice-president is seen as boosting the prospects for more fiscal stimulus.
"Stocks were also hit by news that drug companies Johnson & Johnson and Eli Lilly were halting trials of an experimental Covid-19 vaccine and therapy, respectively, because of safety concerns."
The region-wide Europe Stoxx 600 ended the day flat and
the FTSE 100 benchmark of UK blue-chips fell 0.6 per cent.
"Sterling traded choppily and within a wide range, ahead of a summit where EU leaders will discuss their future trade relationship with the UK."
The pound slipped 0.5 per cent against the dollar to $1.2869 in early dealings.
"It then reversed course, rising 0.7 per cent to $1.3027, after a Bloomberg report suggested the UK would stick with talks beyond an October 15 deadline."
"Against the euro, sterling gained 0.7 per cent at €1.1086, having started the day 0.3 per cent lower at €1.0981."
"At the EU summit starting on Thursday, European leaders are expected to forge their own negotiating plan with Britain, as the deadline for the UK leaving the bloc’s single market and customs union on December 31 looms."
"“The more time goes on, the more likely it looks that no deal will happen,” said Peter Westaway, chief economist for Europe at Vanguard."
"But he added that the difference between no deal and a basic trade agreement, which meant zero tariffs or quotas but maintained supply chain disruptions, was “slight”."
"Ian Tew, a sterling trader at Barclays, said that although the pound was highly sensitive to any hints of sentiment about Brexit, “the market is reacting and acknowledging the tail risk of a no deal”."
"The “recent rhetoric and the no-deal phrase is being expressed quite frequently”, he added, raising concerns that “these talks lead to further negativity”."
"In debt markets, traders continued snapping up bonds issued by economically weaker eurozone nations, in the expectation that the European Central Bank would expand its scheme to buy the securities to bolster financial stability through the pandemic."
"The yield on Italy’s 10-year bonds, which moves inversely to prices, hovered around a record low at 0.655 per cent."
"Greece’s 10-year bonds followed the same pattern, yielding 0.757 per cent."
"On Tuesday, Italy for the first time issued bonds that pay buyers no interest."
"With eurozone consumer prices falling and coronavirus cases rising, investors are betting that the ECB will boost the size of its pandemic emergency purchase programme from its current €1.35tn in the coming months."
"US stock markets advanced on Thursday with the benchmark S&P 500 closing at its highest level in just over a month, as investors looked to the prospect of fresh stimulus after the election."
"The S&P 500 rose 0.8 per cent while the technology-focused Nasdaq Composite advanced 0.5 per cent, continuing to rally after both indices rose by almost 2 per cent on Wednesday."
"Junk bond prices also rose broadly, according to trading platform MarketAxess."
America’s two major political parties remain billions of dollars apart on the size of a second fiscal package to limit the economic damage wrought by coronavirus.
"Polling gains by Democratic candidate Joe Biden have boosted hopes that his party, which has put forth and passed in the House of Representatives a $2.2tn plan to revitalise the pandemic-scarred economy, could open the spending taps soon after the election."
"While President Donald Trump signalled on Thursday that conversations on piecemeal stimulus plans were advancing, Democratic leaders have so far rebuffed that approach, pushing instead for a comprehensive economic package."
"Trevor Greetham, investment strategist at Royal London Asset Management, said financial markets were “starting to look through” the two-party debate over stimulus, given “Joe Biden’s widening lead in the polls”."
"Markets were “increasingly seeing the prospect of Democrats taking control of both houses” of Congress, added Sean Markowicz, investment strategist at Schroders."
“That will be good for stimulus.”
"Companies listed on the S&P 500 are expected to report a 21 per cent decline in earnings for the third quarter, year-over-year, according to FactSet."
This would be their worst performance since the second quarter of 2009.
"But investors have looked beyond such grim forecasts, betting on future government stimulus and the eventual introduction of a coronavirus vaccine, said Christopher Jeffery, investment strategist at Legal & General Investment Management."
"“The market is stepping over the second-wave risks,” he said."
"European equities also advanced on Thursday, with major bourses trading around their highest level in almost three weeks."
The region-wide Stoxx Europe 600 index gained 0.8 per cent and Frankfurt
’s Xetra Dax climbed 0.9 per cent.
"Oil prices rose, with the global benchmark Brent crude settling 3.2 per cent higher at $43.34 a barrel."
"In debt markets, US government bonds strengthened moderately during the trading day, with the yield on 10-year US Treasuries falling 2 basis points to 0.76 per cent."
The 10-year Treasury yield is hovering at about a four-month high while the 30-year yield is near a three-month peak.
"The rise in yields, which move inversely to a bond’s price, comes as traders anticipate that the supply of US government debt will increase if a new stimulus programme is agreed."
"“We’ve seen the yield curve steepen as the expectations around a Democratic victory and the borrowing that would entail have increased,” LGIM’s"
Mr Jeffery said.
"The government’s short-term borrowing costs would be pinned down by the Federal Reserve’s plan to keep US interest rates low, Mr Jeffery added, but funding more than $2.2tn of stimulus would involve Washington “borrowing at all maturities” in the bond market."
"US stocks gained ground on Wednesday after President Donald Trump suggested a new stimulus bill, although the chances of lawmakers agreeing to a deal before the election appeared to fade."
"The S&P 500 index closed 1.7 per cent higher and the tech-focused Nasdaq Composite gained 1.9 per cent, as the indices recovered from falls on Tuesday when Mr Trump announced he would walk away from negotiations with Democrats about the size of a second bailout for the pandemic-scarred economy."
"Mr Trump appeared to change course with a Twitter message calling for what he described as a “stand alone bill” for “stimulus checks” of $1,200, and directing a comment to Nancy Pelosi, the Democratic speaker of the House of Representatives: “Move fast, I am waiting to sign!”"
"Hopes for fresh stimulus faded further after Ms Pelosi, in a television appearance, called Mr Trump’s decision to cease negotiations until after the election a “terrible mistake” that reflected “erratic behaviour”."
"Mark Meadows, the White House chief of staff, and Larry Kudlow, director of the National Economic Council, then hit back at Democrats for failing to seek a compromise in the talks."
"Yanmei Xie, of the research house Gavekal, said the fact Republicans and Democrats were still wrangling over a bailout package meant the chance of the US economy getting fiscal support before the November presidential election was “dimming”."
"Kasper Elmgreen, head of the equity platform at fund manager Amundi, said that despite the “near-term risks” around the timing of a second major bailout for the US economy, “it is clear there is more stimulus to come”."
"According to the Financial Times’ US election poll tracker, Democratic challenger Joe Biden is running ahead of Mr Trump in key battleground states."
"The Democratic-controlled House this week approved a new fiscal stimulus package worth $2.2tn, while the Trump administration wants to spend up to $1.6tn."
"The prospect of the Democrats winning both chambers of Congress in November could support stock markets in the run-up to the polls, said Sean Markowicz, equity strategist at Schroders."
"“They would have the votes to pass an ambitious fiscal stimulus bill, as well as significant investments in education and infrastructure,” Mr Markowicz added."
But he cautioned that US stock markets were vulnerable to falls in the share prices of big tech groups
"Apple, Amazon, Facebook and Google’s parent Alphabet, which were accused by Congress on Tuesday of having abused their dominant economic positions."
The quartet’s shares account for almost a fifth of the S&P 500.
Early gains for US stocks accelerated after the Federal Reserve released minutes from its September meeting in which the central bank said it would keep rates low “for a longer period” if the economic outlook remained subdued.
Investors expect US stocks to continue trading choppily in the lead-up to the election.
"The Cboe’s Vix index, which measures the expected volatility of the S&P 500 over the next 30 days, was elevated at a reading of 28 on Wednesday, above its long-run average of about 20."
Futures contracts on the Vix show investors also believe the so-called Wall Street fear gauge will not fall below 30 in November and December.
"European stocks barely reacted to the fluctuating mood on Wall Street, with the region’s Stoxx 600 index trading flat, while the dollar’s performance against trading partners’ currencies was mixed."
"The euro gained 0.3 per cent against the dollar, to purchase $1.1764."
"But the US currency strengthened 0.4 per cent against the Japanese yen, buying ¥106.03"
"The yield on US 10-year Treasury bonds, which rises when prices fall, added around 5 basis points to 0.78 per cent, rebounding from a dip on Tuesday to the highest level since June."
Brent crude slipped 1.3 per cent to $42.08 a barrel.
"US stocks climbed on Thursday even as European shares hit a three-month low, with investors weighing the latest data on how coronavirus is affecting different regions of the global economy."
The tech-heavy Nasdaq Composite index fell as much as 1 per cent after the opening bell on Wall Street before recovering to end the day 0.4 per cent higher.
The large-cap S&P 500 also reversed early losses to trade 0.3 per cent higher.
Shares in Microsoft gained 1.4 per cent while Apple stock closed the day 1 per cent higher.
"US stocks received a boost after Nancy Pelosi, the Democratic speaker of the House of Representatives, said she was “ready for negotiation” on a new coronavirus relief plan."
"Congressional leaders and the White House have so far failed to agree more fiscal stimulus for the US economy, and talks stalled several weeks ago."
"US home sales reached an annualised rate of more than 1m in August, exceeding analyst estimates of 870,000, according to data on Thursday."
But there was also a rise in the number of Americans filing for first-time jobless benefits last week.
"Thursday’s choppy start followed a US sell-off on Wednesday, in which the Nasdaq shed 3 per cent."
The index had soared 65 per cent from April to its high in August before a sell-off.
"The S&P 500, meanwhile, has fallen 9 per cent from its August peak, reducing the index’s gains for 2020 to just 1 per cent."
"It had been “surprising” how much equities had rallied “against the backdrop of the virus”, said Johanna Kyrklund, chief investment officer at the fund manager Schroders."
“The easy part of the recovery has happened now.
It’s all about what happens from here.”
"In Europe, the region-wide Stoxx 600 index fell 1 per cent to close at its lowest point in three months."
"The FTSE 100 dropped 1.3 per cent and has fallen 2.4 per cent this month, on track for its worst monthly showing since May."
"There was no one factor driving that sell-off, said Alessia Berardi, investment strategist at the fund manager Amundi, but rather a confluence of negative events over the past few days."
"Activity in Europe’s services sector declined unexpectedly in September, a closely watched survey released on Wednesday showed, while England and Scotland announced new lockdown rules."
"The dollar, which is viewed as a haven from market volatility and also rises when institutional investors bank profits from share sales in the world’s reserve currency, held on to a two-month high against trading partner currencies on Thursday."
"The index tracking the dollar’s moves against rivals has gained 2.4 per cent this month, leaving it on track for the sharpest monthly increase since July last year."
"The price of gold climbed less than 1 per cent to trade just above the two-month low struck on Wednesday at $1,868 a troy ounce, having reached a record high of more than $2,000 in August."
"The dollar’s rebound, Ms Kyrklund explained, was less a vote of confidence on prospects for the US economy and more a case of investors choosing to hold the currency because, unlike in the eurozone, America has not implemented negative interest rates."
"“Choosing currencies is like judging an ugly competition,” she said."
“Which do you find the least objectionable?”
Additional reporting by Henry Sanderson
"US and European stocks rebounded on Tuesday, a day after a sharp sell-off triggered by the prospect of economically-damaging measures to limit a resurgence of the coronavirus."
"The benchmark S&P 500 index gained 1.1 per cent, clawing back most of the 1.2 per cent fall on Monday."
The tech-heavy Nasdaq Composite closed 1.7 per cent higher.
"The consumer cyclicals sector and a handful of big tech companies led Tuesday’s stock market in the US, with the online retailer Amazon up 5.7 per cent and the social network"
Twitter climbing more than 7 per cent.
"US energy stocks trailed on renewed concerns about depressed demand, even as the global benchmark Brent crude rose 0.7 per cent to $41.73 a barrel."
"Reflecting the continuing cautious mood, the US dollar index, which measures the greenback against a basket of its peers, climbed to its highest point since July, having also rallied on Monday as investors looked to haven assets."
"European stocks had a brighter day, following the biggest drop in the region’s bourses since June on Monday."
"London’s FTSE 100 index climbed 0.8 per cent, while Frankfurt’s Xetra Dax rose 0.4 per cent and the continent-wide Stoxx Europe 600 index advanced 0.2 per cent."
"French equities were lower, though."
"Separately in Europe, Italy’s"
borrowing costs fell after Matteo Salvini’s anti-migration opposition League party suffered a disappointing round of regional election results.
"The yield on the country’s 10-year bonds, which move inversely to prices, fell 5 basis points to 0.86 per cent."
"The UK is imposing stricter lockdown measures, including forcing pubs and other hospitality venues to close at 10pm from Thursday, and sterling slipped 0.6 per cent against the dollar to trade at $1.274, its lowest level since July."
The currency was weaker even though the governor of the Bank of England made it clear that it did not plan to push interest rates below zero in the near future.
"Matt Peron, director of research at Janus Henderson Investors, said Monday’s equity sell-off amounted to a “correction” in an optimistic market."
"“We think sentiment needs to cool and become more realistic for the market to bottom, and this could take a few weeks,” he said."
"“We will then need some clarity, or at least stability, on the Covid-19 and [US] election fronts for the market to move higher from there.”"
"Jeff Schulze, Investment Strategist at ClearBridge, said Monday’s turbulence amounted to a short-term and “healthy” correction, rather than a sign of more widespread fears about slowing economic growth, since asset classes other than equities had not substantially weakened."
"But investors are also watching the high-yield market, which has been unsettled along with equities in recent weeks."
"The additional yield above Treasuries on US junk-rated corporate bonds rose 0.26 per cent on Monday, the biggest daily sell-off in that market since the beginning of June, according to Ice Data Services."
"Jay Powell, the Federal Reserve chairman, told Congress on Tuesday that businesses hit by the pandemic may need “direct fiscal support” — but investors are not sure how to rate his chances of persuading lawmakers, who have so far failed to agree any stimulus package."
"Robert Rennie, head of global market strategy at Westpac, said “multiple political flashpoints” in the US, including a fight over a new Supreme Court nomination, had lowered the odds of more fiscal stimulus ahead of November’s presidential election."
Mr Rennie said investors were also nervous about a week-long holiday in China that begins on October 1 and its impact on global demand for commodities.
"Markets were showing “signs of softening within a number of key commodities”, he said."
"In the Asia-Pacific region, a sell-off in the shares of HSBC and Standard Chartered deepened."
"Hong Kong-listed shares in both banks fell 2 per cent, taking losses for each of the Asia-focused lenders to 10 per cent during the past two sessions."
The pair were among those named in media reports on Monday that alleged international banks had flagged $2tn in suspicious transfers to US anti-money laundering authorities.
"Hong Kong’s benchmark Hang Seng index closed down 1 per cent, while China’s CSI 300 of Shanghai and Shenzhen-listed shares extended losses to fall 1.2 per cent on Tuesday."
Australia’s S&P/ASX 200 dropped 0.7 per cent.
Markets in Japan were closed for a public holiday.
Global equity markets slid further on Thursday after the US Federal Reserve stopped short of promising changes to its massive bond-buying programme and the Bank of England held rates steady.
"The US blue-chip S&P 500 index fell nearly 1 per cent in the worst trading session in a week, extending Wednesday’s loss of 0.5 per cent."
"The technology-heavy Nasdaq Composite fared worse, losing 1.3 per cent following Wednesday’s decline of 1.7 per cent."
"Big tech companies weighed particularly heavily on markets, continuing a volatile few weeks for the sector."
Tesla fell more than 4 per cent and Amazon dropped by more than 2 per cent.
Apple and Microsoft dropped by more than 1 per cent.
The falls prolonged a day of gloomy trading in which European and Asian markets sank lower.
Investors were left uneasy even after the Fed on Wednesday signalled it would hold US interest rates at historic low levels until at least the end of 2023.
"First-time jobless claims from Americans who found themselves newly unemployed also declined less than expected for the week ending September 12, to 860,000 from 893,000 the week before."
Several economists said they were surprised the policy-setting Federal Open Market Committee did not hint the US central bank would shift to buying more government bonds of a longer maturity to magnify the power of its quantitative easing scheme.
"“We interpret the lack of changes to the composition of Treasury purchases to mean that the FOMC does not currently plan to extend the average duration of its purchases, against our previous expectation that it would,” said Jan Hatzius, chief US economist at Goldman Sachs."
“We now think that some additional trigger — such as a disorderly rise in yields at longer maturities or a deterioration of the economy — would likely be required.”
"Jim O’Sullivan, chief US macro strategist at TD Securities in New York, said the Fed’s policy statement was “modestly less dovish than we anticipated” and that traders in the US Treasury market had been left “disappointed by the lack of stronger guidance on asset purchases”."
Central bank stimulus has been a crucial pillar of a global equity rally that has propelled the MSCI’s gauge of developed and emerging market stocks up 50 per cent since the nadir in March.
That means markets have tended to be highly sensitive to even minor discrepancies between policy announcements and consensus expectations.
"In the UK, the Bank of England’s Monetary Policy Committee voted on Thursday to keep interest rates at 0.1 per cent, in line with expectations, and not to increase its asset purchase programme."
"But “the outlook for the economy remains unusually uncertain”, warned the MPC."
Sterling ended the day flat following a drop earlier in the day after the rate-setting committee said it had been briefed on the UK central bank
’s plans to explore how a negative interest rate “could be implemented effectively” should conditions warrant it.
"Europe’s Stoxx 600 benchmark closed 0.5 per cent lower, having fallen as much as 1 per cent earlier in the day, while the UK"
’s FTSE 100
slipped 0.5 per cent and the German Dax ended the day down 0.4 per cent.
In the US lawmakers in Congress have remained at loggerheads over further fiscal stimulus measures to support the world’s biggest economy.
"“The onus on creating growth and inflation does really fall to fiscal policy,” said Kerry Craig, global markets strategist at JPMorgan Asset Management, adding that “bipartisan politics in Washington” meant a new stimulus package might not come until the new year."
Treasuries were steady in recent trading.
The benchmark 10-year yield was down slightly at 0.685 per cent after ticking up the previous day following the Fed announcement.
"The dollar index, which measures the greenback against a basket of peers, fell 0.4 per cent."
"In the Asia-Pacific region, Japan’s Topix index closed down 0.4 per cent, while China"
’s CSI 300 closed 0.5 per cent lower.
Natural gas front-month futures fell 11 per cent to the lowest level in six weeks after a report from the US Energy Information Administration showed storage grew more than analysts polled by Reuters last week had anticipated.
"US technology stocks ended the holiday-shortened week on a downbeat note, failing to shake investor scepticism towards the sector’s inflated valuations."
The Nasdaq Composite finished 0.6 per cent lower on Friday and the tech-heavy index sits almost 10 per cent below the all-time high it hit last week.
The S&P 500 closed barely changed on the day having been up — and down — as much as 0.9 per cent.
Heavyweight index constituents
"Apple, Amazon, Alphabet and Facebook all fell, extending sell-offs that began last week."
"For the week, truncated by the Labor Day public holiday on Monday, the S&P 500 fell 2.5 per cent, on top of a 2.3 per cent decline the week before — its first back-to-back declines since"
"early May. The Nasdaq Composite was down 4.1 per cent this week, its worst since March."
"“We had some noise at the top of the market, and it has finally shaken some investor confidence."
"Tech has blown off some of its froth,” said Todd Jablonski, Principal Portfolio Strategies chief investment officer."
"Government bonds, seen as a relatively safe bet in times of market stress, were slightly firmer on Friday."
"The yield on the benchmark US 10-year Treasury was down 1 basis point at 0.67 per cent, while that on the policy-sensitive two-year was down 2bp at 0.13 per cent."
Concerns about the US recovery grew after a relief package to cushion coronavirus-induced damage was voted down in the Senate on Thursday.
Analysts at Danske Bank said a Federal Reserve meeting next week could help to calm tense financial markets.
"“The events of recent weeks show latent risks remain high,” they said."
“This will probably force the hands of various central banks who are likely to reiterate continued economic support on the back of this and may even add to such.”
"In Europe, Germany’s Dax closed 0.1 per cent lower and France’s"
CAC 40 gained 0.2 per cent.
"In Asia, China’s CSI 300 index of Shanghai and Shenzhen-listed stocks rose 1 per cent while Hong Kong’s Hang Seng and Tokyo"
"Topix gained 0.8 per cent and 0.7 per cent, respectively."
"The UK pound was down 0.2 per cent against the euro, with one euro buying 93p."
"Sterling has tumbled more than 3 per cent against the dollar this week after the UK government unveiled plans for legislation that would override key parts of its EU exit agreement, risking the collapse of trade negotiations with Brussels."
"“It’s likely this move lower in the pound continues until we find a concrete reason to buy it back,” said Jordan Rochester, foreign exchange strategist at Nomura."
"The pound’s sell-off has helped global-facing companies of the FTSE 100, whose exports benefit from a weaker currency."
"London’s blue-chip index closed 0.3 per cent higher on Friday, taking its increase for the week to 3.5 per cent."
"The euro strengthened against the dollar, adding 0.1 per cent to $1.18."
"The yield on German 10-year Bunds reversed course to slip 5bp to about minus 0.48 per cent, indicating investor demand for the sovereign debt."
"Philip Lane, chief economist at the European Central Bank, warned in a blog post on Friday that there was “no room for complacency” on the region’s economic rebound and expressed concern that the stronger euro was holding back inflation."
"His comments came a day after remarks from the ECB president, Christine Lagarde, that appeared to open the door to further appreciation for the European single currency."
Oil prices swung between small gains and losses.
"Brent crude, the international benchmark, was up 0.2 per cent to $39.92 a barrel on Friday."
Additional reporting by Colby Smith in New York
"Technology stocks extended losses into a second day on Friday, although a late rush to “buy the dip” in the likes of Apple and Tesla mitigated some of the damage from what has been a wild week on Wall Street."
"The Nasdaq Composite index, which fell 5 per cent on Thursday and was down a further 5 per cent in morning trading on Friday, pared back the losses to 1.3 per cent for the day."
"Shares in Apple, the largest US company, turned positive late in the session, reversing an initial fall of 6 per cent, which came on top of an 8 per cent decline on Thursday."
At its Friday low it had lost more than $300bn in market capitalisation in less than two days.
It closed 0.1 per cent higher on the day.
The electric car maker Tesla also suffered heavy selling early on Friday before rallying to a 2.8 per cent gain.
"The S&P 500 index ended down 0.8 per cent, as investors refocused on a US employment report that showed the world’s largest economy added 1.4m jobs in August."
"The figure met economists’ expectations and contributed to a notable improvement in the unemployment rate, to 8.4 per cent from 10.2 per cent in July."
"The US benchmark lost 2.3 per cent over the week, its first weekly loss in six weeks."
"Nasdaq was down 3.3 per cent for the week, its worst weekly performance since March."
Trading resumes on Tuesday after the Labor Day holiday on Monday.
"The drop in tech stocks will naturally trigger “a fairly big buying of the dip” from investors “standing on the sidelines, waiting to fill their portfolios with the octane” of growth-oriented companies, said Jim Paulsen, chief investment strategist for the Leuthold Group."
"Jonas Goltermann, senior markets economist at Capital Economics, characterised the recent run in tech stocks as “frothy” but pushed back on comparisons to the dotcom bubble that burst roughly two decades ago."
"“Unlike in 2000, the largest tech firms today are highly profitable and their valuations, while punchy, don’t look so obviously unsustainable,” he said."
"“So while this correction may well have further to run, and we continue to think that tech stocks will fare less well than most other sectors as the economic recovery continues, we don’t expect that a collapse in tech stocks will drag the entire market down for an extended period in the way that it did in 2000-02.”"
"The turbulence on Wall Street this week has been amplified by funds that execute trades automatically using algorithmic models, said Remi Olu-Pitan, multi-asset fund manager at Schroders."
"A sharp rise in measures of expected volatility probably pushed them to begin selling, she said."
"“Quant funds that run momentum strategies will have built up a big bias to tech,” said Ms Olu-Pitan."
“The higher volatility is a trigger for these quant funds to sell off.”
She added that “nervous retail investors” who had bought heavily into the tech rally were also now selling out of fear of seeing more large downward moves.
"The Vix, a measure of expected S&P 500 volatility, fell on Friday to 30.4 after initially rising to 37.5."
"It still remains well above its long-term average of about 20, having pushed higher since late August."
"Investors reacted to the jobs report by pushing down the price on US government bonds, sending yields rising."
The yield on the benchmark 10-year Treasury note rose more than 8 basis points to 0.716 per cent.
"The dollar, which has weakened significantly since July, was flat against a basket of six peers."
Some analysts warned that the better than expected report could deter Congress from acting quickly to pass another relief package to blunt the economic damage from the coronavirus outbreak.
"“If Congress does not approve [a new package] ahead of the election, there is definitely a risk you could have a slowdown in growth,” warned Chetan Ahya, chief economist at Morgan Stanley."
Oil prices were dinged by concerns over crude demand and signs of rising supply from Opec producers.
"Brent, the international benchmark, fell 3.8 per cent to $42.40 a barrel and West Texas Intermediate, the US benchmark, dropped 4.5 per cent to $39.52."
"In European equities, the continent-wide Stoxx 600 index shed large gains after Wall Street opened to close down 1.1 per cent."
"Still, the continent’s financial shares performed strongly after the Spanish banks Bankia and CaixaBank entered exploratory talks on a potential merger to create the country’s largest domestic lender, with total assets of more than €650bn."
"Shares in Bankia and CaixaBank rose 33 per cent and 12 per cent respectively, with their rival Banco Sabadell climbing 14 per cent and investors loading up on other European bank stocks amid speculation about more such deals to come between the bloc’s struggling lenders."
"Shares in France’s Société Générale gained more than 5 per cent, while Germany’s Commerzbank climbed over 9 per cent and Bank of Ireland rose 4 per cent."
Stock indices from New York to Tokyo have pushed higher over the past month in the biggest August market bonanza in decades.
A sagging dollar has combined with sparks of fiscal and monetary stimulus — reinforced by the US Federal Reserve last week — to help ignite a global equities rally during a month when traders would usually prefer focusing on the beach instead of data terminals.
Indications that major global economies are on a recovery track have also helped to ease investor jitters that dominated this spring.
"The MSCI World index of stocks in developed nations jumped 6.6 per cent in August, the sharpest rally for that month since 1986."
The average move either up or down for the gauge over the past 44 years in August is half that size.
"“Fed officials continue to drive up stock prices by committing to keeping interest rates close to zero for a very long time,” Ed Yardeni of Yardeni Research said in a note on Monday, describing the current rally as “the mother of all melt-ups”."
"The best performer in the index for the month was Tesla, which jumped 13 per cent to a new record high on Monday after a five-for-one stock split, to complete a 74 per cent rally for the month."
"The electric car maker’s stock has increased more than 495 per cent this year, adding $389bn in market value to the company — more than the entire value of JPMorgan Chase, the largest US bank by assets."
"Monday represented the busiest trading day for Tesla on record, with 115m shares changing hands — almost double the previous high."
"The blowout volumes coincided with a rush of trading disruptions at retail brokerages including TD Ameritrade, Charles Schwab and Robinhood."
"The broader All-Country World index that also includes emerging markets gained 6.3 per cent in August, its best run on records stretching back to 1988."
The gains in August have been regionally diverse.
"Wall Street’s S&P 500 index is up 7 per cent, earlier this month having wiped out the last of its pandemic losses and struck an all-time peak."
"Markers tracking stocks in Germany, France, Italy and Spain have risen 4-7 per cent on a euro basis."
"In Asia, Japan’s Topix gained 8.2 per cent and China"
CSI 300 increased 2.6 per cent in local currency terms.
The month’s run comes despite Europe’s Stoxx 600 falling 0.6 per cent on Monday and the S&P 500 falling 0.2 per cent.
UK markets were shut for a public holiday.
The bumper run for August has stirred persistent concerns among some analysts and investors over the risks ahead and the gap between market valuations and the still-fragile health of the global economy.
"The “more positive market view about future growth and inflation faces two tests over the coming two months”, said Nikolaos Panigirtzoglou, strategist at JPMorgan in London."
He said the first would come in mid-September when Federal Reserve policymakers meet following last week’s Jackson Hole economic symposium.
Market participants will be waiting to see whether the US central bank will lay out “more action or stimulus” after Jay Powell unveiled the Fed’s new approach to inflation that will allow for overshoots.
"The second test, Mr Panigirtzoglou said, would come in November with the US election."
"“A very close result is likely to be contested resulting in political gridlock and a lack of policy action, potentially for months after the election,” he said."
"“The fact the odds of the two candidates are narrowing again towards 50-50 suggests that the probability of such gridlock is rising, which by itself raises the probability that some investors will take some risk off the table ahead of the . . ."
The potential pitfalls come as central banks and governments around the world have deployed unprecedented measures to steady the economy and financial markets that appeared to be at risk of total collapse during February and March.
"The manoeuvres have put sharp pressure on bond yields and helped to push up inflation expectations, especially in the US."
"The combination has made high-grade bonds look less appealing because they now offer very low or even negative returns, pushing investors towards riskier assets such as stocks and lower-rated debt."
"A quarterly corporate earnings season that was not quite as bleak as some analysts had feared, added to the more optimistic outlook."
"Asian stocks on Monday were bolstered by data showing further improvement in China’s services sector, while Japanese equities recovered from declines last week."
"Japan’s Topix index rose 0.8 per cent on local media reports suggesting Yoshihide Suga, an ally of Shinzo Abe who is supportive of his monetary and fiscal stimulus measures, would throw his hat in the ring to succeed the prime minister."
Equities were also boosted by Warren Buffett’s Berkshire Hathaway unveiling a $6bn bet on Japanese trading houses.
"Meanwhile, China’s official purchasing managers’ index for the manufacturing sector came in roughly in line with expectations at 51 in August, slightly below the previous month’s reading."
"Non-manufacturing PMI stood at 55.2 in August, up sharply from 54.2 in July."
"US stocks hit further highs on Tuesday, extending a record run amid signs of progress on US-China trade talks."
"The S&P 500 added 0.4 per cent to set a third consecutive record close, having climbed steadily in the last few hours of the session, while the Nasdaq Composite rose 0.8 per cent."
"Both benchmarks were on course for their fifth straight monthly gain, the S&P having climbed more than 5 per cent in August, with the Nasdaq up nearly 7 per cent."
"The Tuesday moves came after the US and China reaffirmed a commitment to their “phase one” trade deal, in a rare sign of co-operation following weeks of wrangling over issues such as the future of Chinese social media platform TikTok in the US."
The weakest reading for US consumer confidence since 2014 tempered some of the optimism around China.
"The Conference Board’s index unexpectedly fell to 84.8 in August, the lowest level since the coronavirus crisis began, from a revised 91.7 in the prior month."
European stocks ended the day mixed even after data showed business sentiment improving in Germany.
The Stoxx Europe 600 slipped 0.3 per cent with German and French benchmarks barely changed.
The UK’s FTSE 100 underperformed with a 1.1 per cent decline as mining and energy companies retreated.
"Data showed German gross domestic product contracted 9.7 per cent in the second quarter, which was the height of the coronavirus pandemic in Europe, as private consumption, investments and exports collapsed."
"An earlier reading had, however, shown the economy shrinking by 10.1 per cent between April and June."
"Meanwhile, a survey by Germany’s highly regarded Ifo Institute showed sentiment among business leaders in Europe’s biggest economy improved to its highest level since February."
"The research group’s business climate index rose to 92.6 for August, up from 90.4 in July."
"The data boosted the euro, which rose 0.4 per cent against the dollar to purchase $1.1831."
"The yield on the 10-year US Treasury, which moves inversely to its price, rose 0.039 percentage points to 0.685 per cent."
"Germany’s 10-year bond yield rose 0.015 percentage points to minus 0.44 per cent,"
"Monica Defend, head of global research at asset manager Amundi, said she was “really struggling with the idea that the S&P 500 will continue to climb”."
"She argued that while markets were pricing in a V-shaped recovery for the US economy, “we are expecting something less resilient”, after US jobless claims rose back above 1m last week."
"She added, however, that she expected US inflation, which is traditionally negative for stocks and bonds, to remain low."
"Investors are wrestling with contradictory views on inflation, which has become harder for economists to forecast because of the pandemic."
"Many are looking to the Jackson Hole meeting of central bank governors, which will be held on Thursday and Friday in a virtual format, for clues."
“We are hoping for more colour on inflation targeting from [Federal Reserve chairman]
"Jay Powell at Jackson Hole,” Ms Defend said."
"The German GDP data were a “final glance in the rear-view mirror”, wrote Carsten Brzeski of ING, predicting a recovery in the July-to-September quarter because of a reduction in value added tax and summer domestic tourism."
"“The economy will have one of its best quarterly performances ever in the third quarter,” he said."
"Shamik Dhar, chief economist at BNY Mellon, said that, while coronavirus cases were once again rising across Europe, hospitalisation and death rates did not appear to be heading back towards the levels seen in March and April."
"“The course of the disease remains hugely uncertain and this latest spike may lead to more regional lockdowns,” he said."
"“But my essential view is that Germany will bounce back”, in part because of pent-up consumer demand."
"August delivery contracts for Brent crude, the international oil benchmark, added 1.8 per cent to $45.92 a barrel."
"US stocks shied away from hitting an all-time high on Thursday, with investors nervous of passing the milestone amid uncertainty over whether Congress would agree another economic stimulus package."
"The benchmark S&P 500 index struggled for direction in New York, trading in a narrow range to finish 0.2 per cent lower."
"That left the S&P 500 20 points short of the record high of 3,393.52, set in February."
The technology-based Nasdaq Composite index finished up 0.3 per cent.
The White House and Congress have been unable to agree a new economic stimulus package to help the millions of Americans left out of work amid the coronavirus pandemic.
Hopes of a deal were tempered by news that weekly jobless claims in the US fell below 1m for the first time since the start of the coronavirus outbreak.
The latest figure was fewer than the 1.1m analysts had expected.
"“With US stock markets at record highs and the jobless claims numbers still on a downward track, US politicians have little incentive to arrive at any sort of new stimulus deal,” said Michael Hewson, chief market strategist at CMC Markets, a UK online trading platform."
"“So the procrastination is likely to go on, until one or other of these two factors goes into reverse.”"
Sentiment in European equities markets was hit after disappointing earnings reports from blue-chip shares including those of the German steelmaker Thyssenkrupp and the Dutch insurer Aegon.
The duo fell 16.3 per cent and 15.3 per cent respectively.
That pushed down the continent-wide Stoxx 600 index by 0.6 per cent.
"Markets in Frankfurt and Paris were lower by a little over half a percentage point while London’s FTSE 100 fell 1.5 per cent, with declines in oil and bank stocks."
"However, the news did not put off some bulls."
"“We expect most equity markets to rally further, so long as progress in limiting the economic impact of the virus continues,” said Oliver Allen, an economist at Capital Economics."
"US Treasuries sold off for a fourth day, sending yields higher, following a record $26bn auction of 30-year bonds that saw lethargic demand."
"The department offloaded the debt at a yield of 1.4 per cent, up from 1.33 per cent at its previous auction."
"The yield on 30-year bonds rose 5 basis points to 1.42 per cent, dragging higher the yield on the 20-year bond as well by 5bp to 1.18 per cent."
"The 10-year note saw less movement, with yields higher by roughly 8bp to 0.71 per cent."
"As investors have shifted from haven sovereign debt into equities, yields on the 10-year Treasury have risen 15bp since the end of July while the German Bund yield touched its highest level since early June."
Yields rise when prices fall.
"“You’ve had a bit of a sell-off [on Treasuries] over the past week, so I think it’s"
"natural you see some consolidation,” said Lyn Graham-Taylor, strategist at Rabobank."
“Markets assume that the Fed isn’t going to allow yields to rise very much.”
"Asian equities markets were broadly higher with a 1.2 per cent gain in Japan’s Topix index, a two-month high, and a 0.2 per cent climb in South Korea’s Kospi."
China’s CSI 300 index of Shanghai and Shenzhen-listed stocks dropped 0.3 per cent.
"Gold climbed 1.7 per cent to $1,951 a troy ounce."
"The precious metal has rallied this year in the face of broad dollar weakness and last week touched a record of more than $2,070 a troy ounce."
"The dollar fell about 0.2 per cent against a basket of six developed market currencies, extending a decline from Wednesday."
Additional reporting by Tommy Stubbington in London and Colby Smith in New York
US stocks rallied to within a few points of a new high and Treasuries sold off on Wednesday after improving economic data and rising hopes over a potential coronavirus vaccine.
"The S&P 500 ended up 1.4 per cent, having climbed briefly above its record-high close set in February."
The rebound gives the US benchmark a 50 per cent gain from March lows.
"Gains were propelled by the mega-cap companies that have come to dominate the US benchmark stock index, with shares of Apple, Amazon and Microsoft together accounting for more than a third of the index’s rise on Wednesday."
"The advance was nonetheless broad-based, with more than two-thirds of the stocks in the S&P 500 rising."
"The benchmark index’s valuation also pushed higher, with the S&P trading at 22.5 times its projected earnings over the next 12 months, far above its average of 15.5 times over the past decade."
"Wall Street’s advance followed strong trading across European markets, where the Stoxx 600 rose 1.1 per cent."
The FTSE 100 closed 2 per cent higher despite second-quarter data showing the UK falling into its deepest recession on record.
"US government bond prices remained under pressure and extended Tuesday’s sharp sell-off, as the Treasury auctioned a record $38bn of new 10-year bonds with a 0.677 per cent yield."
"Analysts pointed to the large borrowing for some of the pressure on Treasuries on Wednesday, as the yield on the 10-year bond rose 0.008 percentage points to 0.66 per cent."
"A week ago, it was just 0.5 per cent."
"The rise in yields also followed a report that showed core US consumer prices, a gauge of inflation, rose at a more rapid pace than expected last month, the latest indication that parts of the world’s largest economy have begun to stabilise after the heavy blow caused by Covid-19."
"Despite the uptick in interest rates, the low borrowing costs secured by the Treasury provided further evidence of the government's ability to borrow massive sums to fund stimulus packages."
"“We are not concerned about the market’s ability to absorb [the record supply],” said David Leduc, chief investment officer for active fixed income at Mellon."
"“The Fed is still in play,” he said, noting that the US central bank has intervened extensively in financial markets this year and has promised to kept interest rates low."
Data from Europe also showed some economic improvement was under way.
Eurozone industrial production rose 9.1 per cent in June as the region
’s manufacturers increased their activity after a near halt in previous months.
"In the UK, the gross domestic product report showed economic output rebounded more vigorously than forecast in June following a historic contraction during the spring."
Yields rose on German and UK sovereign debt.
"Sentiment was further improved by signs suggesting US coronavirus infection rates were plateauing while progress on a vaccine had been made, said Mark Dowding, chief investment officer at BlueBay Asset Management."
"This improved outlook had been one factor that had weighed on US Treasuries and pushed yields higher, he said."
"“Bond markets had been pricing not just that interest rates would stay at zero for a very long time, but also that the [Federal Reserve] and [European Central Bank] would increase their bond buying at some point,” Mr Dowding said."
“Anything that makes that slightly less likely is going to weigh on bond prices.”
Equities in the Asia-Pacific region slipped.
China’s CSI 300 index of Shanghai and Shenzhen-listed stocks shed 0.7 per cent while Hong Kong’s Hang Seng rose 1.4 per cent.
Australia’s S&P/ASX 200 dropped 0.1 per cent.
"In New Zealand, the S&P/NZX 50 index fell 1.3 per cent as authorities put the city of Auckland back into strict lockdown in response to the first locally acquired cases of Covid-19 in more than 100 days."
"Additional reporting by Sarah Provan, Tommy Stubbington and Daniel Shane"
Letter in response to this article:
"Pandemic shows markets are untouched by reality / From Peter Fieldman, Madrid, Spain"
Gains for global stocks were held back on Monday as escalating tension between China and the US weighed against hopes of further economic stimulus.
"Beijing has said it will sanction 11 US citizens in response to similar measures from Washington, intensifying the friction between the world’s two largest economies after the introduction of a tough security law on Hong Kong."
"US stocks were mixed, leaving benchmarks little changed through the session."
"The S&P 500 index inched towards its February record high, rising 0.3 per cent by the closing bell, while the tech-heavy Nasdaq Composite slipped 0.4 per cent."
European trading was similarly muted.
Both London’s FTSE 100 and Europe
benchmark Stoxx 600 ended the day 0.3 per cent higher.
Traders were keeping an eye on manoeuvres in Washington and their implications for more US economic support measures.
President Donald Trump on Saturday bypassed lawmakers and signed executive orders aimed at cushioning the economic blow from the coronavirus crisis.
Investors have largely brushed off headwinds including rising US-China tensions and stalled negotiations over fiscal support in Washington to push shares higher this month.
"Thomas Hempell, head of macro and markets research at Generali Insurance Asset Management, said the strong performance for equities in August showed markets “accounted for the willingness of policymakers to deliver on their responsibility to support economies”."
"Mr Trump’s move was particularly significant in that context, he said."
"“The risk market still has a bit of legs going forward over the next weeks on global data and policy support,” he added."
"“Going into autumn, we are more vigilant and prepared to dial back."
"The rebound in macro data, which has given hopes of a V-shaped recovery, could prove to be an illusion and the recovery will slow down.”"
"Shares in China’s big tech groups fell for a second session after Washington announced sanctions targeting Beijing late last week, fuelling concerns that the spat between the world’s two biggest economies could broaden further."
"Tencent fell another 4.8 per cent in Hong Kong, adding to Friday’s 5.5 per cent loss after the Trump administration said that it would ban US companies from dealing with the Chinese group’s popular WeChat messaging app."
"The Hong Kong-listed shares of Alibaba dropped 2.7 per cent, even though the Chinese ecommerce group was not directly affected by the US orders, which also targeted ByteDance, the owner of the popular video app TikTok."
Concerns over the rising temperature between Beijing and Washington have scythed billions of dollars of market value from China’s fast-growing internet companies over the past two trading sessions.
"“These actions are pushing forward the China-US decoupling,” said Ken Cheung, a strategist at Mizuho Bank in Hong Kong, referring to the US sanctions."
"He said investors were nervous that deepening tension could unravel the so-called phase one trade deal signed between Beijing and Washington at the start of this year, though he added he did not believe the agreement was in any immediate danger."
"China’s CSI 300 benchmark of Shanghai and Shenzhen-listed shares reversed earlier losses to gain 0.4 per cent, while Hong Kong’s Hang Seng fell 0.6 per cent following the high-profile detention of media tycoon Jimmy Lai for allegedly breaching the city’s new national security law."
"Oil rose after Saudi Arabia’s state energy group Saudi Aramco said on Sunday that it was experiencing a “partial recovery in the energy market”, with chief executive Amin Nasser saying “the worst is likely behind us”."
"Brent crude, the international benchmark, advanced 0.5 per cent to $44.99 a barrel."
"Gold for December delivery settled 0.3 per cent higher to $2,039 a troy ounce."
"The US dollar rebounded from a multi-month rout, after key jobs data signalled the labour market in the world’s largest economy was doing slightly better than investors had feared."
The labour department's non-farm payrolls report showed the US added 1.8m jobs in July.
"That was lower than a record 4.8m in June, but better than the 1.6m economists surveyed by Reuters had forecast."
"The dollar, which has fallen more than 6 per cent against a basket of trading partners’ currencies this year, strengthened almost 0.7 per cent to 93.4, adding to gains it had chalked up earlier in the session."
The index has declined from more than 102 in March.
The jobs data failed to energise a robust rally in US stock markets.
"The S&P 500 index closed slightly higher by 0.1 per cent, just shy of a new all-time record high."
"Meanwhile, the technology-heavy Nasdaq Composite dropped 0.9 per cent."
The moves followed an escalation in US-China tensions overnight.
"President Donald Trump took aim at a third major Chinese technology company, giving US businesses 45 days to stop dealing with WeChat, the messaging app owned by Tencent."
"“Against this backdrop, risk sentiment has turned negative,” said Jim Reid, strategist at Deutsche Bank."
"Some analysts cautioned that the dollar was unlikely to recover from here, as US government debt was set to increase."
"The Treasury expects to borrow an additional $2.2tn by the end of the year, which could swell further if yet another fiscal stimulus package beyond the one currently under debate between US legislators is delivered."
"“After a decade of dollar strength we now expect to see structural decline,” said Suzanne Hutchins, portfolio manager at Newton Investment Management."
"“With all the money printing that’s going on by central banks as well as the huge indebtedness that has built up in the financial system, the only way out of this debt trap is to devalue your currency,” she added."
“There will be about $20tn worth of quantitative easing and fiscal responses to the coronavirus in the global economy this year.”
"The US labour market will continue to be weak, added Remi Olu-Pitan, multi-asset fund manager at Schroders."
"“That should put a lot of pressure on policymakers and monetary policy will remain loose,” she said."
"Demand for US government bonds, which are often bought as a hedge against economic uncertainty, weakened slightly following the report’s release."
"The yield on the benchmark 10-year Treasury note, which moves inversely to prices, ticked 3 basis points higher to 0.56 per cent."
"Gold prices edged away from records, falling to $2,035 a troy ounce from $2,063 a day earlier."
"The value of the precious metal has risen by more than a third this year, prompted by the huge easing measures from central banks aimed at cushioning the economic blow from the coronavirus pandemic, as well as a lack of meaningful income returns across major asset classes."
"In Europe the benchmark Stoxx Europe 600 rose 0.3 per cent, while London’s FTSE 100 edged 0.1 per cent higher."
Germany’s Dax rose 0.7 per cent.
"In emerging markets, the Turkish lira extended its slide after meetings between the central bank governor and some of the country’s private bankers on Thursday concluded without any immediate initiatives to try to stabilise the currency, which has tumbled to record lows."
"On Friday the move drove the lira more than 1.5 per cent lower against the dollar at one point, with one unit of the US currency buying TL7.27."
Additional reporting by Katie Martin in London
Technology stocks helped to lift US markets on Thursday ahead of Friday’s non-farm payrolls report for July.
The S&P 500 index was up 0.6 per cent and the Nasdaq Composite had risen 1 per cent by the close on Wall Street after weekly data showed the pace of new applications for US unemployment aid slowed by more than expected.
The data was in contrast to a report from the wage processor ADP released on Wednesday that showed US private jobs growth slowed sharply in July.
"“These mixed signals make Friday’s payrolls print a bit more important, perhaps resulting in investors showing a reluctance to take broad directional bets,” said Goldman Sachs analyst Chris Hussey."
"Investors were also monitoring political developments in Washington, where the Congress and the White House are locked in negotiations to extend jobless benefits that expired last month to support the US economy during the coronavirus crisis."
"“Markets remain concerned about second waves, further lockdowns and, of course, the sheer scale of economic contractions being experienced,” said David Jane, a portfolio manager at Premier Miton."
"Apple rose 3.5 per cent to a record high, with the iPhone maker closing in on a record breaking $2tn market capitalisation."
"Facebook also hit a record high, rising 6.5 per cent, while Walt Disney climbed 2.5 per cent."
"Daniel Loeb, founder of activist hedge fund Third Point, said in an investor letter on Thursday he had opened a new position in Disney based on the media group’s move into video streaming services, which he said were creating the company's “biggest market opportunity ever”."
Sterling rose to a five-month high against the dollar after the Bank of England appeared cool on the prospect of introducing negative interest rates.
"The pound rose as much as 0.4 per cent to $1.3185, its highest level since the turmoil in March when coronavirus-related concerns raced through markets."
"The stronger pound contributed to falls for European stock benchmarks, with the Stoxx Europe 600 ending Thursday down 0.7 per cent and the FTSE 100"
weakening by 1.3 per cent.
"The Bank of England’s monetary policy committee tempered the prospect of introducing negative interest rates in the near future, warning on the possible impact to the banking sector and noting it had “other instruments available” to support the UK economy."
"“The overwhelming focus in the bank’s analysis seemed to be on the drawbacks,” said George Buckley, European economist at Nomura."
“The MPC’s conclusion was about as clear-cut as one could have expected.”
"The absence of a clear signal towards negative rates could spur further gains for the pound in the short term, currency analysts at MUFG said."
"Strong UK construction activity data also boosted hopes for Britain’s economic recovery, and helped the pound move higher."
"Gold, which often serves as a haven in times of uncertainty, sustained its recent rapid rally and was up 0.8 per cent to $2,063 a troy ounce to hit another peak."
"Daniel Been, head of foreign exchange strategy at ANZ, said investors had been turning to gold as it was “the last defensive asset left”."
He said: “People are concerned if we don’t have a renewal in the US of the jobs payments we could see further slowing in what was already a bit of a wobbly growth trend.”
"The dollar, meanwhile, stabilised as the index that measures the currency against a basket of global peers was little changed."
It has fallen in each of the past six weeks as concerns over the US economy and the response to coronavirus weigh.
"“With virus fears on the rise, jobs being lost and incomes squeezed, we feel the second phase of the recovery will be much more challenging, especially in the absence of a new broad and substantial fiscal package,” ING economists said in a note."
"Turkey’s lira slid to a record low, falling 2.5 per cent to TL7.25 against the dollar, breaking lower after months where authorities kept it in check against the US currency."
The losses come after short-term borrowing costs signalled that the country’s money markets were starting to malfunction earlier this week.
"“The hope is that the authorities stop wasting scarce FX reserves and let the lira weaken to a level that is more sustainable,” said Tim Ash at BlueBay Asset Management."
Markets were broadly weaker in Asia-Pacific.
China’s CSI 300 of Shanghai- and Shenzhen-listed stocks dropped 0.3 per cent on Thursday while Hong Kong’s Hang Seng fell 0.7 per cent.
Japan’s Topix index was 0.3 per cent lower.
"Gold pressed further higher on Wednesday after breaking the $2,000 milestone and global stocks rose as upbeat data from Europe counterbalanced a less optimistic report from the US labour market."
"The precious metal has risen for 13 days in the past 14, and a 1.1 per cent gain led it to a fresh all-time high of $2,040 a troy ounce."
"Silver followed in gold’s slipstream with a fourth day of records, rising 3.7 per cent to $26.95 to bring its 2020 increase to more than 50 per cent."
"The gains came as some investors grew nervous after several months in which the stock market has recovered most of its losses, and the yield on government debt in the most economically advanced countries fell towards zero."
"“Markets have discounted so much good news that valuations are looking stretched, whilst downside risks to earnings remain,” said Luca Paolini, chief strategist at Pictet Asset Management."
"“Bonds look even more expensive, offering the worst value in two decades."
Gold is at all-time highs but strong fundamentals and demand for diversifying assets imply further gains.”
"In New York the S&P 500 index rose 0.6 per cent, even after a report revealed that the private sector created fewer jobs than expected last month."
"The tech-heavy Nasdaq rose 0.5 per cent to close within two points of 11,000 for the first time."
"The Vix volatility index, nicknamed Wall Street’s “fear gauge”, fell 2.7 percentage points to 23, its lowest level since mid-February."
The index uses derivatives prices to measure expected swings in the S&P 500 over the next 30 days.
"US government bond yields rose after the Treasury department announced it would boost issuance to fund the record-setting relief packages passed by Congress since March, as well as the new stimulus programme currently being debated by legislators."
The yield on the 10-year US Treasury note rose 3 basis points to 0.54 per cent.
Rising yields suggest the price of the debt has fallen.
"Non-farm private employers added 167,000 jobs in July, said payroll processor ADP, indicating the recovery in the labour market has slowed as coronavirus cases have risen in the south and west of the US."
June’s figures were revised upwards.
"ADP’s data are seen as a harbinger of the government’s official monthly employment report, due at the end of this week."
President Donald Trump told the Fox News channel there will be “another big job number on Friday”.
Europe’s benchmark Stoxx 600 index rose 0.5 per cent while London’s FTSE 100 rose 1.1 per cent.
A batch of positive data helped to buoy market sentiment in the region.
Eurozone retail sales returned to pre-crisis levels while Spanish and Italian services sector activity picked up as government lockdowns eased in July and people returned to bars and restaurants.
"Resurgent coronavirus cases and localised lockdowns, however, have kept markets and economies on tenterhooks."
"Many analysts see haven assets, such as gold and sovereign debt, set to maintain the momentum as the global economic outlook sours."
"Oil prices advanced for a fourth day, with Brent crude rising as much as 4 per cent to $46.06 a barrel."
"That put the price of the global benchmark back to March levels, a time when Saudi Arabia initiated a price war with Russia."
"The price dropped to as low as $15.98 on April 28, the darkest days of the global pandemic lockdown."
But Brent crude is still 31 per cent lower this year.
"In Asia-Pacific, stocks were mixed."
Australia’s S&P/ASX 200 dropped 0.5 per cent while Japan’s Topix index and China’s CSI 300 of Shanghai and Shenzhen-listed stocks finished the session flat.
Hang Seng added 0.6 per cent.
Additional reporting by Colby Smith in New York
"Stock and crude oil markets dropped on Thursday after data laid bare the enormous damage the coronavirus pandemic has wrought on the US and German economies, and raised fears that a recovery may be stalling."
The dollar fell and demand for havens such as US and UK government debt rose after the American economy recorded its largest contraction in postwar history.
"Gross domestic product shrank at an annualised rate of 32.9 per cent in the second quarter, or 9.5 per cent quarter-on-quarter."
A separate report showed the number of Americans filing for first-time jobless benefits rose for the second week in a row.
"The jobs data are “likely to add to concerns in markets about the potential for a double dip”, said Jim O’Sullivan, a strategist at TD Securities, although he cautioned that seasonal adjustments may have exaggerated the increase in unemployment claims."
"Wall Street’s benchmark S&P 500 index closed down 0.4 per cent in New York, led by declines for energy stocks such as ConocoPhillips, which fell 5.8 per cent."
"Bourses across Europe sustained heavier selling, with the composite Stoxx 600 index down 2.2 per cent."
"Germany’s Dax was the continent’s worst performer, down 3.5 per cent, after data revealed its economy contracted by a sharper than forecast 10.1 per cent in the second quarter."
France’s CAC 40 was down 2.1 per cent while the UK
FTSE 100 was off 2.3 per cent.
European equities were also hit by a run of downbeat corporate earnings.
Volkswagen cut its final dividend by more than a third and the UK
Lloyds Banking Group put aside a further £2.4bn to deal with expected customer defaults and said the lockdown had hit the British economy much more than it had expected.
Some investors cautioned against reading too much into historic data.
"David Bahnsen, chief investment officer at Bahnsen Group, which has over $2.25bn in assets under management, said the rise in jobless claims showed the continued fragility of the US economy but he did not expect the number to rise again."
“The stock market has to look forward and most economic data looks backwards.
"Investors should be prepared for a choppy process of data digestion, but not be surprised that the market feels the future is better than the present and that unprecedented stimulus and liquidity exist to drive valuations,” he said."
Crude oil fell on renewed fears of weak demand.
"Brent, the international benchmark, slid 1.4 per cent to $43.14 while WTI, the US benchmark, fell 2.6 per cent to $40.16."
"The dollar index, which tracks the US currency against half a dozen peers, fell 0.5 per cent on concerns about the impact of coronavirus on the US economy."
The pound rose above $1.30 against the greenback for the first extended period since March’s market turmoil.
Global bond markets rallied as investors sought safe assets.
"Gains for highly rated government debt pulled UK 10-year borrowing costs to an all-time low of 0.07 per cent, before a small rebound."
"The US 5-year yield fell 2.7 basis points to 0.226 per cent, a record low."
Yields fall when prices rise.
"Beyond corporate and economic reports, investors were on edge, fearing a second wave of coronavirus sweeping Europe, said Anna Stupnytska, head of global macro and investment at fund manager Fidelity."
"A continuing stalemate between the White House and Congress over new stimulus measures to prop up the struggling US economy, as Washington heads into its summer recess, was also a major concern."
"“The next few days are going to be very worrying for the markets,” Ms Stupnytska said."
"Gold, which has rallied to all-time highs in recent sessions, fell 0.8 per cent to $1,953 a troy ounce."
The precious metal frequently serves as a haven in times of uncertainty.
Additional reporting by Tommy Stubbington in London
"US stocks staged a late rally on Wednesday as investors took heart from better than expected domestic corporate earnings, shaking off rising diplomatic tensions between America and China."
"After spending most of the day trading in a narrow range, the S&P 500 moved higher to finish up 0.6 per cent, its highest point since mid-February."
"The technology-heavy Nasdaq rose 0.3 per cent, close to the record levels it struck earlier this week."
The US tech index has gained almost 20 per cent this year.
"The gains were propelled by better than expected earnings from HCA Healthcare, which rose 12 per cent."
"Advanced Micro Devices, the chipmaker, jumped 8.4 per cent, as investors took heart from an improved outlook from rival Texas Instruments on Tuesday."
"Earlier in the day, stocks in Europe and Asia stumbled and the renminbi retreated after an escalation in diplomatic friction between Washington and Beijing."
The dollar rose above 7 against the Chinese currency after the US asked Beijing to shut its consulate in Houston and local media reports showed what appeared to be consulate staff burning documents.
The renminbi later trimmed those gains to fall back below 7 to a dollar.
"The Stoxx Europe 600 index shed 0.9 per cent, ending a three-session winning streak."
The FTSE 100 closed 1 per cent lower in London while the CAC 40 in Paris dropped 1.3 per cent.
Beijing immediately condemned the US move in Houston and warned it would retaliate unless the Trump administration rethought its decision.
"“This is an escalation of degree rather than of kind,” said Tom Holland of Gavekal Research in Hong Kong."
“Senior US administration officials have been getting increasingly more open and active in their criticisms of China.”
"This week’s visit to London by Mike Pompeo, US secretary of state, was among a number of moves that appeared to be aimed at marshalling support for the US stance against Beijing, Mr Holland added."
"“You would think investors would already have priced in the further steep deterioration in US-China relations, which has clearly been on the cards for a while now.”"
"Japan’s Topix index slipped 0.6 per cent on Wednesday, while Australia’s S&P/ASX 200 fell 1.1 per cent."
Hang Seng was off 2.3 per cent.
"Monica Defend, Amundi’s global head of research, said: “It is clear that tensions between the two countries are rising . . . "
"China’s approach is expected to remain one of tit-for-tat, with emerging speculation that China will close the US consulate in Wuhan.”"
"None of this has yet to put an end to the rally in US corporate bonds, with the yield on higher-rated investment-grade bonds sinking to 1.99 per cent on Tuesday, according to Ice Data Services."
"This marks the first time the index has fallen below 2 per cent, as debt markets remain supported by the Federal Reserve, helping borrowing costs to decline."
Investors continue to examine data on coronavirus in the US.
"More than 1,000 deaths were recorded in the country on Tuesday, the first time the total has been over that number since"
"May. The daily figure for new cases ticked back above 60,000 and California became the second state to surpass 400,000 infections since the pandemic began, after New York."
Uncertainty over the trajectory of the health crisis fuelled demand for some haven assets.
"Gold jumped 1.4 per cent to a nine-year high of $1,863.80 an ounce."
"US government bonds held firm, with the yield on US 10-year Treasuries down 0.01 percentage points at 0.597 per cent."
Yields fall when prices rise.
"The Treasury department was able to auction off $17bn of 20-year notes with ease on Wednesday, fetching a 1.059 per cent yield for the debt."
"The agency only recently revived this security in May, having ceased to issue it roughly three decades ago due to flagging demand."
Oil prices dropped.
"West Texas Intermediate, the US marker, slipped 0.3 per cent to $41.80 a barrel."
"Brent, the international benchmark, fell 0.2 per cent to $44.22 a barrel."
"The euro remained buoyant for a second day, pushing as much as 0.8 per cent higher against the pound to head for a near one-month high."
"Italy’s 10-year government bond yield, a key measure of risk in eurozone bond markets, fell 4.6 percentage points to 1.041 per cent, its lowest level since February."
"Additional reporting by Joe Rennison, Naomi Rovnick and Colby Smith"
US and European stocks advanced on Monday as investors gauged upbeat developments in a vaccine trial and the latest in negotiations for additional fiscal support amid fallout from the pandemic.
Wall Street’s S&P 500 closed 0.8 per cent higher on strong gains in the consumer discretionary sector.
"A rally in technology shares powered the Nasdaq Composite to a record closing high, with the index jumping 2.5 per cent in its biggest daily rise since April."
Lawmakers returned to Washington with another stimulus package at the top of the agenda.
"Steven Mnuchin, US Treasury secretary, indicated during a White House meeting that the Trump administration would open talks for $1tn in supplemental aid."
"Mitch McConnell, Senate majority leader, said Republicans would put forward a “strong starting point” for a stimulus bill as early as this week."
"Investors are also looking for fresh clues this week on how the pandemic has hit corporate earnings, with Microsoft and Unilever among the companies reporting second-quarter results."
IBM shares rose 6 per cent in after-hours trading after it beat earnings expectations.
"Amazon had its best day since December 2018, surging 7.9 per cent to close just shy of its record high."
Microsoft was up more than 4 per cent.
"In Europe, Italian borrowing costs dropped on hopes EU leaders will forge a deal to launch a fund to help the bloc recover from the economic pain caused by coronavirus."
"Italy’s 10-year government bond yield, the benchmark for the cost of borrowing in Europe’s third-largest economy, fell 0.09 percentage points to 1.15 per cent."
"The decline, which is the biggest since early June, reflects rising prices for the debt."
The gap between 10-year Italian and German government bond yields also narrowed to the lowest level since late March.
The spread is seen as an indicator of market sentiment towards the bloc’s more financially vulnerable nations.
"Yields on the debt of other big eurozone borrowers, including Spain and Portugal, also declined on Monday."
"After days of haggling over the recovery fund, which has pitted the leaders of a group of richer countries against those nations hardest hit by the pandemic, Dutch prime minister Mark Rutte and Austrian chancellor Sebastian Kurz expressed optimism about breaking the logjam."
"In currencies, the euro early on Monday hit a four-month high against the US dollar."
"However, those gains cooled during the afternoon session."
The composite Europe Stoxx 600 ended the day 0.8 per cent higher after a muted reaction early in equity markets.
Germany’s Dax was up 1 per cent while the CAC 40 in Paris rose 0.5 per cent.
FTSE MIB rose 1 per cent.
"In London, the FTSE 100 slipped 0.5 per cent, with British Airways owner IAG and online retailer Ocado among the biggest fallers."
"One of the FTSE’s best performers was drugmaker AstraZeneca, up 1.5 per cent amid a burst of enthusiasm about coronavirus vaccines that caused shares in biotech group Synairgen to rise more than five times, or 420 per cent."
"Its shares closed at 190p, up from Friday’s 36.5p."
The experimental coronavirus vaccine developed by Oxford university and AstraZeneca has generated “robust immune responses” and was tolerated by all patients in the first phase of its clinical trials.
"In Asia, China’s CSI 300 index of Shanghai and Shenzhen-listed stocks jumped 2.6 per cent on indications that Beijing was taking steps to support a recent rally in equities."
Regulators said on Friday that they would allow insurers to invest more of their assets in the stock market.
“There’s a lot of speculation of more policy [support] coming for . 
"the buildings materials sector,” said a director at one mainland brokerage."
But Hong Kong’s Hang Seng index closed flat as the city indicated a fresh wave of coronavirus infections.
Japanese stocks were weighed down by data showing exports in June fell by a faster rate than forecast by economists.
"US stocks closed higher for a third straight week, reversing earlier losses on Friday as investors waited for progress on new rounds of economic stimulus in Europe and the US."
"The S&P 500 rose 0.3 per cent on the day, and the Nasdaq, too, clawed back earlier losses even though one of its biggest constituents, Netflix, fell hard."
The streaming group said overnight that subscriber growth would slow in the second half of the year and its shares dropped by 6.5 per cent.
"Despite the consecutive weeks of gains, the S&P 500 still remains slightly negative for the year, having turned positive at one point this week before a mixed bag of corporate earnings and further increases in coronavirus cases across the US stymied its progress."
Investors in the US have expressed concerns that higher than normal benefits for the unemployed are set to expire at the end of the month and questioned if Congress would come to a deal in time to extend them.
"“The sense of urgency has dissipated quite a bit because we have been able to start the recovery already and markets are not collapsing,” said Esty Dwek, head of global macro strategy at Natixis Investment Managers."
"However, she warned US policymakers against removing the support, cautioning that there was just “too much at stake” for the benefits to be scaled back."
"Even more pressing, European leaders are meeting to discuss a €750bn pandemic recovery fund, with sharp disagreements to overcome."
"Emmanuel Cau, head of European equity strategy at Barclays, said “all eyes are now fixed on the EU summit” over the next two days for clues on how the 27 member states resolve their differences."
"“We expect the recovery fund to be watered down,” warned strategists at ABN Amro, with the proposed €500bn for grants and €250bn for loans likely to be adjusted so the split is more even."
"Mark Rutte, prime minister of the Netherlands, told a Dutch broadcaster that he was “not optimistic” before the talks."
"He added that the Netherlands, one of the so-called frugal four, would stick to its position that countries receiving support must sign up to economic reforms."
"Salman Baig, investment manager at Swiss asset manager Unigestion, said the comments were a “bit of jawboning” and more fiscal support was likely given low borrowing costs."
"“When we look at the fundamentals, governments still need to support the economy,” he said."
"He forecast that global equity markets would push higher in a “staircase” pattern, as opposed to a straight line."
"The continent-wide benchmark Stoxx 600 closed up 0.2 per cent, also grinding out its third week of gains."
"The euro rose 0.46 per cent against the dollar to $1.14, while the yield on 10-year German Bunds, a haven asset, rose slightly, indicating a fall in price."
"Spreads between Bunds and other European bonds, a key measure of investor nerves, have tightened since the proposal by France and Germany for a recovery fund in May, suggesting a lower level of perceived risk."
"“We judge that about half of the spread tightening across the eurozone will be reversed, given our expectation that the recovery fund will be watered down,” said strategists at ABN Amro."
London’s FTSE 100 closed 0.6 per cent higher after prime minister Boris Johnson urged workers to return to offices in a push for normality by November.
Chinese stocks swung between gains and losses on Friday as state media sought to reassure investors on the outlook for onshore equities following their worst one-day fall in five months.
China’s CSI 300 index of Shanghai and Shenzhen-listed stocks closed up 0.6 per cent.
"Elsewhere in the region, Hong Kong’s Hang Seng index closed up 0.5 per cent and Australia’s S&P/ASX 200 rose 0.4 per cent, while Japan’s benchmark Topix index fell 0.3 per cent."
Oil prices fell.
"Brent crude, the international benchmark, was off 0.6 per cent at $43.12 a barrel."
"A fresh burst of demand for US government bonds pushed yields on 10- and 30-year debt down this week to the lowest level since states began loosening lockdown restrictions, as a rise in deaths linked to the pandemic raised concerns over reopening the economy too soon."
"The yield on the 10-year Treasury slid as low as 0.56 per cent on Friday before rebounding, while the yield on the five-year note hit a record low of 0.26 per cent."
The potential for fresh lockdowns has increased demand for the safety of Treasuries and amplified the disconnect between nervous bond markets and equity markets that have held on to their gains since a nadir in March and continue to trade near highs for the year.
"“We don't agree with what the bond market is telling us, but we respect it,” said Andrew Brenner, head of international fixed income at National Alliance Securities."
The US government secured record-low interest rates on three- and 10-year debt at auctions this week even as its borrowing needs swelled.
A $19bn 30-year bond auction was also met with elevated interest from investors.
"The strong demand for haven assets emerged after several US states reported further increases in coronavirus cases, after Florida on Thursday recorded its largest death toll since the crisis spread to the US."
Some succour was provided to nervous investors on Friday after Gilead released data showing its potential coronavirus treatment remdesivir had reduced mortality rates in early trials.
That provided a bump to stocks and tempered the gains in Treasuries.
"Some economists believe that even if the US death rate does accelerate, markets should be able to absorb the shock."
"“When you are seeing 10,000 cases in Texas, they are not comparable to 10,000 cases in New York in March or April,” said Chetan Ahya, Morgan Stanley’s chief global economist."
“We have a better ability to manage the disease than we had at that point in time and the economic impact of this round of new cases is lesser than what we had seen in the very first round.”
"The S&P 500 is up 45 per cent from its March low, including a further 1 per cent gain on Friday."
"The tech-heavy Nasdaq Composite has soared to new heights, led by companies that have been boosted by the reliance on technology since the outbreak of the virus; on Friday it was up 0.7 per cent from the previous close."
"“We have certainly seen a disconnect between equity markets and the real economy,” said Kim Tilley, a portfolio manager at Lazard Asset Management, adding that “too much optimism” was currently being priced into markets."
“One side needs to give for things to be more logical.”
"Three US sunbelt states — California, Texas and Florida — recorded on Thursday their largest single-day increases in coronavirus-related deaths since the start of the pandemic."
"US president Donald Trump, who had planned for a rally in New Hampshire at the weekend, postponed the event, citing the bad weather."
"Additional reporting by Harry Dempsey, Daniel Shane, Anjli Raval, Bryce Elder and Tommy Stubbington"
Global stocks slipped on Thursday after an uptick of coronavirus deaths in Florida rekindled fears that the outbreak could hinder the fragile US economic recovery.
"The S&P 500 closed 0.6 per cent lower, led by stocks sensitive to consumer spending and virus-related restrictions such as United Airlines, which fell 7.3 per cent."
"The tech-heavy Nasdaq rose 0.5 per cent to a fresh record, as reliance on online activities remained high."
Investors instead sought out the safety of sovereign debt including US Treasuries and German Bunds.
"States including Florida, Texas and Arizona have suffered a rise in coronavirus cases for some time, without a related acceleration in deaths."
"However, data on Thursday that showed Florida had recorded its biggest single-day jump in Covid-related deaths since the start of the pandemic served as a warning that the impact of the outbreak could still deepen."
Investors shifted into haven assets as a result.
The yield on the 10-year German Bund touched minus 0.5 per cent.
"US Treasuries also rallied, sending yields sharply lower."
"The yield on 30-year bonds dropped 0.09 percentage points to 1.3 per cent, following strong demand from investors in a $19bn auction of new debt."
"The benchmark 10-year note saw its yield slide as well, falling 0.06 percentage points to 0.6 per cent."
Yields fall when prices rise.
"The dollar also gained, rising 0.4 per cent against the euro, and commodity prices declined."
"Brent, the international crude oil benchmark, fell 2.4 per cent to $42.27 per barrel and West Texas Intermediate, the US marker, slipped 3.5 per cent to $39.48 per barrel."
The surge of coronavirus cases knocked shares in the last 90 minutes of trading in Europe.
"The composite Stoxx 600 declined 0.8 per cent, with energy company BP and Commerzbank both down 4.4 per cent."
"London’s FTSE 100 index was the worst performer, down 1.7 per cent."
"The declines contrasted with a continued rally in mainland China shares, kick-started earlier this week by enthusiastic backing for the stock market by state-backed Chinese media."
"The CSI 300 index rose 1.4 per cent on Thursday, taking this week’s gains for Shanghai and Shenzhen-listed stocks to more than 9 per cent."
The latest upswing came after official data from China showed that factory gate deflation eased during June.
"“With fiscal stimulus and infrastructure spending still ramping up, we think that economic activity and producer prices are set to recover further in the coming months,” said Martin Rasmussen, China economist at Capital Economics."
But other analysts cautioned that a surging stock market may prompt policymakers to think twice before unleashing further stimulus measures such as cuts in the amount of reserves
banks were required to hold.
"“Although Beijing needs booming stock markets to boost confidence and channel capital to the business sector, it may also be concerned that an unbridled stock market boom followed by a bust could sabotage its efforts to return the economy to normal,” said Ting Lu, chief China economist at Nomura."
"China’s onshore-traded renminbi strengthened 0.3 per cent and passed the important seven-to-the-dollar marker for the first time since March, reaching 6.9852."
"Additional reporting by Philip Stafford, Colby Smith and Matthew Rocco"
US stocks rose on the first day of the third quarter as bullish investors took heart from cheering economic data and news of a potential coronavirus vaccine.
"The S&P 500 index rose 0.5 per cent in New York on Wednesday, after the ADP employment report showed US private payrolls rose by 2.37m in June following a sharp upward revision to the previous month’s data."
A gauge of manufacturing activity also rebounded to its highest level in 14 months.
"FedEx, seen as an economic bellwether, led gainers, up 11.7 per cent after benefiting from a boom in online shopping and home deliveries."
The tech-heavy Nasdaq Composite index rose 1 per cent.
The gains made for a positive start to the third quarter.
On Tuesday US stocks capped off their best quarter in more than two decades on the back of a broad rally encouraged by central bank support measures and hopes of a powerful economic recovery.
Hopes for a recovery were boosted by news of a potential vaccine from Germany’s BioNTech.
"A trial yielded positive results, preliminary data released on Wednesday revealed."
The clinical study was run with the pharmaceuticals group Pfizer in the US.
"BioNTech shares reversed earlier gains to close down 3.9 per cent on Nasdaq, while Pfizer rose 3.2 per cent."
"The yield on the US 10-year Treasury note, which rises as the price of the bond falls, ticked up 21 basis points to 0.674 per cent."
"However, the optimism was not matched in Europe, where the benchmark indices in London and Paris both finished 0.2 per cent lower, and Germany"
’s Dax finished 0.4 per cent lower.
Economic data showed joblessness had ticked up to a five-year high in June.
"The composite Stoxx 600 eked out marginal gains, up 0.2 per cent."
"Morning trading in Europe was disrupted by technical problems on Deutsche Börse’s trading system, which serves the markets of Frankfurt, Vienna, Malta and Sofia."
An outage lasted for more than two hours although floor trading continued.
The electronic trading system went down in April for a longer period of time.
"So-called purchasing managers’ indices, surveys of business confidence, across Europe were better than forecast but the global manufacturing number still reported a contraction in activity compared to the previous month."
"Gabriella Dickens, assistant economist at Capital Economics in London, pointed out that recent readings have been difficult to interpret."
"“It is not clear whether respondents are comparing output, employment, etc to that in the previous month or to a ‘normal’ level or that of a few months ago,” she said."
"“We suspect that the increase in the PMIs implies a rise in activity, albeit to subdued levels.”"
"Illustrating investors’ uncertainty, the yield on the debt of the 10-year German Bund rose 1bp to minus 0.39 per cent."
"Sentiment was bolstered by better than expected retail data, indicating a faster economic rebound."
Yields rise when prices fall and investor demand for debt softens.
"Gold, a haven asset, also hit an eight-year high, touching $1,780 a troy ounce."
"The weak opening to the quarter in Europe came after mixed signals from Asia, where markets rose on Chinese data that showed a second straight month of expansion in the world’s largest manufacturing sector."
"Hong Kong’s stock market was closed for a public holiday, while China’s CSI 300 index of Shanghai and Shenzhen-listed stocks climbed 2 per cent on Wednesday."
Australia’s S&P/ASX 200 added 0.6 per cent.
The gains came despite the UK government saying that it would open a path to citizenship for almost 3m Hong Kong residents in response to Beijing passing a law that tightens its grip on the territory.
"“We believe this final enactment and full text should not be too surprising for the market and should not lead to another major sell-off,” said Adrienne Lui of Citibank."
“But further international responses to the national security law need to be monitored.”
There was also further evidence that the world’s second-biggest economy is building momentum after the coronavirus crisis hit hard.
"The Caixin manufacturing PMI, a measure of factory activity in China, came in at 51.2 for June, after also indicating growth in May."
"That result “reflected manufacturers’ confidence that there would be a further relaxation of epidemic controls and a normalisation of economic activities”, said Wang Zhe, senior economist at Caixin Insight Group."
"Oil prices rose slightly, with futures on West Texas Intermediate, the US benchmark, gaining 1.2 per cent to $39.75 a barrel."
"Futures on Brent, the international marker, were 1.7 per cent higher at $41.97 a barrel."
Global markets dropped on Wednesday as rising US Covid-19 cases and new quarantine measures fuelled fears that the virus could derail an economic recovery.
"On Wall Street, the S&P 500 finished 2.6 per cent lower and the Nasdaq Composite slid 2.2 per cent."
"Markets in the US and Europe also retreated, with the FTSE 100 and the Euro Stoxx 50 both ending down 3.1 per cent."
"Stocks extended losses after the governors of New York, New Jersey and Connecticut announced that travellers coming in from states that have a high infection rate must quarantine for 14 days."
The restrictions came after Florida reported a record daily increase in Covid-19 cases.
Renewed trade friction between the US and Europe also knocked investor sentiment.
Washington launched a consultation on new tariffs on $3.1bn of European products — ranging from German camera lenses to British biscuits and French wine — in a move that would broaden a transatlantic dispute over aircraft subsidies.
"Traders are scrutinising the latest coronavirus figures as the global case count tally rises above 9m and more than 450,000 deaths have been reported."
"Anthony Fauci, a leading member of the White House coronavirus task force, warned Congress that the US was experiencing a “disturbing surge” in Covid-19 cases as the country on Tuesday recorded its largest daily jump in two months."
"“The next couple of weeks are going to be critical in our ability to address the surges we’re seeing in Florida, Texas, Arizona and other states,” Dr Fauci said."
Those states were among the first to loosen lockdowns in an attempt to restart economic growth that had stalled.
"“There is no need for official ‘stay at home’ orders for economic activity to take a hit,” said Oscar Muñoz, a macro strategist at TD Securities."
“People can become risk-averse and consumer confidence can be dented as infections rise.”
"Other countries have faced rapid rises in their infections as well, with India’s densely populated capital New Delhi on Tuesday reporting 4,000 new cases in a record rise."
Brazil is also a virus hotspot as authorities have struggled to contain the pandemic.
"However, the three months to June is set to be the best quarter for the S&P 500 in 45 years, according to Bloomberg data, marking a rebound from the 20 per cent dive in the first quarter when Covid-19 began to spread worldwide."
"“It will take more than a slow grind higher in daily new Covid-19 cases to deliver a meaningful market adjustment,” said Robert Carnell, head of Asia-Pacific research at ING."
"“There are plenty of options open to countries like the US short of reimposing lockdowns,” he said, such as enforced mask wearing."
Oil prices dropped after US data showed a much bigger than expected increase in crude oil inventories last week.
"Brent crude, the international benchmark, sunk 5.8 per cent to $40.13 a barrel while West Texas Intermediate, the US marker, dropped 6.1 per cent to $37.91."
"A stronger dollar meant gold trimmed earlier gains to hold steady at $1,765."
That is still close to an eight-year high as investors flee to perceived safety during times of turmoil.
The metal has advanced more than 20 per cent since March.
"Nikolaos Panigirtzoglou, analyst at JPMorgan, said the markets were balancing signals of economic recovery against fears of a widespread second wave of coronavirus cases."
"“Outbreaks in the US in the south and west have shown signs of growing momentum, as well as in some parts of [Latin America],” he said."
"However, global data suggested a second wave “might not be as extreme as [the] first”."
The picture in Asia was mixed on Wednesday.
"Hong Kong’s Hang Seng index closed down 0.5 per cent, while China’s CSI 300 benchmark rose 0.4 per cent and Australia’s S&P/ASX 200 added 0.2 per cent."
"Kospi climbed 1.4 per cent after North Korea said it had suspended plans for military action against the country, marking a de-escalation in recent provocations."
"Additional reporting by Jim Brunsden in Brussels, Sarah Provan and Bryce Elder in London"
US equities had a cautious end to the week as fresh optimism about the outlook for the economy was tempered by concerns over the rising number of coronavirus cases.
Morning gains were erased after Apple said it will close again some US stores in states where local cases of the virus are increasing.
The S&P closed down 0.6 per cent while the tech-heavy Nasdaq Composite finished flat.
The falls stalled growing momentum in equities markets this week following last week’s jitters.
The MSCI World index of developed market equities rose 3.2 per cent this week as investors were fortified by the US Federal Reserve’s actions to support the economy.
"Earlier optimism was reflected in Europe, where markets closed before the Apple news emerged."
The composite Stoxx 600 index rose 0.6 per cent.
"London’s FTSE 100 was the standout riser, closing up 1.1 per cent after better than expected British retail sales numbers and news that the government had downgraded its coronavirus alert level."
"However, many investors warn that equities have become overvalued compared with projected corporate earnings, and the economic recovery from the pandemic will become increasingly difficult in the months ahead."
"“In the next few weeks, the easy part of a post-Covid-19 recovery will be over and by then credit and equity will be far more expensive,” said Sebastien Galy, strategist at Nordea Asset Management."
“The question beyond this is whether authorities have managed to stabilise long-term growth expectations which drive many long-term and short-term behaviours.”
The gains came despite renewed fears about upticks in Covid-19 infections.
"The US on Thursday recorded its largest one-day increase in coronavirus cases since early May, raising uncertainty over the prospect of a swift economic recovery."
"The jump of 27,000 infections was fuelled by a record number of new cases in California, Florida, Arizona and South Carolina."
"The Tips yield — often seen as a measure of the real government borrowing costs — for 5-year government debt hit a record low of minus 0.733 per cent, according to data from Tradeweb."
A falling Tips yield is an indication investors are worried about the prospects for economic growth.
Chinese officials have also been grappling with a spate of new Covid-19 cases in Beijing.
"Authorities reported another 25 cases in the city by the end of Thursday, taking the tally for the latest outbreak to 183."
These developments were offset by a potential step towards easing geopolitical tensions between the US and China.
Reports of meetings between officials from the two countries in Hawaii suggested their preliminary trade deal was intact.
"“It shows both sides are willing to step back from the brink, which is positive for markets,” said Andy Maynard, a trader at China Renaissance."
But he added there was “no new catalyst in the market” capable of pushing equity prices higher.
"Investors have batted off fears that new outbreaks would set back economic recovery against a backdrop of liquidity pumped into financial markets by central banks, the potential easing of US-China tensions and the reopening of economies."
"“It is more likely that despite occasional local outbreaks leading to pauses in reopening in some states and potentially to local shutdowns, the overall trend of easing restrictions will continue,” said analysts at Bank of America, who predict European stocks will rise 15 per cent by November."
"The UK pound had its worst week in a month against the dollar, after falling below $1.24."
"Traders focused on the economic damage to the UK from a severe coronavirus outbreak and the prospect of less quantitative easing from the Bank of England going forward, according to analysts at MUFG."
"Sluggish economic recovery is not the only factor threatening to derail the bull run, analysts said."
"An increase in bankruptcies, permanent unemployment and renewed geopolitical friction in Asia-Pacific could reverse the positive sentiment in markets."
Stocks in Asia struggled for direction on Friday.
Tokyo’s benchmark Topix index was flat while Hong Kong
Hang Seng rose 0.8 per cent.
Kospi gained 0.4 per cent and mainland China
’s CSI 300 index gained 1.3 per cent.
Oil prices were supported by a report citing two of the largest commodity traders saying that crude demand was recovering rapidly this month and pledges by two producers to compensate for overproduction in May to comply with quotas set by Opec and its allies.
"Brent crude, the international benchmark, rose 1.3 per cent to $42.05 a barrel, while West Texas Intermediate, the US marker, climbed 1.9 per cent to $39.57 a barrel."
Global stocks drifted lower on Thursday over signs an economic recovery could be snarled by new measures to contain the virus in some jurisdictions.
"London’s FTSE 100 closed down 0.5 per cent in spite of sharp losses for the pound after the Bank of England flagged a slower pace of bond buying, while in Paris the CAC 40 lost 0.8 per cent."
Germany’s Dax also slipped 0.8 per cent on a record plunge for index member Wirecard after the payments company said €1.9bn of cash was missing.
"On Wall Street, stocks flitted between gains and losses with the S&P 500 ending barely changed."
The Dow Jones Industrial Average fell 0.2 per cent and tech-weighted Nasdaq rose 0.3 per cent.
Investors have continued to pay close attention to clues on the spread of Covid-19 across big economies.
"Several US states reported increases in the number of coronavirus infections, while a German meatpacking plant was ordered to close on Wednesday after hundreds of its workers tested positive for the virus."
Officials in Beijing have also been attempting to contain a fresh outbreak.
Authorities said they had identified 21 coronavirus cases in the Chinese capital on Wednesday.
"The developments have raised concerns that authorities may have to implement further lockdown measures, damping recoveries from the pandemic in the world’s biggest economies."
"“This tightening will likely negatively impact the economic recovery,” Goldman Sachs analysts said of authorities’ moves to lock down parts of Beijing in response to the current outbreak."
Some analysts suggested that concerns over a Covid-19 resurgence might be overdone.
"“Although worries about ‘second waves’ of coronavirus are likely to persist in the coming months, we do not expect such concerns to weigh on equity prices for long,” said John Higgins, chief markets economist at Capital Economics."
"“This view rests on an assumption that there will be localised outbreaks, rather than second waves, in response to which any reimposition of lockdown measures will be limited."
"If so, the economic effects should also be contained,” he added."
Stimulus measures from central banks have helped to power the rally in equity markets since they hit their nadir in March.
"In the latest example of the use of monetary policy to boost liquidity, the European Central Bank said on Thursday that banks have rushed to borrow a record €1.3tn at deeply negative interest rates."
"China’s State Council signalled on Wednesday that the country’s central bank would lower requirements on reserves held at commercial lenders, in a move that could release more money into the financial system."
Data on applications for unemployment benefits in the US released on Thursday added to uncertainty over a quick recovery.
"The number of Americans applying for first-time jobless benefits edged lower again to 1.51m last week, as employers continued to call back workers amid the phasing out of lockdown restrictions."
But the decline in new applications was less than analysts had expected.
"James Knightley, an economist at ING, said that the numbers “suggest the reopening story isn't having as much of a positive impact on the labour market as hoped”."
"The yield on UK 10-year gilts rose 0.032 percentage points and sterling's losses accelerated against both the dollar and the euro after the BoE announced a £100bn extension to its bond-buying programme, as expected, but indicated that asset purchases would be tapered from next week onwards."
Bond yields move in the opposite direction to prices.
With the UK Debt Management Office issuing on average £
"9.4bn gross in gilts since the beginning of April, “the question inevitably arises of who is going to be buying the bonds when the BoE buys less”, said analysts at Société Générale."
"“Considering the scale of uncertainty over the economic outlook, this is asking investors to take a sanguine view of public finances and the limits to fiscal stimulus.”"
The pound slid 1 per cent against the dollar to trade around $1.243.
"The euro, meanwhile, strengthened 0.8 per cent against sterling to trade above £0.90."
Optimism in equity markets is also being challenged by geopolitical scares.
Investors are closely watching an escalation in tensions on the Korean peninsula and the fallout of deadly clashes between Indian and Chinese troops in the Himalayas.
"In Asia-Pacific, Japan’s Topix index fell 0.3 per cent while Australia’s S&P/ASX 200 and South Korea"
"Kospi shed 0.9 per cent and 0.4 per cent, respectively."
Hang Seng index was down 0.1 per cent and mainland China’s CSI 300 added 0.7 per cent.
"West Texas Intermediate, the US oil benchmark, rose 2.3 per cent to $38.85."
"Brent crude, the international crude marker, was up 1.9 per cent to $41.47."
Data released earlier this week showed US oil output had fallen to its lowest level in two years.
"The yield on US 10-year Treasuries, which are viewed by investors as a haven during times of uncertainty, fell 0.028 percentage points to 0.7052 per cent."
Additional reporting by Don Weinland in Beijing and Eva Szalay in London
US and European shares fell on Tuesday as investors turned cautious on the rally that has wiped out this year’s losses for the Wall Street benchmark indices.
The S&P 500 index closed down 0.7 per cent in New York as investors worried about corporate earnings for blue-chip stocks.
"The jitters were felt in Europe too, with the benchmark Stoxx 600 falling 1.2 per cent."
"However, the tech-heavy Nasdaq Composite continued to rise, briefly hitting 10,000 points for the first time as investors sought out technology companies such as Apple and Alphabet, parent of Google."
Shares in the online used car seller Vroom more than doubled on its listing.
"The index finished 0.4 per cent higher, at a record closing high of 9,953.75."
"US Treasury bonds rallied, suggesting a rising demand for perceived haven assets."
"The yield, which moves inversely to prices, on the 10-year note fell 0.06 percentage points to 0.82 per cent."
Yields on 10-year Spanish debt rose by 8.5 basis points to 0.56 per cent amid strong demand for a new 20-year sovereign bond.
"“The stock market and the bond market are telling two very different stories,” said Nancy Davis, chief investment officer at Connecticut-based firm Quadratic Capital Management."
"“Stocks are near record highs, while the bond market is pricing in an apocalypse with yields at historically low levels."
One of these markets is in for a rude awakening.”
Stock markets in Frankfurt and Paris were hit after banks were asked by a financial watchdog to delay dividend payments until at least next year.
"The French lenders Société Générale, BNP Paribas and Crédit Agricole led falls across the sector in Europe."
"Reports released on Tuesday highlighted that, even while equity markets especially in the US have recovered, signs of acute strain in the global economy have persisted as scars from the coronavirus pandemic leave their mark."
"France’s central bank estimated that output this year would contract 10 per cent, adding to gloomy forecasts from other big regional economies."
"Exports from Germany, Europe’s biggest economy, in April plunged the most on records dating back 70 years."
"Data from Japan, meanwhile, showed orders for machinery last month fell the most in more than a decade."
"The global economy faced many threats, such as a second wave of coronavirus infections, US-China trade tensions and the ripple effects of rising unemployment and corporate bankruptcies."
Equities have nonetheless come off the lows struck in March after stimulus measures from governments and central banks and as many countries have been slowly easing their lockdown measures.
"The US large-cap index is still outperforming Europe’s Stoxx 600 gauge, which has shed more than 11 per cent this year."
"Mark Haefele, chief investment officer at UBS Wealth Management, said more economic normalisation and central bank support could give equities “a second wind” following the rebound since March."
"“But the move does increase the importance of selectivity — looking for the stocks and sectors that still have room for growth,” he said."
"In Europe, the Stoxx travel and leisure sector fell 3.4 per cent, squeezed in particular by airline groups IAG and easyJet, which have been under persistent pressure following a plunge in global travel."
"Oil prices, which initially extended Monday’s sell-off, rebounded in the US trading day."
"Brent crude, the international benchmark, settled 0.9 per cent higher at $41.18 a barrel."
"West Texas Intermediate, the US marker, also erased losses and closed 2 per cent higher at $38.94."
US stocks have recouped all of their losses for the year thanks to a rally spurred by central bank stimulus and optimism among investors that economic activity may be rebounding.
"The S&P 500 advanced 1.2 per cent on Monday to close at 3,232.39, back above their level at the start of 2020, building on gains from Friday’s unexpected rise in US employment in May."
"The blue-chip Dow Jones Industrial Average rose 1.7 per cent thanks largely to Boeing, on hopes of a rebound in air travel, while the tech heavy Nasdaq Composite added 1.1 per cent to set a new closing record of 9,924.75."
"US stocks have climbed more than 40 per cent from a mid-March low, with the Nasdaq up 10.6 per cent since the start of the year and the S&P 500 now little changed."
The rebound has come in spite of the recession caused by the coronavirus pandemic and civil unrest in the US after the killing of George Floyd.
"“The history of markets is that they always overshoot both ways,” said Lee Spelman, head of US equities for JPMorgan Asset Management."
“What you’re seeing is an expectation of a V-shaped recovery and that may prove to be too optimistic.”
"Stanley Druckenmiller, a former hedge fund manager, said that “the excitement of reopening is allowing a lot of these companies that have been casualties of Covid to come back and come back in force”."
Support by the US Federal Reserve has also helped to alleviate the economic strain.
"The central bank has slashed interest rates to zero, launched an unlimited bond-buying programme and announced 11 lending facilities."
"“I would also say I underestimated how many red lines, and how far, the Fed would go,” Mr Druckenmiller said, in an interview with CNBC."
"European stocks failed to build on recent gains at the end of a quiet session on Monday, as a historic 18 per cent contraction in German industrial output in April undermined some investors’ confidence that there would be a swift recovery from the pandemic."
"“At least for German industry, the period after the imminent rebound does not look too promising,” said Carsten Brzeski, chief economist for the eurozone at ING."
"“Contrary to the financial crisis, and the important role of Asian countries in the swift recovery of German industry back then, there is currently no saviour in sight to quickly boost external demand,” he added."
Yields on German Bunds — the benchmark for the eurozone — were steady at around their highest level in two months after rising last week as investors sold haven assets following the European Central Bank
’s announcement of further support measures to tackle the pandemic.
"Xetra Dax equity benchmark fell 0.2 per cent, a decline matched by London’s FTSE 100, which slipped back from a three-month high."
The continent-wide Euro Stoxx 600 fell 0.3 per cent.
"After a near-40 per cent drop from late-February to mid-March, European stocks have rebounded strongly and now stand 10 per cent lower for the year."
"Goldman Sachs strategists Jan Hatzius and Jari Stehn said that while the broker had increasing confidence in European growth prospects, the risk of a US disappointment was growing."
“We continue to forecast a whopping 24 per cent rebound in global GDP growth . . .
"driven by a quick normalisation in industries that can readily bounce back from social distancing, like autos, manufacturing, and commercial construction,” Goldman told clients."
"However, the US “is now a clear underperformer in virus control” and Friday’s jobs report “might result in complacency among fiscal policymakers”, they said."
"In the Asia-Pacific region, Japan’s benchmark Topix rose 1.1 per cent while China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks added 0.5 per cent."
Hang Seng was little changed.
"Official Chinese data over the weekend showed that exports shrank 3.3 per cent in May in dollar terms, significantly less than the contraction forecast by economists."
"But imports fell more than anticipated due to weak local demand, raising questions over the pace of the country’s economic recovery from the virus."
"In Japan, economic figures published on Monday showed that the world’s third-largest economy shrank at an annualised rate of 2.2 per cent in the first quarter of 2020, compared with initial estimates of a 3.4 per cent decline."
Oil prices fell after Saudi Arabia said that the extension of Opec+ production cuts until the end of July would not include voluntary curbs by a trio of Gulf producers.
Brent crude ended 3.5 per cent lower at $40.80 a barrel while US marker West Texas Intermediate slipped 3.4 per cent to $38.19 a barrel.
Additional reporting by Robin Harding in Tokyo
US stocks rallied and Treasuries slid sharply on Friday after an unexpected rise in American employment stunned investors and fuelled hopes that the world’s biggest economy was beginning to recover from its coronavirus shock.
The S&P 500 closed 2.6 per cent higher following the release of data that showed that non-farm payrolls rose by 2.5m last month.
"The tech-heavy Nasdaq rose 2.1 per cent, leaving it just three points short of its record high."
"Consensus expectations had been for a loss of 7.5m jobs, which would have put the US unemployment rate close to 20 per cent, not far off the Great Depression peak of 24.9 per cent."
"But the new jobs pushed the rate down to 13.3 per cent in May, from 14.7 per cent in April."
"Seema Shah, chief strategist at Principal Global Investors, which has $437bn of assets under management, said the jobless numbers were “an incredible turnround” from the previous month."
"“Today’s data suggests that the US economy is more resilient than expected,” she said."
“It also raises the question: does the US really need as much policy support as it is receiving?”
"Share prices this week have continued to claw back the heavy losses sustained in March amid growing optimism that economies are emerging from their lockdowns, supplemented by central banks willing to extend their programmes that underpin government spending."
"Friday’s rise means the US S&P 500 benchmark stock index rose 4.9 per cent over the week and is only 1.1 per cent lower for the year, having risen more than 40 per cent since the March lows."
"As optimism boosted shares, investors sold 10-year US Treasury bonds, leading yields to rise to 0.87 per cent, the highest level since mid-March."
"According to Tradeweb data, the yield on the 10-year notched up its largest week-over-week increase since September last year, which indicated investors showed greater appetite for riskier assets."
"The sell-off in longer-dated US bonds, seen throughout the week, intensified."
"The difference in yields between five-year and 30-year Treasuries rose to 122 basis points, the most since December 2016."
"Dan Ivascyn, chief investment officer at Pimco, said the figures confirmed to investors that the US economy was recovering and powering a strong rebound across financial markets, including in shares of hard-hit banks and industrial goods groups."
"“It is what you want to see in a recovery process, broad participation even in weak, fragile parts of the market,” he said."
"In Europe, the US jobs data added to the investor enthusiasm created by the European Central Bank’s expanded stimulus package on Thursday."
The bank said it would buy more bonds into next year.
"The ECB’s action follows similar moves by central banks in the US, Japan and UK."
"Together with China’s central bank, their combined balance sheets have risen from $5tn in 2007 to more than $23tn, according to research group Haver Analytics."
"The continent-wide Stoxx Europe 600 index was up 2.5 per cent, helped by a 2.3 per cent gain in London’s FTSE 100."
"Xetra Dax jumped 3.4 per cent, which left the benchmark up 50 per cent in just over 50 sessions."
"Travel and leisure stocks were the largest gainers, albeit from low levels, as countries began to form agreements to reopen their borders."
"Europe’s travel and tourism sector, which has been hit hard by coronavirus, is down almost a third this year."
Some analysts are confident the rally has plenty of momentum.
Bank of America said the Stoxx 600 was set to rise a further 10 per cent by the third quarter of this year as Europe
’s economies returned to activity.
That would take European equities close to pre-pandemic levels.
"The bullish mood led to investors moving out of the relative safety of German government bonds for a second straight session, sending the yield on the 10-year Bund above minus 0.3 per cent, its highest level in two months."
"The euro fell against the US dollar, after gaining almost 4 per cent in eight days to reach its highest point since early March."
"In Asia-Pacific equities, Hong Kong’s Hang Seng added 1.7 per cent, taking its advances for the week to 7.9 per cent, its biggest weekly gain in more than five years."
"Meanwhile, Japan’s benchmark Topix rose 0.5 per cent, Australia’s S&P/ASX 200 gained 0.1 per cent and"
China’s CSI 300 index of Shanghai and Shenzhen-listed stocks added 0.5 per cent.
Oil prices rose after Opec and its allies agreed to meet over the weekend to discuss the possibility of extending production cuts.
"Brent crude, the international benchmark, rose more than 5 per cent to trade above $42 a barrel, while West Texas Intermediate, the US marker, rose as much as 5.3 per cent at $39.68 a barrel."
Additional reporting by Martin Arnold in Frankfurt and Eric Platt in New York
Eurozone bonds rallied and the euro surged on Thursday after the European Central Bank announced a bigger-than-expected boost to its stimulus package to tackle the economic fallout from the coronavirus crisis.
The yield on 10-year Italian and Greek debt dropped sharply after the ECB said it would expand its bond-buying programme by €600bn and extend it until 2021.
"The actions “show that the ECB is in whatever-it-takes mode”, said Joost van Leenders, investment strategist at Kempen Capital Management."
"“It is clear that with the inflation outlook much weaker and financial conditions tighter, the ECB felt it better to be safe than sorry.”"
"In response the euro rose nearly 1 per cent against the dollar to reach $1.136, its highest since early March."
"The additional yield on Italian 10-year debt over German debt — a key measure of risk for the eurozone — fell below 1.8 percentage points, from a peak of 2.8 points during the coronavirus sell-off."
"The Italian debt yield slipped 0.16 percentage points to 1.4 per cent, the lowest borrowing costs in nearly three months."
"European stocks, which have outperformed US markets this week, trimmed earlier gains."
"London’s FTSE 100 and the CAC 40 in Paris closed down 0.6 and 0.2 per cent, respectively."
US equity markets broke a four day winning streak in spite of gains for airline and aerospace stocks.
The S&P 500 ended 0.3 per cent lower while the tech-heavy Nasdaq slipped 0.7 per cent.
"The ECB said its move — which extended its current €750bn pandemic emergency purchase programme — was intended to support “funding conditions in the real economy, especially for businesses and households”."
“Today’s decision should dent any future speculation about whether or not the ECB is willing to play its role of lender of last resort for the eurozone.
"It is,” said Carsten Brzeski, chief economist at ING."
But some analysts said the ECB would have to do more to keep fuelling investor optimism and support an economic recovery.
The bond-buying programme “is still insufficient to mop up this year’s supply (given that not all purchases are government bonds)
"let alone the still large bond supply that will come to the market next year”, said Nick Kounis of ABN Amro."
"In a press conference, Christine Lagarde gave a downbeat assessment of the speed of economic recovery in the bloc."
The ECB president said the eurozone economy was “experiencing an unprecedented contraction” and the recovery had been “tepid” compared with the rapid pace of contraction when the pandemic hit.
The advances on Wall Street earlier this week have come despite nationwide protests sparked by the killing of George Floyd.
"First-time unemployment benefit claims by Americans last week slowed down for a ninth consecutive week to 1.9m, according to official data released on Thursday."
It takes the total number of new claims to nearly 43m since lockdowns began in mid-March.
"Investors sold 10-year benchmark US sovereign debt, with the yield rising as much as 0.8 per cent."
"The spread between yield on 2-year and 10-year Treasury bonds expanded to 60 basis points, its widest level since mid-March."
"In the Asia-Pacific region, Japan’s Topix index gained 0.3 per cent while South Korea"
Kospi edged 0.2 per cent higher.
"China’s CSI 300 of Shanghai and Shenzhen-listed stocks was flat, while Hong Kong’s Hang Seng rose 0.2 per cent."
"In the latest escalation of tensions between China and the US, the White House on Wednesday moved to block Chinese airlines from operating in American airspace unless Beijing relaxed restrictions on US airlines."
"“Economies are gradually lifting lockdowns, ending states of emergency and easing restrictions."
"But just as equity markets start to recover, another crisis looms: escalating tensions between the US and China,” said Frank Benzimra, a strategist at Société Générale."
"Oil prices were little changed after Brent crude, the international benchmark, failed to close above $40 a barrel on Wednesday on signs that not all members of the Opec+ production alliance were willing to extend output cuts."
Brent crude traded on Thursday at $39.75 a barrel.
"West Texas Intermediate, the US marker, was $37.10 a barrel."
Global stocks climbed and yields on longer-term US and German government debt rose as investors brushed aside political risks and pinned their hopes on a swift rebound for economies rocked by the coronavirus pandemic.
"The S&P 500 index was up 1.4 per cent, notching a fourth consecutive day of gains."
"The tech-weighted Nasdaq rose 0.8 per cent to within a couple of percentage points of an all-time high, recouping its coronavirus-induced losses."
"The Vix volatility index, a measure of expected swings in options on the S&P 500, often dubbed a “fear gauge” for the market, fell 5.9 points to 25.88, its lowest level since late February."
"Gains on European markets were even sharper, with the UK"
FTSE 100 up 2.6 per cent and the continent-wide benchmark
Stoxx 600 ending 2.5 per cent higher.
"“Just as the winners of the last two months were running out of steam, along come the laggards to the party,” said Jim Reid, Deutsche Bank strategist."
Investors’ expectations were also fuelled by a growing conviction that central banks would announce more stimulus packages.
The European Central Bank could report an expansion of its programme on Thursday.
"The strong gains in equities were mirrored by rising yields on longer-dated German and US sovereign debt, indicating that investors were looking instead for more risky assets."
"The yield on the 10-year US Treasury rose as high as 0.75 per cent, its highest closing point in 10 weeks, and the 30-year “long bond” rose to as much as 1.56 per cent before crimping its gains."
"The yield on 10-year German debt rose to minus 0.35 per cent, its highest level since early April."
US stocks have forged ahead despite mass protests in cities across the country after the death of an African-American man at the hands of police and rising tensions between Beijing and Washington.
"JPMorgan shares rose 5.4 per cent, Citigroup 4.9 per cent and Bank of America 4.6 per cent on hopes of an economic recovery."
"The S&P 500 is now less than 10 per cent off its all-time high, though in a sign the rally in equity markets was broadening, stocks in Europe have outperformed Wall Street this week."
“It’s more than a little uncomfortable that America
"markets continue to edge higher even as its cities have convulsed into violence,” said Christopher Smart, head of Barings Investment Institute."
"“Perhaps it’s a reminder that the S&P 500, like any equities index, is an imperfect measure of the state of a country."
Perhaps it’s a reminder of just how much liquidity is sloshing through the system looking for a home.”
"The US dollar index, which measures the currency against a basket of its global peers, fell for a seventh straight session to its lowest level in almost three months."
"Survey data released on Wednesday showed that business activity in Europe had begun to recover as lockdowns loosened, although German unemployment has risen to a four-year high in a sign of the significant economic damage caused by the pandemic."
Oil prices gave up earlier gains that had seen Brent climb back above $40 a barrel for the first time in almost three months.
"Brent, the international benchmark, fell 0.7 per cent to $39.25 a barrel."
US marker West Texas Intermediate slipped 0.1 per cent to $36.80 a barrel.
A planned Opec+ meeting on Thursday was in doubt after a dispute erupted over producers’ compliance with an agreement to curb production.
"Equity markets in the Asia-Pacific region rose, with South Korea"
Kospi adding nearly 3 per cent after Seoul announced an additional $29bn stimulus programme to help support the economy.
"“Markets are in full liquidity-on mode” as investors look through headwinds including geopolitical friction such as over the future of Hong Kong, strategists at HSBC said in a note."
"“Instead, news flow around new stimulus packages and possible vaccine breakthroughs are greeted jubilantly."
"This might continue in the short term, but is hardly sustainable,” they added."
"Elsewhere in Asia, China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks was broadly flat after the Caixin purchasing managers’ index showed that Chinese services sector activity rose for the first time in four months in"
"May. New orders jumped at the fastest pace in a decade, indicating a robust recovery in certain parts of the world’s second-largest economy following its Covid-19 outbreak."
Global stocks climbed to their highest levels in three months as optimism about a speedy economic recovery eclipsed geopolitical risks.
"The S&P 500 index closed 0.8 per cent higher in New York, with a third straight daily gain leaving the US benchmark within 10 per cent of an all-time high struck in February."
"The tech-heavy Nasdaq Composite ended just over 1 per cent away from its record high, having risen 0.6 per cent on Tuesday."
"Stocks such as Caterpillar, the construction equipment maker, and the chemicals group Dow led Wall Street’s advance as better-than-feared manufacturing data from China helped to provide a distraction to the violence rippling across the US."
"“Green shoots have begun to emerge along the road to recovery,” said Piper Sandler strategists Craig Johnson and Adam Turnquist."
“Signs of a bottom in economic data have recently developed as the global economy begins to reopen.
"New confirmed cases of Covid-19 are decelerating, while hope for a timely vaccine remains high."
"Tensions with China continue to escalate, but we continue to believe cooler heads will ultimately prevail given the vulnerable economic backdrop.”"
The S&P 500 has risen almost 38 per cent since its March low while Europe’s Stoxx 600 is up more than a quarter over the same period.
Optimism about reopening the economy has helped investors to shrug off increasing US-China tensions and protests on the streets of America following the death last week of an unarmed black man at the hands of police.
"Late on Monday President Donald Trump warned that he would send in the military to US cities that have been hit by violence, if local authorities do not clamp down."
Analysts said Mr Trump’s decision threatened to undermine the positive market narrative.
"Some fear that Covid-19 could spread among large groups of protesters, leading to a second wave of infections."
"“Not only does the violence and damage to property hinder the reopening of the economy, but it surely also creates a hotbed for renewed infection,” said Robert Carnell, head of Asia-Pacific research at ING."
"New case numbers in the US have been “fairly steady recently”, Mr Carnell said, adding “it wouldn’t take a lot for them to start rising again”."
"In Europe, London’s FTSE 100 closed up 0.9 per cent."
"Frankfurt’s Xetra Dax caught up after being closed on Monday, gaining 3.8 per cent following reports that Angela Merkel’s government is considering a second stimulus package."
"“Coronavirus has sent the world economy into its deepest recession since the Great Depression,” said economists at Danske Bank."
"“However, we continue to think it will be relatively shortlived, seeing a rebound on the cards late in the second quarter or early in the third as economies open up.”"
Economists at Rabobank said investors had brushed off the impact of the US unrest on equities due to central banks’ stimulus packages.
"“In many respects the rise in stocks when the military are about to be called in is odd,” they said."
But central banks’ “largesse ensures it is almost impossible to repress asset prices”.
"They warned, however, that further central bank buying of assets is only likely to inflame sociopolitical tensions, since only the rich would benefit, while the feeling of disenfranchisement, shared in common between protesters in the US and Hong Kong, would intensify."
Tumult in US cities is not the only factor that investors believe could unseat the rally.
Tension between Washington and Beijing has resurfaced in recent weeks over the status of Hong Kong.
On Monday Bloomberg reported that China had halted imports of some US agricultural products in a development that could damage further the trading relationship between the world’s two biggest economies.
"The dollar index, which tracks the US currency against a basket of global peers, slipped 0.1 per cent on Tuesday to edge closer to a three-month low."
"All G10 currencies, except the yen, have strengthened against the dollar over the past five days."
Sterling rose to trade at a four-week high against the US currency and it is up about 1 per cent against the euro since the start of the week.
"However, traders are cautious about further gains as the UK and EU enter into a fourth round of Brexit negotiations on Tuesday with the deadline for agreeing an extension of the transition period less than a month away."
The yield on 10-year US Treasuries rose slightly to 0.667 per cent.
"Bond yields, which move inversely to prices, slipped across the eurozone, ahead of the European Central Bank’s meeting on Thursday."
"There are concerns about possible objections to the plan for a €750bn recovery fund from the bloc’s “frugal four” — Austria, Denmark, the Netherlands and Sweden."
"In the Asia-Pacific region, Japan’s benchmark Topix jumped 1.2 per cent while Hong Kong"
Hang Seng added 1.1 per cent and Australia’s S&P/ASX 200 was 0.3 per cent higher.
"China’s CSI 300 index of Shanghai and Shenzhen-listed shares rose 0.3 per cent after the central bank said it had earmarked Rmb400bn ($56bn) to temporarily purchase small business loans from banks, as part of measures to support lenders hit by coronavirus."
"Oil prices rose as Opec and its allies discuss a short extension of production cuts beyond July, with international marker Brent crude adding 3.5 per cent to settle just below $40 a barrel."
Wall Street turned higher late in Friday’s session after Donald Trump’s latest salvo aimed at China did not deliver the harsh sanctions traders had feared.
"The S&P 500 closed up 0.5 per cent and the Dow Jones Industrial Average ended little changed, recovering from a fall of more than 1 per cent, after the US president said in a scheduled address that his administration would revoke special trade privileges for Hong Kong."
Analysts had been predicting a much more aggressive US response to Beijing’s approval of a national security law for Hong Kong.
"A range of measures, including scrapping the countries’ Phase One trade deal, new import tariffs and freezing assets of Chinese citizens had all been mooted, which helped unravel some of the recent investor optimism over the loosening of coronavirus lockdowns."
"In Europe, markets had closed sharply lower as risk aversion led investors to take profits from cyclical sectors such as travel and leisure, which have led the market’s rebound over the past two weeks."
"London’s FTSE 100 was down 2.3 per cent, while in Frankfurt the Xetra Dax dropped 1.6 per cent."
"“The risk of an economic, earnings, trade, or political hiccup to normalisation means near-term returns are skewed to the downside, or neutral at best,” Goldman Sachs analysts including David Kostin told clients."
"The S&P 500 had already hit Goldman’s year-end 2020 target of 3,000 points and the earnings growth now priced into stocks for 2021 “represents a best-case scenario — achievable, but definitely optimistic,” said the broker."
Sino-US tensions had been brought to the fore after Beijing pushed ahead with legislation that has raised concerns about Hong Kong’s future as a financial centre.
"“Geopolitical risks from US-China relations do not appear to be fully priced in, although we believe China’s V-shaped recovery will remain on track,” said Joyce Chang, chair of global research at JPMorgan."
"“The global economy is opening up and is set to generate one of the strongest growth out-turns on record, with GDP up close to 20 per cent annualised in the second half of the year, but we see the balance of risks as only moderately bullish."
Markets have rebounded aggressively across most asset classes . . . 
and are pricing in an expansion that is already under way instead of one that is just beginning.”
"The onshore exchange rate for the renminbi, which investors have been watching as US-China friction intensifies, was little changed at Rmb7.14 per dollar."
That was after the People’s Bank of China set the currency’s trading band stronger than analysts had expected.
"“Recent [renminbi] fixings by the PBoC suggest an effort to dampen volatility — not drive the currency lower,” said Larry Brainard, chief emerging markets economist at TS Lombard."
He added that the currency was set for “periodic bursts of volatility . . . 
but not of continuing steady depreciation”.
Oil prices climbed.
"US benchmark West Texas Intermediate oil futures touched their best levels since early March, with the July contract rising more than 5 per cent to $35.49 a barrel."
Additional reporting by Yuan Yang in Beijing
Global stocks and crude oil slowed advances made this week as fears over renewed tensions between Washington and Beijing outweighed hopes of more stimulus packages to support the world’s largest economies.
Investors sought out havens such as gold and US Treasuries after China moved to assert its authority over Hong Kong with plans to impose a national security law on the territory.
"The Communist party’s decision earned a sharp rebuke from Washington, where Mike Pompeo, US secretary of state, called the plans a “death knell” for autonomy in the financial hub."
"Hong Kong’s Hang Seng index closed down 5.6 per cent, marking the benchmark’s worst one-day performance in almost five years."
"In the US the benchmark S&P 500 index finished 0.2 per cent higher, lacking direction."
"Brent crude, the international benchmark, fell as much as 5.2 per cent but later halved its losses."
The concerns over China-US relations checked some of the positive momentum generated this week as the world’s biggest central banks indicated they had further ammunition to support spending plans in the wake of the coronavirus.
Investors’ hopes of a recovery were also stirred by more countries beginning to ease their lockdown restrictions.
"The S&P 500 rose 3.4 per cent over the week, leading other global benchmarks higher."
"In Europe, France and Germany indicated they had reached an accord on a recovery fund for the EU while the UK’s central bank said it was exploring negative interest rates."
"Friction between Washington and Beijing has been rising steadily as Donald Trump, US president, blames China for the global spread of the coronavirus."
Earlier this week Mr Trump claimed China was behind a disinformation and propaganda attack on the US and Europe.
"Jonas Golterman, an economist at Capital Economics in London, said an escalation of tensions in Hong Kong risked undermining a rebound in equity markets."
"“It appears to serve leaders on both sides to distract attention from the pandemic and the resulting economic hardship,” he said."
"“Unless either side takes concrete steps to escalate the conflict further, which would probably hurt their own economies, the impact on markets is likely to remain limited.”"
"European stocks were mixed on Friday, with London"
FTSE 100 down 0.4 per cent and the regional Stoxx Europe 600 index flat.
"Stocks exposed to Asia were hit hard, with the insurer Prudential losing 9.2 per cent and banking group HSBC down 4.9 per cent."
Traders in Hong Kong said they had been blindsided by China’s move and said the local equity market could fall further if it reignited the territory’s pro-democracy movement over the weekend.
"Mainland China’s CSI 300 index of Shanghai and Shenzhen-listed stocks fell 2.3 per cent as the National People’s Congress, China’s rubber-stamp parliament, declined to set a gross domestic product target for the first time."
The country faces its most severe economic downturn since the 1970s owing to the impact of coronavirus.
"“The focus [will] be on policy easing and stimulus for recovery after the Covid-19 pandemic,” said Bruce Pang, head of macro strategy research at China Renaissance."
"“Stabilising employment will remain Beijing’s top priority, considering it will help to anchor business and consumer expectations, and expenditure.”"
"Tai Hui, Asia-Pacific markets strategist at JPMorgan Asset Management, said dropping the economic growth target was “realistic”."
“There are just too many variables.
"You’ve got the outbreak, [and]"
"you’ve got the escalation in US-China trade tensions,” he said."
"The ratcheting up of geopolitical tension helped to lift haven assets such as gold, the dollar and core government bonds."
"The dollar index, a broad measure of the greenback against a basket of global peers, rose to its highest level of the week, while gold climbed 0.5 per cent to $1,733 an ounce, near a seven-year high."
"Government bonds rallied, with the yield on the 10-year US Treasury note falling 0.015 percentage points to 0.623 per cent."
The market closed early on Friday ahead of a holiday weekend.
"The yield on the five-year UK gilt remained in negative territory, having crossed below zero for the first time on Thursday on rising expectations for further easing in monetary policy from the Bank of England."
Additional reporting by Don Weinland in Beijing
Global stock markets pushed higher on Wednesday as investors took heart from the prospect of central banks offering further measures to stimulate economic growth and protect incomes.
"The optimism was underpinned by continued demand for sovereign debt issued by some of the world’s biggest economies, enabling governments to fund their record spending commitments."
Minutes from the US Federal Reserve indicated the central bank was ready to support the economy over the medium term if there were additional outbreaks of the virus.
"The S&P 500 rose 1.7 per cent to its highest level since the first week of March, while the Nasdaq rose 2.1 per cent to its highest point since mid-February."
"Investors shrugged off concerns raised by medical news website Stat on Tuesday, that called into question the rigour of an early-stage trial of a Covid-19 vaccine."
"Optimism for the vaccine, manufactured by Moderna, stoked a rally in equities markets around the world but the article raised doubts over the speed at which a vaccine could be developed."
"European equities caught the mood, reversing early losses to make strong gains in the last hour of trade."
The FTSE 100 in London closed up 1.1 per cent and the regional benchmark
Stoxx 600 finished nearly 1 per cent higher.
Crude oil rose on hopes that a combination of rising demand and falling supply would boost prices.
"Futures on Brent crude, the international benchmark, were up 3.7 per cent at $35.94 a barrel while futures on West Texas Intermediate, the US marker, rose 5 per cent to $33.60 a barrel, the highest level since mid-March."
Consultancy Wood Mackenzie estimated that national oil companies would cut exploration budgets by more than a quarter on average in 2020.
"Dominic Schnider, an analyst at UBS, said that the “bottoming out process had begun” for commodities."
But he cautioned that it would be a slow recovery.
"“Unlike equities, which are strongly driven by expectations, commodity prices are influenced by actual supply and demand dynamics."
"On this assessment, nothing has fundamentally changed.”"
Investors drew comfort that governments were able to support their economies and consumers by issuing long-term debt.
The US successfully sold its first 20-year bond since 1986 and the UK broke new ground by selling debt with a negative yield for the first time.
"“[Coronavirus] has prompted governments to take massive fiscal support measures,” said Bastien Drut, a senior strategist at CPR Asset Management, part of Amundi."
"“As a result, public deficits will widen sharply and sometimes reach historically high levels."
The sovereign debt markets will enter a new era.”
"However, after a surge in April, equities markets have struggled to gain ground in May as investors grapple with a series of unknowns — from the prospects for economic recovery to the likelihood of a new wave of infections as countries lift lockdowns."
MSCI’s broad index of global stocks is up just 0.3 per cent on the month.
"The spot price of gold rose as high as $1,750 per troy ounce, close to an all-time high."
Analysts remain cautious over whether the easing of lockdowns will derail the success many governments have had in lowering coronavirus infection rates.
"The reproduction number remains below one — the key threshold below which the virus recedes — in many big economies, such as the UK, Germany, France, Spain and Italy, according to figures collated by JPMorgan Chase."
"The Wall Street bank, however, warned in a note to clients on Wednesday that “at the moment, nowhere in Europe has the resources to do the kind of widespread testing that is needed” to track and trace new coronavirus cases effectively enough to staunch a second wave."
"“This suggests that if exit strategies continue to be aimed at preventing a second wave of infection — by keeping R [the reproduction rate] below one — restrictive social distancing measures will need to remain in place for an extended period,” JPMorgan said."
“The easing in lockdown measures that we are now seeing risks a second wave of infection.”
Asian stocks were mixed.
"Topix index rose 0.6 per cent on Wednesday, while Australia’s S&P/ASX 200 rose 0.4 per cent."
Hong Kong’s Hang Seng rose 0.1 per cent and China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks fell 0.5 per cent.
The rise in Japanese shares came after data showed that core machinery orders — viewed as an indicator of capital spending in the coming months — fell less than analysts expected in April.
Wall Street stocks turned lower in the last hour of trading on Tuesday as doubts about the strength of economic recovery and scepticism around a potential Covid-19 vaccine triggered a reversal.
"Equities had surged on Monday, with global markets recording their best sessions since early April after biotech company Moderna said the initial results from a clinical trial of its vaccine candidate had been positive."
But traders reacted to a report on healthcare news website Stat that questioned the strength of Moderna’s data and moved to take profits.
"“When you have a lack of clarity in the market, any kind of headline with some credibility to it is going to lead to quite sharp swings,” said Willem Sels, global chief market strategist at HSBC Private Banking."
The Dow Jones Industrial Average closed 1.6 per cent lower as selling of industry bellwethers such as Merck and Procter & Gamble gathered pace in the last half-hour.
The S&P 500 fell just over 1 per cent and the technology heavy Nasdaq Composite ended 0.5 per cent lower having been in positive territory until the final hour of trading.
"Markets had ended mixed in Europe, with benchmarks largely holding on to Monday’s sharp gains."
"London’s FTSE 100 ended down 0.8 per cent as sterling bounced against the dollar and the euro, making UK stocks more expensive for international buyers."
Frankfurt’s Xetra Dax closed 0.2 per cent higher while in France the lifting of a ban on short selling helped to drag the CAC 40 lower by 0.9 per cent.
"Also lifting market sentiment on Monday was news that Germany and France had joined forces to push for a €500bn EU recovery fund, boosting the effort to create a co-ordinated European fiscal response to the crisis."
"But analysts at Rabobank warned against welcoming these developments as though they were “already with us”, as there remained significant hurdles for both the EU recovery fund and the Covid-19 vaccine."
"“Virus experts urge caution [on a vaccine], so I’ll listen to them,” said Kit Juckes, macro strategist at Société Générale."
On Tuesday gold prices climbed almost 1 per cent and US 10-year Treasury yields slid 0.28 percentage points to 0.714 per cent as investors inched back into the relative safety of government debt.
"Expectations for an economic rebound from the pandemic, due in part to robust support measures by big central banks, have helped to drive a sharp rise in global stocks over the past two months."
The S&P 500 is up about a third from a low in late March.
"“Equities are pricing in an optimistic path forward,” said strategists at ClearBridge Investments, noting that investors were focused on the potential path of the economic recovery."
"The positive sentiment spilling over from Monday’s trading helped to overshadow growing concerns over a US-China rift, with Huawei emerging as a significant source of tension."
The Chinese telecoms equipment maker this week warned that new sanctions from Washington put its survival at stake.
"Beijing also hit back at Donald Trump’s threat to withdraw from the World Health Organization, accusing the US president on Tuesday of attempting to shift the blame for his own handling of the coronavirus crisis."
"In the Asia-Pacific region, Hong Kong’s Hang Seng index rose 1.9 per cent, while China’s CSI 300 index of Shanghai and Shenzhen-listed stocks added 0.9 per cent."
Japan’s Topix index climbed 1.8 per cent and Australia’s S&P/ASX 200 rose by the same margin.
Oil prices also paused on Tuesday following a recent rally spurred by signs that crude demand was picking up and supply cuts led by Opec had begun to take effect.
"The US marker West Texas Intermediate was 1.7 per cent higher at $32.50 a barrel after jumping 8 per cent a day earlier, having moved back above the $30 mark for the first time since mid-March."
"Brent crude, the international benchmark, slipped 0.9 per cent to $34.51 a barrel."
"Wall Street ended the week lower, even after stocks rebounded in a volatile trading session punctuated by mixed economic data from across the world and escalating disputes between the US and China."
The S&P 500 closed up 0.4 per cent on Friday but declined 2.3 per cent for the week as a whole.
The tech-heavy Nasdaq Composite has slid 1.2 per cent over the past five trading days.
US stocks had opened lower on Friday after the US Department of Commerce said it would tighten export controls targeting the Chinese telecoms equipment maker Huawei and its US suppliers in the semiconductor industry.
"Disappointing economic data, including figures that showed a record drop in industrial production and retail sales in April, also weighed on investor sentiment."
Chipmakers were hit particularly hard.
"The Philadelphia Semiconductor index, which tracks 30 companies that design, distribute and sell chips, fell more than 2 per cent, with Qualcomm sinking 5.1 per cent."
Tensions between the global powers have intensified this week as President Donald Trump sought to pin the blame on China for the surge in coronavirus cases in the US and elsewhere in the world.
Optimism about the relaxation of lockdowns across the US and Europe has been tempered this week by new clusters of virus outbreaks in countries such as South Korea and China and central bank warnings of a protracted economic recovery.
"The price of gold rose to $1,744 a troy ounce on Friday as the mix of concerns nudged investors towards haven assets."
"In Europe, Frankfurt’s Xetra Dax stock index climbed 1.1 per cent on the day, following figures showing German growth fell slightly less than economists had expected."
"The eurozone’s biggest economy shrank 2.2 per cent in the first quarter, its fastest contraction since the 2008 financial crisis."
"The FTSE 100 rose 1 per cent on the day, while the continent-wide Stoxx 600 was up 0.5 per cent."
"“Investors are seeing a dichotomy between the bullish views being expressed in many markets and the ongoing output of bad economic data,” said James Ashley, head of international market strategy at Goldman Sachs Asset Management."
"Sterling fell, weakening 0.9 per cent against the dollar, after the UK’s chief Brexit negotiator said “very little progress” had been made in the latest round of negotiations, with a deadline only weeks away."
Shares across Asia-Pacific inched higher following fresh signs
’s economy could be recovering from the coronavirus crisis.
"Official data from China on Friday showed growth in industrial output resumed last month, while retail sales and investment in capital goods such as machinery shrank at a slower pace than previously."
The upbeat data also lifted mining companies listed in Europe such as Anglo American and BHP.
"“If the recovery momentum continues, China could avoid another GDP contraction” in the second quarter, said Betty Wang, senior China economist at ANZ."
"Japan’s Topix index closed 0.5 per cent up, while Hong Kong’s Hang Seng index dipped 0.1 per cent."
Oil prices rose following signs that demand was recovering.
"Brent crude, the international benchmark, settled 4.4 per cent higher at $32.50 a barrel, while West Texas Intermediate, the US marker, gained 6.8 per cent to $29.43 a barrel."
"“The fundamentals in the market are clearly improving,” said Warren Patterson, head of commodities strategy at ING."
"“But we still believe that in the near term, the upside is limited given that we are still in a surplus environment and as there is plenty of inventory.”"
"The gulf between a buoyant Wall Street and withering Main Street, which has perplexed many investors for more than a month, was widened further on Friday by a rally in stocks despite the biggest decline in US payrolls on record."
"The benchmark S&P 500 index climbed 1.7 per cent, back to levels last seen in September, months before coronavirus infections had first been identified."
"The technology-heavy Nasdaq Composite, which was up 1.6 per cent, had already erased its losses for this year and is within striking distance of its all-time high."
"The two indices ended the week up 3.5 per cent and 6 per cent, respectively."
Those gains came in the week government data confirmed more than 20m Americans were cut from payrolls last month and household names in the retail sector filed for bankruptcy.
"“Stocks have decoupled from the economy,” Kristina Hooper, chief global market strategist at Invesco, said."
"Investors have pointed repeatedly to one force that has driven global asset prices higher: swift actions from the US Federal Reserve, the European Central Bank and the Bank of Japan."
"It has been enough, at least for now, to outweigh the economic toll since business activity in the developed world ground to a halt."
"“The Fed has really altered the landscape for capital markets,” Ms Hooper said."
"“By providing such extraordinary and somewhat experimental monetary policy, it has altered risk and reward profiles for asset classes.”"
"The Fed alone has snapped up roughly $1.5tn of Treasuries over the past two months, having committed to buying an unlimited quantity of government securities."
"Beyond its historic asset purchase programmes and slashing interest rates close to zero, the US central bank has also rolled out emergency measures to shore up the markets for commercial paper, municipal debt and corporate credit, among others."
"That intervention has helped to stabilise debt markets, allowing some companies to access much-needed financing."
"Those which have, including the likes of Walt Disney, Coca-Cola and Apple, are better insulated to withstand the shocks from the pandemic than small and midsized businesses, which together cut 11m jobs in April, according to the payroll processor ADP."
"Large companies, particularly those in the technology sector, have come to dominate stock indices."
"Markets around the world have rebounded at a historic pace in recent weeks, with MSCI’s measure of global equities rallying by a quarter in just 34 trading days since reaching a bear market trough on March 23."
But the benchmark is still down 15 per cent from the end of 2019.
"Investors’ confidence had been bolstered by a “significantly improved” outlook on the trajectory of Covid-19 and governments’ abilities to begin reopening their economies, said Marko Kolanovic, head of quantitative and derivatives research at JPMorgan."
"“We saw an earlier-than-expected apex and lower peak of hospital resource use, broader-than-expected spread of the virus, and estimate a lower mortality rate than consensus models,” he said."
"“This means economic activity could pick up sooner than most expected, and any potential future virus waves are likely to be less severe.”"
"Mr Kolanovic said that while the collapse in economic activity brought on by lockdowns was unprecedented, “so too is the global policy response to cushion the impact and support a recovery as containment measures are relaxed”."
"Despite the enormous efforts undertaken by the Fed and US legislators, who have passed a series of historic relief packages in quick succession since March, some investors fear the growing economic costs associated with locking down states and cities across the country to stop the spread of coronavirus."
"“You can hit the off switch on the economy for a few months, but you can’t leave it in that position,” said James Paulsen, chief investment strategist at the Leuthold Group."
"“The biggest risk that I see is when you ultimately turn it back on, there won’t be anything to restart.”"
"In April, employment fell sharply across most sectors of the economy, with large declines in leisure and hospitality, education and manufacturing."
But the declines were widely expected by Wall Street.
Bret Barker of asset manager
TCW noted that the number of newly unemployed Americans was so large it was simply staggering.
"“When you see 30m unemployed, how do you differentiate that from 17m?”"
"Chris Rupkey, an economist with MUFG in New York, added that the market saw one silver lining in the figures released on Friday, which followed dozens of reports showing a collapse in activity."
"“The economy cannot possibly get any worse than it is right now,” he said."
“Joblessness can only diminish from this point forward as many states start reopening.”
"Tech stocks helped lead Wall Street higher on Thursday and sent the Nasdaq into positive territory for the year, even as sliding US Treasury yields indicated the depth of concern about the economy."
"The Nasdaq Composite index closed up 1.4 per cent, a shade above its level at New Year and underlining how the resilience of the technology sector in particular has helped equity markets claw back a lot of their coronavirus-related losses."
"The S&P 500 rose 1.2 per cent, with its communication services sector — which includes Facebook and Google’s parent company, Alphabet — up 2 per cent."
"The Philadelphia semiconductor index, which tracks 30 chipmaker shares, posted its fourth consecutive gain of at least 1 per cent."
"“While the economic data will continue to post rolling negative reports over the next several weeks, we see some hints of positive data supporting the recent market reversal,” said Tom Stringfellow, chief investment officer at Frost Investment Advisors."
"“Case in point: although recent consumption was negative, spending was positive across certain product lines . . . "
"and distribution channels,” including tech and ecommerce"
", he said."
The advances came as investors tracked the lifting of lockdowns that have paralysed economic activity across the globe.
"“The strongest economies are starting to emerge from lockdown and that’s a big positive,” said Fabiana Fedeli, global head of fundamental equities at Robeco, adding that investors have started scouring the market for “laggards which are slightly wounded but not mortally wounded”."
"Equity investors took another set of hefty US jobless claims in their stride, focusing on the slowing trend of furloughs and lay-offs."
"A total of 3.2m Americans filed for unemployment benefits last week, down from 3.9m a week earlier, bringing the tally for the past seven weeks to more than 33m."
The Treasury market signalled that the economic damage will necessitate very low interest rates for a long time.
"The two-year yield hit a record low of 0.129 per cent, down 0.05 percentage points, and the five-year note hit 0.293, also a record low, down 0.08 percentage points."
The yield on the benchmark 10-year Treasury note fell 0.09 percentage points to 0.63 per cent.
Oil prices reversed gains to settle lower.
"West Texas Intermediate, the US marker, was down 1.8 per cent at $23.55 a barrel, while global benchmark Brent crude fell 0.9 per cent to $29.46 a barrel."
"“Given the severity of the current market situation and significant production curtailments announced already since April, shale producers are not relying on natural decline but are rather choosing more drastic methods to reduce their output substantially and fast,” said Veronika Akulinitseva, vice-president of North American shale and upstream at Rystad Energy."
"In Europe, the region-wide Stoxx Europe 600 equity benchmark rose 1.1 per cent while Frankfurt’s Xetra Dax gained 1.4 per cent."
London’s FTSE 100 climbed 1.4 per cent after the Bank of England announced its decision to hold interest rates steady.
The pound reversed a decline against the dollar to be up 0.1 per cent during the US session.
"The Turkish lira weakened, hitting an all-time low after Ankara announced a crackdown on “manipulation” by foreign banks based in London."
"Earlier on Thursday, Chinese trade data showed a surprise uptick in exports, which rose 3.5 per cent in April compared with the same month a year ago."
Economists had expected a fall of almost 16 per cent.
"A private survey of Chinese business activity, however, underscored weakness in the country’s economy as its services sector contracted for a third consecutive month in April because of the pandemic."
The Caixin-Markit services purchasing managers’ index also showed the second-sharpest fall in export orders and the fastest rate of job shedding on record for China’s services industry.
Some analysts pointed out that the extent of the Chinese economy’s recovery from the pandemic was still unclear.
"Zhong Zhengsheng, chief economist at CEBM Group, said the “second shockwave for China’s economy brought about by shrinking overseas demand should not be underestimated in the second quarter”."
China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks closed down 0.3 per cent.
"Hong Kong’s Hang Seng slipped 0.7 per cent, while Japan’s Topix benchmark fell 0.3 per cent and Australia’s S&P/ASX 200 dipped 0.4 per cent."
US stocks staged a comeback on Monday despite tensions between Washington and Beijing resurfacing and traders following famed investor Warren Buffett in ditching airlines shares.
"The S&P 500 pared back earlier losses and rose 0.4 per cent, while the tech-heavy Nasdaq Composite closed up 1.2 per cent."
Their rebound followed weakness in Asian and European stocks.
The latest sharp sell-off in US airlines was triggered Mr Buffett
’s admission over the weekend that Berkshire Hathaway had dumped $6bn of investments in the sector.
"The industry would be substantially changed by the coronavirus pandemic, he said on Saturday."
"Shares in the four largest US carriers, United, American, Delta and Southwest, all closed down at least 5 per cent, though off their worst levels."
"By the end of Monday, traders had also worked through renewed tension between the US and China, including claims reiterated on Sunday by Mike Pompeo, US secretary of state, linking the coronavirus outbreak to a laboratory in Wuhan."
Beijing has denied the allegations.
"“Global equities have fallen back in recent days and could come under more pressure in the near-term if tensions between the US and China continue to rise,” Capital Economics analysts wrote in a note to clients."
"“However, the latest flare-up between them does not alter our broader view that most equity markets have further to rise this year.”"
"In Europe, the benchmark Stoxx 600, which tracks the region’s largest companies, closed down by 2.7 per cent."
"The losses were sharpest in continental Europe, where markets had missed out on Friday’s sell-off because of a public holiday."
"In Frankfurt, the Dax fell 3.6 per cent, while the CAC 40 in Paris was 4.4 per cent lower."
"London’s FTSE 100, which had fallen more than 2 per cent in the previous session, slipped a further 0.2 per cent."
"Jeffrey Kleintop, chief global investment strategist at Charles Schwab, said there was “genuine concern” among investors about souring relations between the world’s two largest superpowers, adding that it creates “further vulnerability” to an economy that is already on shaky footing."
"“We don’t know what the recovery is going to look like,” he said."
"“If the recovery takes longer than currently expected and if we get another surge in virus cases, stocks are headed back to their lows.”"
"Kit Juckes, a strategist at Société Générale, added: “The last thing we need is more trade war.”"
Strategists at Bank of America said their discussions with clients had revealed “a fairly unanimous view that the US-China relationship would worsen moving ahead”.
The Wall Street bank said the biggest risk was the sustainability of the “phase one” trade deal signed in January after months of negotiations.
The re-emergence of US-China trade tensions also weighed on the price of industrial metals.
"Copper extended its decline from its late-April high of $5,250 a tonne, trading as low as $5,060 on Monday."
"Aluminium dropped 0.7 per cent to $1,487."
Weak manufacturing data and the absence of Chinese buyers because of a public holiday added further pressure on the sector.
"“As the global economy looks to escape its current lockdown, May is likely to be a test month and for that reason risk appetite is likely to remain muted at best,” said Alastair Munro, a metals trader at brokerage Marex Spectron."
Asian stocks also dropped on Monday.
Hong Kong’s benchmark Hang Seng fell 4.2 per cent while South Korea
Kospi slid 2.9 per cent.
Markets in Japan and mainland China were shut for holidays.
"Meanwhile, oil benchmarks shrugged off persistent worries about oversupply and inadequate storage."
"West Texas Intermediate, the US marker, rose 5 per cent to $20.75 a barrel while Brent crude, the international benchmark, ticked higher by 4.4 per cent to $27.61."
US oil prices last month collapsed into negative territory for the first time as the rising cost of increasingly scarce storage pushed producers to pay buyers to take the product off their hands.
"But signs of risk aversion were still prevalent on Monday, with a $500m oil exchange traded fund in Hong Kong saying that its broker had blocked it from increasing its holdings of crude oil futures."
"Analysts at Citi warned that the “worst is likely yet to come, given signs of global storage reaching tank tops even as a demand recovery starts”."
"US stocks climbed on Wednesday as investors focused on positive data from a trial of a potential coronavirus treatment, rather than worse-than-feared US gross domestic product figures or the latest pronouncements from the Federal Reserve."
"Gilead Sciences, the California-based biotech company, said in a pre-market update that its potential coronavirus drug remdesivir had produced positive results in a US study."
"The S&P 500 closed 2.7 per cent higher, while the tech-weighted Nasdaq rose 3.6 per cent."
Shares in Gilead advanced more than 5 per cent.
"“The data suggest remdesivir is likely approvable and should have a role in certain corona subpopulations,” said Brian Abrahams, senior biotech analyst at RBC Capital Markets."
But the Gilead evidence is far from conclusive — and the same drug was unsuccessful in another trial in China.
Global equity markets have repeatedly swung around on news about remdesivir trials.
"Earlier this month, they jumped after a report suggested the drug had shown positive results in one study."
The accidental early publication of results from the China trial the following week suggested the drug had had no effect on patients.
"On a day that should help investors better gauge the impact of the pandemic, data released before the bell showed US growth contracted in the first quarter at the fastest rate since 2008."
"At the conclusion of its two-day policy meeting, the Federal Reserve kept interest rates near zero and pledged to take additional measures if needed, citing the “tremendous human and economic hardship” caused by the coronavirus pandemic."
"“Looking ahead, we believe economic recovery remains contingent upon a peak in the infection rate, and in the long term, a vaccine,” said Richard Flynn, managing director at Charles Schwab."
"“Until then, any further action by the Fed will only provide short-term relief and will need to be revisited on an ongoing basis to support the ever-evolving needs of the US economy.”"
"The US dollar index, which tracks the greenback against global peers, was down 0.3 per cent."
The yield on the benchmark 10-year Treasury note was close to flat at 0.62 per cent.
"In Europe, the Stoxx 600 rose 1.8 per cent, taking the benchmark’s rise this week to 5 per cent as some countries across the continent pushed ahead with plans to reopen after weeks of lockdowns."
"Switzerland announced on Wednesday that its restaurants and cafés would reopen on May 11, making the alpine state the first in Europe to allow its hospitality industry to resume widespread trading."
Oil prices rebounded on hopes that a glut in global crude markets was easing and the reopening of big economies would help fuel a rise in demand.
"The market has been rocked by sharp price swings in recent days, with traders concerned a drop in demand caused by the coronavirus pandemic would lead to storage problems for a sector contending with an oversupply of crude."
"Supply worries were eased by overnight figures from the American Petroleum Institute, an industry group, which reported that US oil inventories increased by fewer than 10m barrels in the week ending April 24."
Analysts polled by Bloomberg had forecast a rise of 12m barrels.
"Oil prices rose further on Wednesday morning in New York after US government data also showed a smaller rise in stockpiles than forecast, while domestic production slowed."
"West Texas Intermediate, the US crude oil benchmark, climbed as high as $16.78 a barrel and settled at $15.35, up more than 24 per cent."
"Brent crude, the international marker that has also been pummelled in recent weeks, was up more than 10 per cent at $22.54 a barrel."
"Analysts at UBS warned that the possibility of WTI prices returning to sub-zero levels next month could not be ruled out, however, as traders look to offload futures contracts for June delivery of crude."
"In the bond market, the Italian government’s borrowing costs rose after Fitch downgraded the country’s credit rating to a single notch above “junk”, in an unscheduled update."
"Gains across big stock markets in Asia were led by Australia’s S&P/ASX 200, which added 1 per cent."
"The positive session on Wednesday pushed the MSCI Asia Pacific index to a level up 20 per cent from its recent lows, meeting the technical definition of a bull market."
Wall Street erased earlier gains after a potential antiviral drug for coronavirus disappointed in its first randomised clinical trial.
"The S&P 500 closed 0.1 per cent in the red on Thursday, having jumped as much as 1.6 per cent in the morning despite another 4.4m Americans filing for first-time unemployment benefits last week."
"Remdesivir, a drug developed by California-based Gilead Sciences, did not improve patients’ condition, according to draft documents published accidentally by the World Health Organisation and seen by the Financial Times."
Gilead warned that the draft included “inappropriate characterisations of the study”.
Shares in Gilead closed down 4.3 per cent.
"Since the market nadir in late March, investors have been looking past mounting unemployment in the US to the prospects for a gradual reopening of the economy."
"The latest claims figures were broadly in line with expectations, and represented a slowdown from the previous week’s 5.2m."
More than 26m Americans have now filed for jobless claims since the outbreak began in mid-March.
"“In spite of week five of employment Armageddon, markets continue to look beyond the economic damage that is being incurred,” said Ronald Temple, head of US equity at Lazard Asset Management."
“Monetary and fiscal stimulus have put a floor under the economy.
"However, the unprecedented disruption to business and household finances inflicted by Covid-19 will leave lasting scars even after testing, therapeutics and a vaccine are widely available.”"
"Wall Street was buoyed by a rally in oil prices, which rebounded from multi-decade lows as renewed tensions in the Middle East and optimism over supply cuts offered some respite to a market battered by a collapse in crude demand due to coronavirus."
"The energy sector was the leading performer in the S&P 500 on Thursday, pushing its gains over the past two sessions to 7 per cent."
Oil plunged to record lows in recent days on concerns that there is not enough global capacity to store the growing supply glut.
"Prices for the US benchmark turned negative for the first time on Monday, meaning producers were forced to pay buyers to take oil off their hands."
"Brent crude built on the previous session’s gains, adding 4.7 per cent to $21.33 a barrel."
"That left the international benchmark $5 off its lows of the previous day, when it hit its weakest level since 1999."
US marker West Texas Intermediate rose 19.7 per cent to settle at $16.50 a barrel.
Analysts attributed the rise in part to Donald Trump readying US warships to attack any Iranian vessels in the Gulf if they posed a threat.
The US president said in a tweet on Wednesday that he had “instructed the United States Navy to shoot down and destroy any and all Iranian gunboats if they harass our ships at sea”.
"But with the market heavily oversupplied, Brent crude remains 24 per cent down this week and well off highs of $60 a barrel at the beginning of the year."
Analysts warned that any lift in prices triggered by the president’s sabre-rattling could be shortlived.
"“The idea of tensions in the Gulf sustainably pushing up prices is a little difficult to grasp at this stage,” said Paul Donovan, chief economist at UBS Global Wealth Management."
"“In a world awash with oil and with global supply significantly exceeding global demand, President Trump’s aggressive attitude is not likely to change the fundamentals of the oil market in the near term.”"
"Crude output has remained robust despite a collapse in global demand of up to a third, which has left the market massively oversupplied and storage facilities on the brink of capacity."
"There is, however, optimism that forthcoming production curbs will help to ease the oversupply."
"A record output cut of 9.7m barrels a day, or roughly 10 per cent of global supply, by Opec and its allies is set to take effect from May 1 — though market participants worry this is not enough to offset the collapse in consumption."
Analysts at JBC Energy said the latest gains in the oil price suggested the market anticipated further reductions could be on the way.
"But as global lockdowns suppress demand and inventories swell, there is growing pressure on producers to do more."
Storage at the key US delivery point at Cushing
", Oklahoma is just weeks away from filling up."
"European stocks climbed higher, with the continent-wide Stoxx 600 index closing up 0.9 per cent, while London’s FTSE 100 and Frankfurt"
Dax each rose 1 per cent.
The euro fell 0.4 per cent against the dollar to $1.08 as EU leaders agreed to work on creating a “recovery fund” to rebuild Europe’s economy.
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Stocks on Wall Street advanced on Thursday in a bumpy trading session after economic data showed another steep jump in US unemployment claims and
Goldman Sachs warned that equity markets had rallied “too far too fast”.
"The benchmark S&P 500 closed 0.6 per cent higher, reversing losses from earlier in the day, as shares of some of the largest companies in the index, including Amazon and Microsoft, climbed."
The technology-heavy Nasdaq Composite was up 1.7 per cent.
"The gains followed figures that showed 5.2m first-time jobless claims were filed last week, down from the 6.6m submitted the week before, lifting the cumulative total since the March lockdowns began to 22m."
"Seema Shah, chief strategist at Principal Global Investors, said that, while the rise was “astounding”, the figures were in line with expectations."
A slowdown in infection rates and sweeping monetary and fiscal intervention have caused global stocks to bounce back after lockdowns sent them plummeting in February.
The S&P 500 is up more than 25 per cent since its mid-March nadir.
"Analysts are wary about whether the recovery can be sustained, however."
"“It’s clear that the worst is yet to come,” said Win Thin, a strategist at Brown Brothers Harriman."
"“This rally in equity markets is probably too far too fast, and there are probably still downside risks from here,” said Peter Oppenheimer, chief global equity strategist at Goldman Sachs."
“But we will see a strong recovery in the economy starting in the second half of this year and that will generate a reasonable recovery in risk assets.”
There were modest rises in Europe following signs that lockdown restrictions were easing in the region after Germany on Wednesday joined a list of countries that have announced plans to relax measures.
Both Frankfurt’s Xetra Dax and Paris
"’s CAC 40 rose 0.2 per cent, while the continent-wide Stoxx 600 gained 0.6 per cent."
"Lee Hardman, currency analyst at MUFG, said the German announcement provided a “small chink of light” amid some otherwise bleak news."
But he cautioned that the return to normality will take time.
"“Economic activity is unlikely to pick up more notably until later this year in the best-case scenario,” he said."
Concerns about debt levels in Europe also linger.
"Eric Stein, a portfolio manager at Eaton Vance, said tensions in the region about debt and disagreement about the best way to deal with the impact of coronavirus could dent European assets."
"“The breakdown premium is not yet priced in,” Mr Stein said."
A more pessimistic sentiment hung over the Asian trading day after the IMF warned that growth in the region would grin to a halt for the first time in six decades because of coronavirus.
Japan’s benchmark Topix index fell 0.8 per cent and Hong Kong’s Hang Seng dropped 0.6 per cent.
"Strategists said investors were unlikely to find any sources for hope when China reports its first-quarter GDP figures on Friday, in what is expected to be the week’s most important economic reading."
"The data “may not provide much optimism on a quick turnround in economic recovery, since external demand is now a new threat to the Chinese economy and domestic demand is recovering only gradually”, said Tai Hui, chief market strategist for Asia at JPMorgan Asset Management."
"Brent crude settled 0.4 per cent higher at $27.82 a barrel, reversing losses earlier in the day."
"The benchmark has lost more than 10 per cent this week, with traders unconvinced by an Opec deal that promised the biggest cuts to production in history in the face of a collapse in crude demand."
The 10-year US Treasury yield was 0.02 percentage points lower at 0.62 per cent.
Additional reporting by Katie Martin in London and Eric Platt in New York
US stocks tumbled on Wednesday as corporate earnings and economic data reversed the optimistic tone of recent trading sessions by highlighting the heavy toll coronavirus was taking on businesses across the globe.
"The S&P 500 closed down 2.2 per cent, while the tech-heavy Nasdaq Composite was down 1.4 per cent."
The losses followed the release of new data illustrating the scale of the US economic downturn.
US industrial output fell by the most in more than 70 years in March while there was a record 8.7 per cent drop in retail sales.
A gauge of business activity in New York state also plunged to a record low in April.
“The reality is that it will take a while for activity to get back to normal even after the lockdown
"so it’s hard to believe that riskier assets will just keep going up,” said Ugo Lancioni, head of global currency at Neuberger Berman."
The retreat in stocks follows several positive trading sessions where equities rebounded and demand for the safe-haven dollar weakened.
"“The market overshot on the upside,” said Ron Temple, head of US equities at Lazard Asset Management."
"“It was important to have the fiscal and monetary actions, but we still don’t know how the course of this virus will play out.”"
"Equities could retest their lows of last month, he added."
"“Until we know how many people have it, where they are and how to treat them, we can’t go back to business as usual.”"
"Following the dismal economic data, demand for the dollar picked up on Wednesday, pushing the currency as much as 1 per cent higher against the euro and the pound early in the US trading day."
"Emerging market currencies such as the Russian rouble and the South African rand also weakened against the greenback, with both slipping roughly 2 per cent."
By afternoon in New York the dollar edged down from its highs but the euro was still trading 0.6 per cent weaker.
"Investors piled into US Treasuries, sending the yield on the 10-year note 0.12 percentage points lower to 0.63 per cent."
"A sharp fall in the price of oil further weighed on equities, after a new forecast for global crude demand estimated it would plunge even if lockdowns and travel bans were lifted."
"Oil majors including Total, BP and Shell each fell over 6 per cent, while Brent crude was down 5 per cent to $28.813 a barrel."
The sell-off on Wall Street mirrored a similar move in Europe.
"The Stoxx 600 index fell 3.3 per cent, alongside London’s FTSE 100, the CAC 40 in Paris and Frankfurt’s Dax."
"Asian equities also fell, following further indications the pandemic was set to hit the global economy hard, with the IMF warning of the biggest worldwide slowdown since the 1930s."
"“The publication of the IMF’s spring forecast has rather put the dampeners on the brightening market mood,” said Société Générale strategist Kit Juckes."
European and US stock markets are trading more than 20 per cent above mid-March lows on optimism that the rate of Covid-19 infections is peaking.
But this quarter’s corporate results season looks set to test the strength of the rebound.
"Goldman Sachs, Citigroup and Bank of America on Wednesday all prepared for more pain among their clients by setting aside billions of dollars to cover loan losses as they reported first-quarter numbers."
"Wall Street analysts forecast an 8 per cent decline in S&P 500 profits this year, which would mark the biggest fall since 2009, in the depths of the financial crisis."
"Meanwhile, in Europe, strategists at Barclays said “dire” results there should not be a shock to markets, but could offer a “reality check” following the recent swing higher."
"“Sharp downgrades lie ahead and unusually vague guidance due to the fluid situation won’t improve visibility,” the bank’s European equity strategists wrote in a note to clients on Wednesday."
"“Yet with central banks ‘all in’, unprecedented government bailouts and signs of a slowing outbreak, a second-half recovery seems more likely than not.”"
"Analysts expect 20 per cent falls in profit for the Stoxx Europe 600 this year, according to FactSet data."
The outlook in China has soured as well.
"Nomura analysts recently warned that markets “might still be too optimistic about the recovery in China”, as the country faces the dual challenges of falling external demand and the possibility of a second wave of coronavirus cases that could again disrupt the economy."
"US stocks rose on Tuesday, following broad gains across Europe and Asia, as investors looked past the start of a potentially bleak earnings season to focus on the prospects for a gradual reopening of virus-hit economies."
"The S&P 500 closed up 3.1 per cent, reversing the previous session’s losses and settling at its highest level in a month."
The move came despite earnings releases from US banks that showed the early damage from the coronavirus outbreak and sent their share prices lower.
"JPMorgan Chase, the US’s largest bank, said profits fell 69 per cent in the first quarter as it increased provisions for losses on loans to customers hit by the crisis."
Wells Fargo said net income fell almost 90 per cent.
"“There is a battle for the mindset of investors between two major forces,” said David Joy, chief market strategist at Ameriprise, citing sharp declines in earnings and economic growth versus unprecedented support from policymakers to offset damage from Covid-19."
"Right now, “public policy support is trumping the anticipation of negative news”, he said."
Credit markets initially rose before edging lower on Tuesday.
The high-yield corporate bond exchange traded fund known by its ticker HYG rose 0.6 per cent.
The investment-grade corporate bond fund LQD was down 0.2 per cent.
Companies continued their dash for cash.
Investment grade-rated hotel operator Marriott raised $1.6bn and the junk-rated manufacturer of aircraft parts Spirit AeroSystems raised $1.2bn from bond investors.
Typical safe havens performed well.
"The gold price rallied roughly 1 per cent to $1,728 a troy ounce, its highest level since 2012."
"Meanwhile, the yield on 10-year US Treasuries fell 0.02 percentage points to 0.75 per cent, indicating a rise in price."
"According to Lee Ferridge, head of macro strategy for North America at State Street Global Markets, these havens will continue to do well, considering the vast amount of uncertainty about the economic outlook."
"“We don’t know the timing for the end of the lockdowns, what it will look like and how people will react to it,” he said."
“Markets have had a very optimistic tone over the last week or two.
I would be more on the cautious side.”
"In European equities, the Stoxx 600 index gained 1.3 per cent, while Frankfurt’s Dax 30 rose 2.3 per cent."
"London’s FTSE 100 was the only major index down, 0.2 per cent lower."
The UK government indicated there were no immediate plans to ease lockdown measures.
Chinese exports fell in March by much less than analysts had anticipated as the country ended lockdowns aimed at combating the spread of coronavirus.
China’s CSI 300 index of Shanghai and Shenzhen-listed stocks closed up 1.9 per cent.
"“While the data has not always proven reliable, it suggests that the Chinese economy is starting to stabilise faster than expected,” said Sebastien Galy, senior macro strategist at Nordea Asset Management."
Oil prices fell on Monday as concerns lingered over whether a US-backed Opec deal to cut supply would be enough to offset the global crude glut.
"Brent crude, the international benchmark, fell over 5 per cent to $30.07 a barrel while West Texas Intermediate was down more than 7 per cent at $20.65."
"The S&P 500 has recovered a good part of its losses since plunging in late February and early March, on optimism the virus was nearing its peak."
"It is still 16 per cent off its all-time high, however."
"“It is remarkable that the US is in the midst of its greatest economic crisis in nearly a century and unprecedented societal disruption while the stock market trades at the same level as it did in June 2019, just 10 months ago,” analysts at Goldman Sachs said."
Additional reporting by Joe Rennison in London
Global stocks climbed and credit markets rallied into the Easter long weekend after the Federal Reserve unleashed new stimulus to prop up the economy.
"The measures by the US central bank, which said it would provide an additional $2.3tn in loans to shore up the economy during the coronavirus pandemic, included a hotly anticipated move to back the $1.2tn junk bond market where lower-rated companies secure funding."
"The S&P 500 index, which has advanced 25 per cent from its March lows, closed up 1.4 per cent, led by gains in bank and real estate stocks."
"The holiday-shortened week was the index’s best since 1974, having risen 12 per cent over the four sessions."
"The largest high-yield bond exchange traded fund — known by its ticker HYG — soared more than 6 per cent on Thursday, its biggest one-day gain since the financial crisis after the Fed indicated it could start buying its shares."
"The junk bond market had trailed the rebound seen across global equity bourses over the past month, as the first measures introduced by US and European policymakers centred on purchases of higher-grade debt."
"A barometer of higher quality investment-grade corporate bonds in the US, the ETF called LQD, rose more than 4 per cent on Thursday."
"Municipal bonds were also in demand, following the Fed’s decision to buy up to $500bn of short-term notes directly from US states, as well as select counties and cities."
"Yields on 30-year municipal debt fell 0.08 percentage points to 2.03 per cent, while three-month muni bond yields slipped 0.08 percentage points to 0.91 per cent."
Yields go down when bond prices go up.
"The Fed fired its new bazookas at the same time as the US labour department released data showing that 6.6m Americans filed new unemployment claims in the week ended April 4, as the economy reeled from the impact of lockdowns."
"Jerome Powell, Fed chairman, said the central bank would use its powers “forcefully, proactively and aggressively” until the economy recovered."
"The latest jobless claims “emphasise how important it is that small and midsized businesses feel the benefits of Fed policy which, typically, has only tended to reach the larger-sized businesses”, said Seema Shah, chief strategist at Principal Global Investors."
"Separately, oil prices swung wildly as traders monitored developments from a meeting between Saudi Arabia and Russia, at which they agreed cuts of 10m barrels a day."
"Brent crude, the international benchmark, was around 4 per cent lower at $31.48 a barrel after earlier leaping as much as 10 per cent."
Traders worried that the measures may not be enough to support prices in an industry grappling with a sharp fall off in demand since the coronavirus outbreak began.
"The global number of new daily cases of Covid-19 held steady on Wednesday as 84,835 people were confirmed to have the virus."
"New daily cases in the US have remained around 30,000 for the past seven days, fuelling hopes that the spread of the virus is starting to plateau."
Markets had been largely positive during the European and Asia-Pacific trading sessions on Thursday.
London’s FTSE 100 index closed 2.9 per cent higher.
"The pan-European Stoxx 600 advanced 1.6 per cent, to trade about 23 per cent above its mid-March lows."
"In Hong Kong the Hang Seng rose 1.4 per cent, while Sydney’s S&P/ASX 200 index added 3.5 per cent and South Korea"
Kospi was up 1.6 per cent.
"Japan’s Topix dropped 0.6 per cent, ending a three-day run of gains."
"Richard McGuire, a rates strategist at Rabobank, urged caution."
"“Though the market is desperately trying to embrace the positive sentiment associated with a flattening Covid-curve, the reality is that the numbers are incredibly mixed and difficult to gauge as regards any firm and lasting improvement,” he said."
"The rally in stocks continued in Asia on Thursday morning, after US stocks closed higher amid optimism that coronavirus infections in the country could be close to peaking."
"Asia-Pacific stocks were broadly higher, with South Korea"
’s Kospi up 1.6 per cent and S&P/ASX gaining 2.2 per cent in Australia in morning trading.
Topix was down 0.4 per cent.
The moves came as US stock indices extended their rally on Wednesday.
"The benchmark S&P 500 closed 3.4 per cent higher, despite the weaker earlier performance of European stocks, which wavered after eurozone finance ministers failed to reach a deal on a common response to the pandemic."
The tech-heavy Nasdaq Composite was up 2.6 per cent.
"US virus cases increased 8.1 per cent on Tuesday, marking a fifth straight day of slower growth."
"The absolute number of new cases rose by almost 30,000, but some analysts hoped Wednesday’s tally could be the high-water mark."
"“A week from now, we think confirmed-case growth will be about 26,000 per day [and] in two weeks’ time we expect consistent sub-20,000 and falling,” said Ian Shepherdson, chief economist at Pantheon Economics."
"Renewed hopes for oil production cuts helped fuel the rally, with a late surge in crude prices driving gains in energy shares."
There was also support from the release of the Federal Reserve’s minutes from two emergency meetings in March.
The minutes showed most members favoured leaving interest rates near zero “until policymakers were confident that the economy had weathered recent events”.
"Policymakers and investors have been closely scrutinising credit markets, hopeful for signs that businesses most in need of cash are once again able to borrow."
"While investment grade companies have issued debt in record amounts in the past month, only a handful of lower-rated groups have tapped junk bond markets since they went into a deep freeze in early March."
Investors demonstrated appetite for junk debt on Wednesday.
"The largest high-yield bond exchange traded fund, known by its ticker HYG, was up 2.6 per cent."
Junk-rated Ferrellgas raised $575m in a bond issue on Wednesday afternoon at an interest rate of 10 per cent.
"Earlier this week, casino operator Wynn Resorts and cash machine manufacturer NCR together borrowed $1bn in the junk debt market."
"With its move on Wednesday, the S&P 500 has risen 23 per cent from its low on March 23, eclipsing the 20 per cent threshold that signifies a bull market."
There was a more pessimistic tone in Europe and Asia.
The Stoxx Europe 600 was nearly flat.
"In London, the FTSE 100 shed 0.5 per cent, while Paris"
CAC 40 was up 0.1 per cent and the Dax 30 in Frankfurt
was 0.2 per cent lower.
A 14-hour meeting between ministers broke up without agreement on Wednesday.
"“The impression it gives the world is that Europe is disjointed, and that will reinforce the view that the overall response will be slower and less impressive than elsewhere,” said Kit Juckes, an analyst at Société Générale."
"“And impression, as well as optics, matter.”"
Equities worldwide had gained ground earlier in the week as investors welcomed signs that sweeping restrictions on movement in the US and Europe were proving effective in slowing the spread of coronavirus.
"But optimism has not always proved resilient, with little clarity yet on how quickly those restrictions can be lifted and fears remain about the economic impact of the pandemic."
"On Wednesday, government bond prices fell moderately after gains earlier in the day The yield on US 10-year Treasuries — which moves inversely to price — was up 0.03 percentage points at 0.764 per cent."
Oil traded higher as the market weighed the prospect of a deal later this week between Saudi Arabia and Russia that would curb production and underpin the market.
"Four dozen House Republicans, in a letter to crown prince Mohammed bin Salman on Wednesday, said they would support “any reciprocal responses that the US government deems appropriate” if Saudi Arabia “fails to act fairly to reverse this manufactured energy crisis”."
"Brent crude, the international oil benchmark, climbed to $33.59 per barrel in post-settlement trade, up 5.4 per cent."
G20 oil ministers are set to meet on Friday to try to find measures to support the global industry.
"Before that, Saudi Arabia and Russia are scheduled to meet on Thursday to address a feud over production that has flooded global markets with supply and halved the price of oil this year."
"“We’re obviously set up for the next couple of days with very high expectations,” said Robert Rennie, global head of market strategy at Westpac."
"Reporting by Myles McCormick in London, Thomas Hale, Alice Woodhouse and Daniel Shane in Hong Kong and Matthew Rocco and Eric Platt in New York"
Wall Street closed lower to cap a negative week for global stock markets as evidence of the heavy economic toll inflicted by the coronavirus pandemic continued to mount.
The benchmark S&P 500 fell 1.5 per cent on Friday after the US recorded its largest pace of job losses since the financial crisis and reports out of Europe showed a sharp contraction in the service sector.
"The latest decline for the US blue-chip index, which suffered a loss of more than 2 per cent for the week as a whole, was mirrored by other closely followed indices including the technology-heavy Nasdaq Composite and the Dow Jones Industrial Average."
"But the dire economic data reported, including a sharp contraction in the US labour force, did not send equity markets back towards the lows seen in mid-March, when more than a third of the value of global stock indices had been wiped out."
"Economists and investors have largely factored in a painful recession to their models, and are now waiting for any clues as to when countries will end social distancing policies and open for business."
"“What we need to see next is how does the government help the efficient reopening of the economy,” said Bob Miller, the head of Americas fundamental fixed income at BlackRock."
"“What we don’t want to see, what would be truly disruptive to markets, is if we start to reopen and we can’t maintain the opening.”"
"In the US, the grim economic figures included 701,000 job losses in the March payrolls report, which ended a 113-month streak of gains."
"The rise in the unemployment rate to 4.4 per cent was also stark, but both numbers reflected only the early part of the month."
"Nearly 10m Americans filed for jobless benefits in the last two weeks of the month, after states mandated business closures."
"“These were numbers that everyone feared we might see but hoped we wouldn’t get yet,” said Bob Michele, JPMorgan Asset Management"
’s global head of fixed income.
“Looking at the weekly [jobless] claims data you knew the speed of lay-offs was happening at a mind numbing rate.”
"Elsewhere, surveys of business conditions were equally bleak, showing the services sector in the eurozone and parts of Asia had collapsed at an unprecedented pace in March."
"“It’s clear that the economy is contracting more quickly than ever before during peacetime,” said Jack Allen-Reynolds, an economist at Capital Economics."
"London’s FTSE 100 fell 1.2 per cent on Friday, taking its losses for the week to 1.7 per cent, and the British pound slid 1 per cent against the US dollar."
"The benchmark Stoxx Europe 600, which counts some of Europe’s largest publicly traded groups, fell less than 1 per cent for the week."
"In Asia, Hong Kong’s Hang Seng ended 1.1 per cent lower for the five trading days."
"Although they ground lower through the day, stocks had been supported earlier on Friday by a sharp rise in the price of oil, which has rallied on hopes of a ceasefire in the price war between Saudi Arabia and Russia."
"Brent crude settled up 14 per cent at $34.11 per barrel and WTI, the US oil marker, was at $28.34 per barrel, up 12 per cent — both building on rises of more than 20 per cent on Thursday."
"Robert Rennie, global head of market strategy at Westpac, said he was sceptical that the kind of oil production cuts being talked about by US President Donald Trump — up to 15m barrels per day — were realistic."
"“It’s difficult to see the kind of numbers that Trump was suggesting in terms of crude production cuts being easily achievable,” he said."
Global equity markets sold off heavily in the first trading session of the new quarter as investors digested a series of grim predictions about the human and economic toll of the coronavirus pandemic.
"US stocks closed more than 4 per cent lower on Wednesday and debt markets signalled renewed concern about the creditworthiness of corporate and local government borrowers, despite the passage of a $2tn economic stimulus that had encouraged investors in the final days of March."
"The flight from risk assets followed the worst quarter for markets since the 2008 financial crisis and came after President Donald Trump warned late on Tuesday that up to 240,000 people could die in the US from Covid-19. Data on the number of Americans claiming unemployment benefit, due on Thursday, are expected to show a figure even worse than last week’s"
"The S&P 500 closed down 4.4 per cent, with banks and airlines among those hardest hit."
The tech-heavy Nasdaq Composite also fell 4.4 per cent and the Russell 2000 index of small-cap stocks — which are more exposed than larger companies to the domestic US economy — was more than 7 per cent lower.
"“Every time you get a data point suggesting the pandemic will be longer, people flock back to defensive stocks,” said Jim Tierney, the chief investment officer of concentrated US growth at AllianceBernstein."
“The sentiment change out of the White House briefing even from just four or five days ago is very noticeable.”
The yield on 10-year US Treasuries slipped 0.05 percentage points to 0.62 per cent.
Yields fall as bond prices rise.
"Earlier on Wednesday, European and most Asian equity markets had also closed lower."
’s CAC 40 fell 4.3 per cent and London’s
FTSE 100 was down 3.8 per cent.
The UK’s biggest banks sold off after saying they would scrap billions of pounds worth of dividends under pressure from the country’s top financial regulator.
Shares in HSBC were down more than 9 per cent on Wednesday.
Barclays and Lloyds Banking Group were both down nearly 12 per cent.
"US banks followed their European counterparts lower, with the KBW bank index, one of the most widely tracked measures of the performance of the US banking sector, down 6.9 per cent."
Citigroup shares were down 8.6 per cent.
Sentiment on banks has soured as low interest rates put pressure on net interest margins and investors worry about defaults on mortgages and loans.
"Bond markets reflected the rising concern about the financial health of borrowers, with heavy selling of junk bonds on Wednesday."
"Shares in a popular high-yield exchange-traded fund, HYG, were down almost 3 per cent."
"Volatility also returned to the $4tn municipal debt market, where US states and cities raise cash."
"Yields on highly rated debt maturing in 10 years soared 30 basis points, while 30-year debt saw yields climb 50bp — swings that are uncommon for a typically staid market viewed by investors as a safe haven, at least until coronavirus put local governments on the front line of an expensive health emergency."
"Global markets on Wednesday also had to digest gloomy surveys of business executives in the eurozone, Japan and South Korea which reported a marked deterioration in the factory sector in March."
"Robert Carnell, Asia-Pacific head of research at ING, said Wednesday’s Asia PMI readings confirmed a “grim picture” for manufacturers."
"He added that “the prospect for most economies’ manufacturing sectors as they head into the second quarter is for even more weakness, exacerbated where lockdown measures are newly enacted or tightened”."
Japan’s Nikkei 225 closed down 4.5 per cent and South Korea’s
Kospi was off 3.9 per cent.
China’s CSI 300 slipped 0.3 per cent.
Global equities had rallied over the past week as investors rebalanced their portfolios after a painful month of trading.
"However, many have remained on the sidelines, shifting billions of dollars of capital to money market funds to avoid the broad stock market ructions that have cut the value of global indices by nearly a quarter this year."
"“Investors and institutions have decided that holding cash is a better choice at the moment due to liquidity concerns,” said Randy Frederick, vice-president of trading and derivatives at Charles Schwab."
"“I believe we have clearly transitioned from a period where ‘cash is trash’ to a period where ‘cash in king’,” he added."
"US stocks had their best day since the financial crisis more than a decade ago on Tuesday, on signs that Congress was closing in on an agreement for a potent fiscal stimulus package to alleviate the economic and financial market effects of the coronavirus."
"The US benchmark S&P 500 closed up 9.4 per cent at its high for the day, anticipating a deal to pour nearly $2tn into the US economy in the form of bailouts for stricken companies and payments to individuals."
Nasdaq was up 8 per cent.
An 11.4 per cent increase in the Dow Jones Industrial Average of US blue-chip stocks was its biggest since 1933 during the Great Depression.
"“The market is definitely excited by the prospects of the historic $2tn virus relief bill,” said Stephen Aniston, president of Vixcontango.com, a volatility trading analytics provider."
“I can hardly think of other legislation that will be as well received and as popular as this one.
This is a very balanced package that will make both Republicans and Democrats happy as well as the average American.”
"Nancy Pelosi, Democratic speaker of the House of Representatives, told CNBC on Tuesday morning that there was “real optimism” that an agreement would be reached “in the next few hours”."
"Less than an hour later, Mitch McConnell, the Senate’s top Republican, said negotiators were “very close” to a deal."
The S&P 500 remains down more than 27 per cent from its peak on February 19.
"European bourses also jumped on Tuesday, with the continent’s Stoxx 600 index up 7.5 per cent."
"FTSE 100 rose 9 per cent, while Frankfurt’s Dax gained 11 per cent."
Adding fuel to the broad-based global equities rally were the reverberations from the Federal Reserve’s additional monetary measures announced on Monday.
"The US central bank unleashed its most forceful effort to date to contain the fallout of the pandemic, including a pledge to buy US government bonds in unlimited amounts and provide a backstop to the US corporate bond market."
"Mr Aniston said “big short covering is happening” in sectors hardest hit by the outbreak such as airlines, where stock prices reversed sharply."
"A US exchange-traded fund tracking global airlines was up 19 per cent, the SPDR S&P Homebuilders ETF was up 15 per cent, a fund tracking the auto sector was 12 per cent higher and the Energy Select Sector SPDR"
ETF was up 16 per cent.
"Defensive sectors such as consumer staples and utilities lagged behind on Tuesday, while cyclicals were leading."
"The Cboe Volatility index — known as the market’s “fear gauge” — fell from elevated levels, trading around 60."
"Kit Juckes, strategist at Société Générale, said the improvement in mood followed “Herculean efforts by central banks and governments”."
"“Overall, the response is broader, and bigger than during 2008/2009 financial crisis."
"But this is more global, and more serious."
If you take a step back and look at what the Fed has done . . . 
"it’s incredible,” he said."
"The dollar, which has surged amid the crisis, weakened to provide some respite for vulnerable currencies including the British pound, which rose close to 2 per cent to $1.17."
The 10-year US Treasury yield gained 0.03 percentage points to 0.82 per cent.
"The exchange traded fund LQD, which tracks an investment-grade corporate bond index, rose about 2 per cent after jumping 7 per cent on Monday following the Fed’s intervention."
"The price of Brent crude, the international oil marker, settled 0.4 per cent higher at $27.15 a barrel."
The economic picture remains bleak across the world.
"Surveys on Tuesday showed that business activity in Europe crumbled this month, providing some of the first glimpses into the extent of the damage to the region"
’s economy caused by the pandemic.
"Analysts said the real situation was likely even worse, as more restrictive measures banning social contact came into force in most countries after the surveys were taken."
"Credit Suisse said it expected the S&P 500 to rise 20 per cent from current levels by the end of the year, but its chief US equity strategist Jonathan Golub warned there will be further pressure on stocks in the coming weeks as poor economic data tests investor confidence further."
"“For the US economy to be able to come out of the current crisis and the ongoing recession relatively unscathed, more radical policy interventions will be needed in the next few weeks,” said Anna Stupnytska, global head of macro and investment strategy at Fidelity International."
"“It’s still anyone’s guess how deep this actually is,” said Bert Colijn, a senior economist at ING."
“Perhaps most relevant is how much unemployment and bankruptcies can be avoided to determine the possible steepness of a recovery.”
"A promise of unprecedented government and corporate bond buying from the Federal Reserve helped push down US borrowing costs on Monday, but equity markets ended in the red as investors anxiously awaited the second half of the US authorities’ response to the coronavirus crisis, namely a fiscal stimulus being wrangled on Capitol Hill."
"The US equity benchmark S&P 500 closed down almost 3 per cent in New York after a roller-coaster trading session, with a similar move in the Dow Jones Industrial Average."
"The sell-off came despite the US central bank unleashing its most forceful effort to date to contain the economic and financial fallout of the pandemic, including a pledge to buy US government bonds in unlimited amounts and provide a backstop to the US corporate bond market."
"“There has been mounting fear that we would see a repeat of the political dysfunction on display during the global financial crisis,” said Kristina Hooper, chief global market strategist at Invesco."
"“And, as with the global financial crisis, the Fed has stepped in, offering enough ‘bazookas’ to soothe markets for the moment.”"
"Jeffrey Gundlach, chief executive of DoubleLine Capital, said: “Unlimited Quantitative Easing forever will have that effect, at least temporarily."
Fed blinked in response to the chorus of panic over the weekend.”
Investors had been waiting for an economic stimulus package to support the US economy during the outbreak.
"On Monday, Mitch McConnell slammed Democrats’ refusal to back Senate Republicans’ proposals for a nearly $2tn economic stimulus package."
But Democratic Senate leader Chuck Schumer insisted that negotiations were continuing and that lawmakers were “very close to reaching a deal” by the end of the day.
US Treasuries whipped around in early trading but
later the Fed’s promised buying spree appeared to be having an effect in solidifying demand.
"The yield on the benchmark 10-year note, which moves inversely to price, was roughly 0.08 percentage points lower at 0.77 per cent."
The central bank’s historic decision to buy corporate debt also helped to buoy that market.
"The exchange traded fund LQD, which tracks an investment-grade corporate bond index, jumped 7 per cent."
Markit's North American Investment Grade CDX index showed a sharp decline in perceived corporate bond default risk.
"“The Fed’s corporate credit facilities should help alleviate existing strains in the corporate market,” said Laura Lake, chief investment officer of Breckinridge Capital Advisors, which oversees $40bn in assets."
“This will also help alleviate short-term funding pressures as companies will be better able to access the debt capital markets.”
"Federal Reserve chair Jay Powell has already moved much further and faster than other policymakers did in late 2008, when Lehman Brothers’ demise was a seminal event in the financial crisis that began in the US subprime mortgage industry, spread to the credit markets, and then burnt through the world’s financial markets."
European equities bounced from lows on the Fed’s new intervention but not enough to crawl out of the red.
The Stoxx 600 was 4.3 per cent lower and the UK
FTSE 100 closed down 3.8 per cent.
"“Fundamentally what the market is looking for is a very solid fiscal response,” said Anik Sen, global head of equities for PineBridge Investments."
"“If the main issue is businesses shutting down, then monetary policy from the Fed has limited efficacy.”"
The dollar weakened against a number of major currencies.
The euro rallied against the buck and gained more than 1 per cent to trade at $1.07.
"The UK pound was down, however, to under $1.15."
"By late-afternoon, the dollar index was close to flat."
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"The latest Fed intervention followed a stream of bleak news reports over the weekend, showing the outbreak worsening in Europe and a second wave spreading in Asia."
Asia-Pacific shares fell sharply led by Australia and India as governments boosted lockdown measures against coronavirus.
"On Monday, India’s Sensex plunged 13 per cent — the worst day on record — and Australia’s S&P/ASX 200 fell 5.6 per cent."
"Elsewhere in Asia, China’s CSI 300 index dropped 3.4 per cent and Hong Kong’s Hang Seng fell 4.9 per cent."
In Japan the Topix index gained 0.7 per cent after the country returned from a three-day weekend.
Oil prices steadied.
"Brent crude, the international benchmark, settled 0.2 per cent higher at $27.03 a barrel."
"The moves herald what could be another volatile week for markets, which have been pummelled over the past month."
"“The ‘corona crisis’ has pushed the world economy into a deep recession,” said Jan Hatzius, chief US economist at Goldman Sachs, in a note to clients on Sunday."
He said the crisis — and governments’ response to it — represented a “constraint on economic activity that is unprecedented in postwar history”.
"In Italy, the centre of the outbreak in Europe, the government has ordered all businesses except those deemed essential to close, as the death toll there climbed above 4,000."
"The global tally of those infected with Covid-19 has hit 341,427, with more than 14,500 fatalities."
"Coronavirus cases in the US have reached almost 30,000 and investors said it was crucial"
Washington quickly enacted measures to cushion the blow to the world’s biggest economy.
The disease’s rapid spread has left investors desperate to quantify its economic impact.
"Michael Hood, a global strategist at JPMorgan Asset Management, forecast a quarter-on-quarter drop of 14 per cent in US gross domestic product in the first three months of the year."
Additional reporting by Leo Lewis in Tokyo
Global stocks closed higher on Tuesday after the US Federal Reserve worked to shore up corporate funding markets and governments on both sides of the Atlantic set out stimulus packages designed to counter the economic impact of the coronavirus.
"After another volatile day, the S&P 500 recovered from Monday’s sell-off to end up 6 per cent."
The Fed announced plans to enter the market for short-term company debt known as commercial paper and to provide an extra $500bn to support the overnight lending market.
European stocks also rebounded.
The UK FTSE 100 swung throughout the session but closed 3 per cent higher.
"The European composite Stoxx 600 gained 2 per cent, having lost more than a third of its value in less than a month."
The Trump administration said it was seeking support from Congress for a spending package to address the economic impact of the coronavirus with a price tag initially pitched at about $850bn.
"The UK also outlined a £330bn rescue package for business, while France promised a €45bn economic aid package as it forecast its economy would contract this year."
"The prospect of stimulus boosted long-term bond yields, including a particularly large move in the 30-year US Treasury, which jumped 0.4 percentage points to 1.68 per cent."
"The long bond “is finally joining the party,” DoubleLine Capital founder Jeffrey Gundlach said in his client webcast late on Tuesday."
"The 10-year Treasury yield was also up 0.36 percentage points, to 1.08 per cent."
"Short-term funding markets continued to show strains, however, and oil fell again, with Brent crude trading at $28.65 a barrel."
"“Actions that have taken place today are hoping to stem the risks in the future posed by slowing activity, strains on small business and employment,” said Yana Barton, a portfolio manager with Eaton Vance."
“The fear of the unknown is the biggest threat.
Cooler heads must prevail.”
Investors have warned that any market rebound would likely be shortlived without solid indications that Europe and the US were bringing the coronavirus outbreak under control.
"The health crisis has brought activity in large parts of Europe to a virtual standstill, and there are lingering questions over how effective monetary and fiscal policy can be to mitigate its effects."
"Jim Reid, a strategist at Deutsche Bank, said: “The impact of the various western world shutdowns will mean that at its peak the Covid-19 impact on the global economy will probably be worse than the peak of the financial crisis.”"
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Many global stock indices have fallen into bear markets due to concerns the coronavirus will lead to a global recession this year.
"The S&P 500 on Monday fell 12 per cent, its worst single-day performance since 1987."
Asia-Pacific markets rose on Tuesday in another volatile session.
Australia’s S&P/ASX 200 stock index jumped 5.8 per cent after plunging nearly 10 per cent a day earlier.
Topix was 2.6 per cent higher after earlier falling as much as 3 per cent.
"John Woods, Asia-Pacific chief investment officer at Credit Suisse, said despite the recent sharp losses he was still not recommending to his clients to re-enter equity markets without signs of stronger fiscal measures."
"“The knife is still falling,” he said."
"Mohammed Apabhai, head of Citi’s Asia-Pacific trading strategies group, said investors were increasingly concerned about a credit crunch in Asia’s corporate sector."
“The equity sell-off is morphing into something much more serious.
We now have three or four crises happening at the same time.”
On Monday the Bank of Japan said it would buy as much as ¥12tn per year of exchange traded funds to help stabilise markets.
"“You have got some buying in here based on the view, however unfounded, that the BoJ is going to buy big to protect the 1,200 line on the Topix [which is currently trading around 1,240]."
"I think the market is going to test a lot of these theories in coming days,” said one broker at a large domestic house."
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"The S&P 500 index of US stocks fell 12 per cent on Monday, a day after an emergency rate cut by the Federal Reserve, as the US and other countries around the world imposed stricter curbs on public activity."
"The increasingly aggressive measures to prevent the spread of coronavirus, and their deepening economic impact, sent global shares, oil prices and US government bond yields lower."
"While investors sought the safety of US Treasuries, European sovereign debt fell in price, sending yields sharply higher."
"The S&P 500, the benchmark for the US equity market, lurched lower in the final minutes of trading, eclipsing the worst performance of the pandemic and marking the biggest single-day loss since the crash of October 1987."
"The tech-heavy Nasdaq Composite had its worst day ever, down 12.3 per cent."
"The Cboe Volatility index, the market’s “fear gauge”, jumped to a record high."
“The Fed has thrown everything at this.
"If we are now facing the end of central bank action, it means we are on our own,” said Seema Shah, chief strategist at Principal Global Investors."
“There is a fear settling in the market; investors are terrified that this was all that was left.”
"The Fed cut US interest rates by a full percentage point on Sunday, restarted its programme of quantitative easing and introduced new measures to improve market liquidity."
"On Monday, the Group of Seven industrial nations followed up with a promise to do “whatever is necessary” to support the global economy through a period of intensifying disruption."
"Shortly before the market close, President Donald Trump urged people in the US against discretionary travel and gathering in groups of 10 or more."
Some US authorities went further: San Francisco told people to stay at home except for essential activities and New Jersey imposed a recommended curfew between 8pm and 5am.
"Also on Monday, France said people would be allowed to leave their homes only for essential trips, and Canada closed its borders to most foreigners."
"Joachim Fels, global economic adviser to Pimco, the asset manager, said markets were concerned about “what currently looks like an inevitable recession . "
"turning into a depression, and financial markets [going] from a drawdown to a meltdown”."
"In Europe, the UK’s FTSE 100 tumbled 4.7 per cent to its lowest level since 2011 — its year-to-date losses have now spiralled to more than 30 per cent — and the Stoxx Europe 600 index fell 4.9 per cent."
Airline stocks were especially hard hit as carriers grounded most of their fleets and took steps to conserve cash.
"British Airways parent IAG tumbled 27 per cent in the UK, while US carrier United Airlines was off 15 per cent."
"Shares in banks also came under intense pressure: Capital One, a leading US credit card issuer, was down 24 per cent; Citigroup fell 19 per cent."
Lower-rated bonds reflected the deteriorating sentiment.
"BlackRock’s flagship junk bond ETF, known widely by its ticker HYG, was down 5.5 per cent, its worst day since October 2008."
"“There is forced selling all over the place,” said Jeffrey Gundlach, chief executive at DoubleLine Capital, blaming investor redemptions and margin calls."
“The Fed is not buying stocks or junk bonds and that is where you are seeing massive pressure.”
"With the coronavirus outbreak in Europe at its most advanced in Italy, an investor focus has been that country’s government bonds."
"Spreads above German Bunds — a key measure of country risk in the eurozone — hit the highest level since June last year, with the yield on the 10-year Italian government bond up nearly 38 basis points to 2.16 per cent."
"“The idea that the European Central Bank is limited means that fiscal stimulus has to be the way to go [and] fiscal stimulus means more bond issuance,” said Andrew Brenner, head of international fixed income at National Alliance Securities, adding a prediction: “The credit quality of Europe is being strained as everything is closing and GDP will plummet 10 per cent in the short term.”"
Oil prices plunged as the pandemic started to hit demand in Europe and North America.
"Brent crude, the international marker, fell more than 10 per cent to just below $30 a barrel, breaching that level for the first time in four years."
The Fed on Sunday cut US interest rates by a full percentage point to zero and announced emergency measures including the purchase of $700bn of US Treasuries and mortgage bonds.
The Bank of Japan on Monday followed the Fed’s actions by announcing it aimed to double its purchases of exchange traded funds to ¥12tn ($112bn) a year.
"However, the central bank left its key policy rated unchanged at -0.1 per cent."
Japan’s benchmark Topix closed 2 per cent lower after the announcement.
"In other Asia-Pacific markets, Australia’s S&P/ASX 200 index was 9.7 per cent lower while Hong Kong’s Hang Seng index fell 4 per cent and China’s CSI 300 closed down 4.3 per cent."
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"Reporting by Hudson Lockett in Hong Kong, Leo Lewis in Tokyo, Katie Martin, Philip Georgiadis and David Sheppard in London, Robin Wigglesworth in Oslo and Jennifer Ablan and Colby Smith in New York"
"US and European stocks staged a powerful recovery on Friday to trim the losses from a frenetic week of trading, as governments and central banks around the world stepped up their efforts to limit the damage from the coronavirus pandemic."
"Wall Street rallied into the close, sending the S&P 500 index of US equities up 9.3 per cent, while the return of risk appetite sent the yield on the US Treasury above 1 per cent for the first time in more than a week."
Half the equity market gains came in the final half-hour of trading.
"US President Donald Trump declared a national emergency and announced measures to expand testing of Americans, along with purchases of oil for the strategic petroleum reserve and a suspension of interest payments on federal student loans."
The tech-heavy Nasdaq ended up 9.3 per cent.
The price of a barrel of Brent crude oil was up 4.6 per cent at $34.80.
"Earlier, London’s FTSE 100 closed 1.6 per cent higher, having peaked up more than 5 per cent following the steepest sell-off since the crash of 1987."
The Stoxx Europe 600 also gained 1.4 per cent following its worst single session in history.
"“The market has been volatile in ways I haven’t seen before,” said Todd Jablonski, chief investment officer of portfolio strategies for Principal Global Investors."
“The ferocity of the move is what has caught investors off guard.”
"Circuit breakers have been hit multiple times this week after both large falls and large drops, underlining the scale of the market volatility."
The Cboe volatility index — known as Wall Street’s “fear gauge” — this week jumped to its highest levels since the financial crisis.
Sentiment improved on Friday as government after government stepped in with attempts to cushion the financial and economic damage from the coronavirus outbreak.
"Germany, Europe’s biggest economy, said it was prepared to deploy unlimited cash to companies hurt by the pandemic."
The EU said it was prepared to use emergency flexibility in the bloc’s budget rules as it pledged to do “whatever is necessary” to support the economy.
The People’s Bank of China on Friday cut reserve requirements for banks in a move to ease borrowing conditions for companies that have been disrupted during the past six weeks.
"The central banks of Norway and Canada cut interest rates, while the Bank of Japan bought billions of dollars of Japanese government bonds, the Reserve Bank of Australia injected A$8.8bn (US$5.5bn) into the financial system."
"The US Federal Reserve also said on Friday it would buy $37bn of Treasuries, accelerating a plan unveiled on Thursday that included the injection of trillions of dollars of short-term loans to address disruption to the government bond market."
"The yield on the benchmark 10-year note stood at 1.01 per cent, up 21 basis points from Thursday’s level."
Yields rise when prices fall.
Securities watchdogs in Europe also moved to try to calm markets.
Italian and Spanish market regulators banned bets against 154 stocks in an attempt to lessen the tumult in their equities markets.
The short selling bans were at present in effect for Friday’s trading session only.
Economic disruption across Europe is mounting as the virus spreads.
"France has urged its citizens to avoid travel and has closed schools; Belgium will shut schools, restaurants and bars later on Friday; and in Italy, which is suffering the most severe outbreak in Europe, the 60m population has been living under lockdown for much of this week."
Markets have reflected these extraordinary circumstances.
"The Stoxx Europe 600, which tracks the region’s largest companies, has dropped more than 30 per cent in less than a month, while government bonds have rallied as investors search for safe corners of the market."
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"Markets in Asia-Pacific staged wild moves on Friday, with Sydney’s S&P/ASX 200 swinging more than 12 per cent during the day before closing 4.4 per cent higher."
Japan’s Topix index closed 5 per cent lower after earlier trading down as much as 9 per cent.
"Investors remained cautious about dipping their toes back into the market, said Masamichi Adachi, an economist at UBS in Tokyo."
One trader in the Japanese capital said: “Nobody wants to hold any positions into the weekend.”
"Elsewhere, China’s CSI 300 index of Shanghai and Shenzhen-listed stocks dropped 1.4 per cent while Hong Kong"
Hang Seng was off a similar amount.
Both indices staged sharp recoveries from earlier losses.
Additional reporting by Jim Brunsden in Brussels and Don Weinland in Beijing
US stocks fell almost 10 per cent in their worst day since the 1987 crash despite emergency actions by the Federal Reserve and the European Central Bank to mute the financial and economic damage from the coronavirus.
Markets responded violently on Thursday to Donald Trump’s
"ban on Europeans travelling to the US, announced the previous night in a White House address intended to calm anxiety over the pandemic."
"“This was the most expensive speech in history,” said Luca Paolini, chief strategist at Pictet Asset Management."
"“Investors are voting with their feet, and I can’t blame them.”"
A further leg down in the final minutes on Wall Street left the S&P 500 off 9.5 per cent.
European equities had already shed a tenth of their value.
FTSE 100 fell 11 per cent.
Thursday’s action extended the S&P 500’s losses to 26.7 per cent from its high less than a month ago.
The Fed promised midway through the trading day that it would inject trillions of dollars into the short-term funding markets
— the third time in four days that it has announced new lending — after analysts and investors said US government bond trading had  begun to seize up in the market volatility.
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The falls in Europe accelerated after the European Central Bank left interest rates on hold.
"The ECB declined to join the Fed and the Bank of England in rate cuts and although it announced a package of other measures, investors had expected a reduction of the banks’s main rate."
"The week’s intense rout suggested investors were bracing themselves for a worst-case scenario, including a global recession, the lockdown of large urban centres and a severe credit crunch, said Masanari Takada, strategist at Nomura."
"“The market has been jolted to the point of breaking,” he added."
Travel and leisure stocks came under acute pressure.
"The cruise ship operator Carnival lost nearly a third of its value, while United Airlines fell 25 per cent and British Airways owner IAG declined 11 per cent."
Giant banks were also hard hit.
"Morgan Stanley, Citigroup and Wells Fargo all lost around 15 per cent of their value."
The corporate fallout of the viral outbreak has deepened.
"UK companies including WHSmith, Go-Ahead and Travelex  warned investors about the impact of the pandemic, while Cineworld, the world’s second-biggest cinema chain, warned that, in a worst-case scenario, it would be unable to pay its debts, calling into question its ability to continue trading."
"Alicia Levine, chief market strategist for BNY Mellon Investment Management, warned that the credit market could face a further shock if investment grade companies are re-rated as junk, forcing large investors like pensions to sell their bonds."
"“This will create forced selling, exacerbating the impact to the economy.”"
"Oil prices, which  crashed at the start of this week, fell on the expectation the US travel ban would cause more pain for the travel industry."
The international benchmark Brent crude was down 7.2 per cent at $33.22 a barrel.
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Additional reporting by Richard Henderson in New York and Myles McCormick in London
US stocks staged a late rally on Tuesday as global markets stabilised from heavy losses and policymakers prepared to launch significant stimulus measures to address the coronavirus outbreak.
"The benchmark S&P 500 was in negative territory at midday, but rallied in the last two  hours to close with a 4.9 per cent gain, the most since December 2018."
"The strong showing comes after a 7.6 per cent loss on Monday, its biggest one-day plunge since the global financial crisis."
"“I think we got to levels that got oversold in equities over the past week or so,” said Erin Browne, a managing director at Pimco."
"“We saw some risk put on today, across the board."
"That said, we are still in a highly volatile environment."
We shouldn’t take today as an all-clear sign.”
"Ms Browne said discussion of various fiscal stimulus measures around the world, including in the US, is helping to support stock prices, too."
European stocks rose 4 per cent earlier in the day before dipping 1.1 per cent.
That followed a
chaotic Monday that saw a wave of selling because of the collapse of oil prices and concerns about the spread of the contagion.
The shift in sentiment comes as governments around the world prepare significant interventions to help economies cope with the anticipated disruption caused by the spread of Covid-19.
"US President Donald Trump has promised a “major” economic relief package, including a possible payroll tax cut."
"Analysts at Citigroup said that while the exact make-up and size of the package remains unclear, “the type of programmes being discussed . . . "
are macroeconomically significant”.
Italy plans to suspend mortgage payments and other household bills across the country as it enters an unprecedented lockdown.
"Earlier on Tuesday, China’s president, Xi Jinping, made his first visit to Wuhan, the city at the centre of the virus outbreak, in a signal that the Communist party believed it had brought the epidemic under control."
"Still, several analysts and investors urged caution as the virus continued to spread and its economic consequences remained difficult to quantify."
"“You’ve got a thin semblance of sanity in the market today, but we are talking very thin indeed,” said one Tokyo-based broker."
“There are some stabilisers out there — the low oil price is actually not bad for some of these big Asian economies — but there is nothing in the news that makes anything look remotely settled.”
"The ease in the sense of panic prompted a rush out of havens, which have rallied aggressively in recent weeks."
"The 10-year US Treasury yield jumped 23 basis points (0.23 percentage points) to 0.78 per cent, after having dived below the 0.5 per cent threshold for the first time on Monday."
The 30-year Treasury yield rose back above 1 per cent.
Bond prices fall as yields rise.
"Brent crude, the international oil benchmark, rebounded 10 per cent to $38 a barrel on Tuesday, while the US marker West Texas Intermediate rose to $35."
Saudi Arabia on Tuesday said it will supply the market with 12.3m barrels of oil per day next month in a severe escalation of its price war that rocked markets on Monday.
"Asian markets recovered early losses to close higher, while the yen weakened 2 per cent to ¥105.45 per dollar, past the ¥103 level that is seen as an important threshold for the currency."
"In Japan, stocks staged one of their biggest intraday recoveries in decades on Tuesday as the yen fell against the dollar and hedge funds and retail investors stampeded to cover short positions."
"After shedding almost 4 per cent of its value in a bleak morning session that defied the buoyancy of oil markets, Japan"
Topix began a sharp reversal through the afternoon to close higher.
Traders and brokers said the day’s move had clearly exposed the type of investor that had been driving moves in recent days.
“The same very fast money that was driving the market down was now very rapidly covering short positions on the dollar and Japanese equities.
"In Japan’s case, the CTAs and the leveraged exchange traded funds so loved by Japanese retail investors were in full force,” said one Tokyo based dealer, referring to commodities trading advisers, a type of hedge fund."
Additional reporting by Jennifer Ablan in New York
US stocks suffered their worst one-day fall since December 2008 and Treasury yields plummeted to record lows on Monday after a crash in the price of oil rocked financial markets already reeling from the impact of coronavirus.
"The benchmark S&P 500 index plunged 7.6 per cent, bringing its losses since February 19 to 18.9 per cent, just shy of the 20 per cent decline that traders define as a bear market."
The Dow Jones Industrial Average slipped 7.8 per cent.
Earlier Europe’s continent-wide Stoxx 600 lost 7 per cent to close in a bear market.
"Saudi Arabia’s decision to launch an oil price war sent energy stocks tumbling 20 per cent, with ExxonMobil off 12 per cent and the UK’s BP tumbling by a fifth."
Financials fell 11 per cent and funds investing in junk bonds and leveraged loans lost value as fears grew about the ability of highly leveraged energy producers to repay debts.
"“The mantra right now is you can forget about return on investment,"
it’s return of investment —
will I get my money back?
"That’s all investors care about,” added Alex Tedder, head of global equities for Schroders."
Government bonds rallied as investors anticipated more support from central banks to stave off a recession.
"The yield on the 10-year US Treasury bond tumbled to a record low of 0.318 per cent before rebounding to 0.54 per cent, as investors priced in a 75 basis-point rate cut by the Federal Reserve at its March 17-18 meeting."
"“In just over two weeks, investor sentiment has swung from complacency to panic,” said Paul O’Connor, a portfolio manager at Janus Henderson Investors."
"“What started as a virus-driven de-risking has now mutated into a broad-based, multi-asset capitulation.”"
"The day began on Wall Street with the S&P 500 falling 7 per cent shortly after the opening bell, triggering a “circuit breaker” to halt trading for the first time since 1997."
"At one point, the 30-year US Treasury yield dropped below 1 per cent, taking the entire US yield curve below that level for the first time."
"The gyrations across markets followed Saudi Arabia’s weekend decision to increase production, which sent the price of crude falling as much as 30 per cent."
The drop — the biggest since the Gulf war in 1991 — exacerbated two weeks of market turmoil caused by escalating concerns over the economic effects from the coronavirus outbreak.
US President Donald Trump said on Twitter: “Saudi Arabia and Russia are arguing over the price and flow of oil.
"That, and the Fake News, is the reason for the market drop!”"
"He added: “Good for the consumer, gasoline prices coming down!”"
"Jim Reid, a strategist at Deutsche Bank, said the plunge in oil had led to a “complete capitulation” across asset classes."
"FTSE MIB was also hit especially hard, shedding more than a tenth of its value after 16m people in the country"
’s prosperous north were locked down in an effort to control the country’s virus outbreak.
Late on Monday night the Italian government extended the lock down to the entire country.
“No one has an information advantage when it comes to coronavirus.
"As a result, the path that investors are taking is to take risk off the table, regroup and re-evaluate when more clarity becomes available,” added Michael Arone, chief investment strategist for State Street Global Advisors."
Interest rate futures suggest the Federal Reserve will this summer cut its main interest rate back to the historic lows set during the 2008-09 financial crisis of 0-0.25 per cent.
The Fed last week slashed rates by half a percentage point — the biggest cut since the crisis — to a range of 1-1.25 per cent.
Goldman Sachs chief US economist Jan Hatzius said on Monday he expected the Fed to reduce rates by half a percentage point both in March and April.
Fears about the impact of lower rates on bank profit margins combined with credit worries to punish bank stocks.
"JPMorgan fell 13.4 per cent, Bank of America slid 14.7 per cent and Citigroup lost 16.2 per cent."
"The New York Fed, which handles the central bank’s market operations, also said on Monday it would increase the size of daily repo operations by $50bn to $150bn as it sought to ease conditions in the US money markets."
"Joachim Fels, global economic adviser at the US asset manager Pimco, said a recession in the US and the eurozone in the first half of the year was “a distinct possibility” and that Japan was “very likely” already in one."
"Philipp Carlsson-Szlezak, chief economist at the Boston Consulting Group, said it was likely that the US faced a “U-shaped” recovery, where there was a permanent loss of output from the virus outbreak."
"“We are looking at a shock from multiple perspectives,” he added."
"Haven currencies rallied, while the currencies of oil-exposed countries came under heavy pressure."
"Japan’s benchmark Topix closed down 5.6 per cent, meeting the technical definition of a bear market."
"The yen, viewed as a haven during times of market uncertainty, strengthened as much as 3.6 per cent against the dollar to ¥101.57."
"Sydney’s S&P/ASX 200 fell 7.3 per cent, marking its worst one-day decline since the global financial crisis."
"The Australian dollar experienced a “flash crash”, plunging almost 5 per cent against the US dollar in just 20 minutes to briefly touch its lowest level since the financial crisis in 2008."
Traders blamed algorithmic trading platforms affecting market liquidity.
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"Oil prices crashed by more than a fifth after Saudi Arabia started a price war, sending rattled stock markets plunging and spurring a rush into government bonds as investors sought havens."
"Crude was on track for its biggest one-day drop since the 1991 Gulf war after the Saudi move, which threatens to swamp the oil market with supplies just as the coronavirus outbreak hits demand."
"Saudi Arabia will raise production and offer its crude at deep discounts to win new customers next month, according to two people familiar with the country’s oil policy."
"Oil prices fell as much as 30 per cent but later Brent trimmed losses slightly to be down 20 per cent at $36 a barrel, while West Texas Intermediate traded at about $33.00 a barrel."
"European stocks slumped, with London’s FTSE 100 down more than 6 per cent and on track for its worst day since the 2008-09 financial crisis."
Germany’s Dax and France
"Cac 40 fell by similar amounts and the Stoxx Europe 600 index, which tracks the region’s largest companies, slid into bear market territory — meaning a fall of a fifth since a recent high."
"S&P 500 stock futures pointed to a slide on Wall Street when trading begins on Monday, falling as much as 5 per cent — the maximum allowed in a single session."
"In a rush by investors to find haven assets, the 10-year US Treasury yield tumbled down through 0.5 per cent to a record low in the sharpest rally for American sovereign debt in more than a decade."
"The 30-year US Treasury yield dropped below 1 per cent, taking the entire US yield curve below that level for the first time."
"Investors now face the prospect of the 10-year yield, which stood at 1.5 per cent just 18 days ago, soon joining government bonds in Europe and Japan in negative territory."
"“The market is in the process of pricing a global recession,” said George Saravelos, a strategist at Deutsche Bank."
Big energy groups were under acute pressure.
Shares in BP and Royal Dutch Shell lost about a fifth of their value in London trading.
"Smaller oil companies fell more sharply, with the UK’s"
Premier Oil collapsing in value by a half.
“It is the most crude price-bearish combination since the early 1930s.
"The price collapse has just begun,” said Bob McNally at the Rapidan Energy Group."
The currencies of oil-producing countries took a hit.
The Canadian dollar dropped 1.4 per cent against the US dollar while Norway’s krone fell as much as 4.7 per cent to its lowest level against the US currency since 1985.
Russia’s rouble dropped 7 per cent against the dollar.
"“In economic terms, the major oil exporters will all suffer an unwelcome additional brake to growth,” said Kit Juckes, strategist at Société Générale."
"“For growth-sensitive and for oil-sensitive currencies, it’s far too early to pick a bottom,” he added."
"The Australian dollar experienced a “flash crash”, plunging almost 5 per cent against the US dollar in just 20 minutes to briefly touch its lowest level since the global financial crisis in 2008."
"Japan’s benchmark Topix closed down 5.6 per cent, meeting the technical definition of a bear market."
The decline was the index’s biggest one-day fall since the UK’s 2016 Brexit vote.
"The yen, seen as a haven during times of market uncertainty, strengthened as much as 3.6 per cent against the dollar to ¥101.57, the highest in more than three years."
How markets woke up to the threat
How dangerous is the coronavirus and how does it spread?
Additional reporting by Jamie Smyth
Global markets suffered a second week of volatility that pushed the yields on government bonds to record lows and weighed on stock prices globally on fears the coronavirus would spread further.
Demand for haven assets and increasing bets from traders that the US Federal Reserve will cut interest rates again.
This sank the yield on 10-year government debt to below 0.7 per cent — a record low — before ending the day at 0.758 per cent.
This compares with a yield of 1.9 per cent at the start of 2020.
UK and German government bonds also hit records this week.
"US stocks staged late dramatic rally on Friday afternoon that added 2.4 per cent to the S&P 500 index in the final minutes of trading, trimming the loss on the day to 1.7 per cent."
"This lifted the seesawing S&P 500 back into positive territory for week, to be 0.6 per cent up overall, after some of the most volatile trading since the financial crisis."
"The final rally was driven by equity investors’ desire to remain invested in stocks in case positive news emerged about containing the virus, said Max Gokhman, head of asset allocation for Pacific Life Fund Advisors."
"“Sentiment may shift,” he said."
“There’s no clear answer to what will happen on Monday.”
US stocks had fallen earlier on Friday despite a strong US jobs report.
"The worst performing sector was energy, after Opec failed to reach a deal for deeper production cuts."
"This sent the price of Brent crude, the international oil benchmark, down 9 per cent to $45.53 a barrel, a three-year low."
"Financial stocks, which typically suffer from lower rates, were the second-worst performers."
"The Vix index that measures share market volatility, known as Wall Street’s"
"“fear gauge”, rocketed to 42 points by the end of Friday, a nine-year high."
Yields on the US 10-year Treasury note have tumbled by more than 0.3 percentage points in each of the past two weeks — the biggest such moves since the height of the 2008-09 financial crisis.
"The sharp slide has taken aback investors, reflecting “pure fear” in the market, according to one fund manger."
Yields fall when prices rise.
"At the same time, global stocks fell in some of the most significant selling action since the outbreak of the coronavirus began rattling global markets last month, capping off yet another week of losses."
Europe’s main bourses fell roughly 4 per cent each.
"The Stoxx 600 index, which tracks the region’s leading companies, saw its third consecutive week of declines."
"It is down almost 12 per cent since the start of the year as concerns rise about the health of companies’ balance sheets, as well as their earnings."
The Stoxx index tracking European bank shares fell on Friday to its lowest level since the financial crisis as the expectation of lower interest rates amplified concerns over lenders’ profitability.
"“There has been a morphing of this crisis from earnings downgrades due to Covid-19 impacts to the potential for it to be a credit crisis,” said Alan Custis, head of UK equities at Lazard Asset Management."
"The cost of insuring against the default of some of Europe’s biggest corporate borrowers had “blown out” over the past couple of days, and “investors are now treating companies with leverage with a lot of caution”, he added."
Some analysts advised investors to keep cool heads.
"“Don’t give in to panic,” said Alain Bokobza, a strategist at Société Générale."
“We do not recommend switching away from a balanced [portfolio] allocation at this stage.
"Policymakers have clearly entered the race, which should prevent — for now — an extended bear market on risk assets.”"
The Fed earlier this week cut interest rates by half a percentage point.
Futures markets have priced in another half-point reduction when Fed policymakers meet on March 17-18.
There is now a 68 per cent chance implied that there will be a further quarter-point cut at the central bank’s April meeting.
"Eric Rosengren, president of the Federal Reserve Bank in Boston, said on Friday the US central bank should be allowed to buy a broader array of assets to provide stimulus given the sharp and historic decline in Treasury yields."
"Gold ended the day higher, capping a 5.6 per cent gain for the week, its best run since 2011, as investors looked for safe places to invest."
The price of the metal has also been boosted by the collapse in government bond yields to historic lows.
"“Markets are struggling to balance the competing forces of more extensive virus containment measures, and of monetary and fiscal stimulus,” said Mark Haefele, chief investment officer at UBS Global Wealth Management."
"China’s CSI 300 index dropped 1.5 per cent, bringing it down from the two-year high notched on Thursday."
"Still, the index of Shanghai and Shenzhen-listed stocks recorded its best week in a year as investors prepared for more relief measures from Beijing."
"Topix index earlier fell 2.9 per cent as the yen, seen as a haven during times of uncertainty, strengthened nearly 1 per cent to touch a six-month high of Y105.20 per dollar."
The Asian Development Bank warned on Friday that disruption from the virus could lop 1.7 percentage points off China’s economic growth in a worst-case scenario and bring down global gross domestic product by as much as 0.4 percentage points.
how markets woke up to the threat
How dangerous is the coronavirus and how does it spread?
Additional reporting by David Sheppard and Neil Hume in London and Jamie Smyth in Sydney
"US stocks dropped and Treasury yields touched record lows, as investors ramped up bets the Federal Reserve will cut its main policy rate by another half percentage point at its meeting this month."
"The S&P 500 lost about 3.4 per cent, with bank shares leading the declines, erasing much of the previous day’s gains."
"The Dow Jones Industrial Average slid 3.6 per cent, while the Nasdaq Composite fell 3.1 per cent."
"Investors scooped up Treasury securities as protection against the economic impact of the spreading coronavirus, sending yields to record lows."
"The yield on the 30-year Treasury bond tumbled 16 basis point to a new low of 1.54 per cent, while the 10-year Treasury yield fell as much as 15 basis point to another record low of 0.897 per cent, before edging slightly higher."
"The policy-sensitive two year note yielded 0.59 per cent, down 11 basis points."
The pressure for further action by the Fed — which cut its policy rate by 50bp on Tuesday — was evident in the futures markets.
Investors on Thursday were fully pricing in a 50bp cut when Fed policymakers gather March 17-18 and another 25bp reduction in April.
"“Eventually, additional actions to support banks and ensure ample liquidity across the banking sector may be needed, said Tiffany Wilding, US economist at Pimco."
“The Fed may need to do more where it can if bank funding market stresses flare up.”
"Bank shares were hit hard as fears rose that the yields on their bond portfolios would fall more than their deposit costs, compressing profit margins."
"Bank of America and Citigroup were off by more than 5 per cent, while JPMorgan lost just shy of 5 per cent."
US bank stocks have now shed nearly a fifth of their value since February.
"Mike Mayo, bank analyst at Wells Fargo, said he had slashed his earnings forecast for the sector by 10 per cent and warned of a potential 25 per cent decline if conditions worsen"
"“We are all bond analysts now,” he said."
“It’s a buyer strike out there.”
"In Europe, the composite Stoxx Europe 600 closed down 1.4 per cent, with investors unwilling to build on gains in Asia, where Chinese shares hit a two-year high."
"FTSE 100 fell 1.6 per cent, while Germany’s Dax was 1.5 per cent lower."
"“Stock markets are unlikely to see a sustained rebound until the spread of the coronavirus epidemic slows,” said Jonas Goltermann, senior economist for Capital Economics."
Companies from retail to financial services have spelt out the disruption to their businesses resulting from the coronavirus outbreak.
"On Thursday, the airline industry warned it could face a revenue hit of more than $100bn"
"“Investors continue to struggle to find the correct balance,” said Richard McGuire, head of rates strategy at Rabobank."
He pointed to the tension between the fundamental concerns thrown up by the virus and the “growing appeal of risky assets in the wake of an unfolding global policy response”.
"Going against the trend, China’s CSI 300 index of Shanghai- and Shenzhen-listed shares added 2.2 per cent on Thursday to close at a two-year high."
"The index is the world’s best performing major stock market this year, up nearly 3 per cent, as most other big global indices languish in the red."
Analysts at Mizuho said comments from President Xi Jinping at a politburo meeting this week implied Beijing “had not yet given up” on its goal of doubling gross domestic product from 2010 by 2021.
"That would require growth of 5.6 per cent this year, they added, and lent credence to expectations of a “massive stimulus package” later in the year to make up for a collapse of growth in the first quarter."
Hang Seng gained 1.9 per cent.
"Australia’s S&P/ASX 200, which fell sharply in the previous session, rose 1.1 per cent."
Topix was 0.9 per cent higher.
"Oil prices fell, with international crude marker Brent slipping 2.3 per cent to $49.97 a barrel."
Additional reporting by Robert Armstrong in New York
How markets woke up to the threat
How dangerous is the coronavirus and how does it spread?
US stocks rose more than 4 per cent on Wednesday as investors cheered Joe Biden’s strong showing in the US Democratic primaries and members of the US House approved an $8bn deal to fund a response to the coronavirus outbreak.
The equity market extended earlier gains after the House of Representatives announced the vote on a spending package to help limit the spread of the virus.
"The Senate is expected to take up the bill soon, which will allocate money for protective equipment like masks, and bolster state and local governments’ testing and surveillance."
Investors have also welcomed signs of a more co-ordinated policy response by governments and central banks around the world.
"The S&P 500 finished the day 4.2 per cent higher, marking another sharp move in one of the most dramatic periods of trading on Wall Street since the financial crisis."
On Tuesday stocks sold off after the Federal Reserve’s shock decision to cut interest rates by half a percentage point.
"On Monday, they posted one of the best days in the last decade."
Last week saw heavy selling due to fears of the spread of the coronavirus.
"“The fiscal stimulus is a net positive for the stock market,” said Quincy Krosby, chief market strategist for Prudential Financial."
“Many take that as an early sign we have hit a market bottom.”
"The yield on the US 10-year Treasury note was at 1.031 per cent after spending the morning below 1 per cent, a threshold it breached for the first time on Tuesday."
"Healthcare stocks led the market with a 5.8 per cent gain, their best day since 2008."
"Health insurer Anthem led the US market with a 16 per cent advance, which would mark its best day since the financial crisis."
"Cigna, another large health insurer, gained 11 per cent."
The rally in healthcare stocks follows a strong performance from Joe Biden in “Super Tuesday” — the biggest primary results day for Democratic presidential contenders.
"This indicates the market had reduced the chances of a win for Bernie Sanders, who has made a single-payer national health insurance programme a core part of his campaign."
The strong US performance followed gains in Europe.
"The Stoxx 600, an index of the region’s largest companies, ended the day 1.4 per cent higher."
FTSE 100 rose 1.5 per cent.
The Fed’s interest rate cut is part of a wave of central bank support to alleviate some of the worst effects of the coronavirus.
Tuesday’s decision is its first emergency intervention since the peak of the financial crisis.
"Pimco’s US economist Tiffany Wilding said that while rate cuts are an imperfect instrument when dealing with a global health emergency, “they can contribute to an environment where easy financial conditions buffer the economic shock, as opposed to exacerbate it.”"
Trading in futures linked to the federal funds rate indicates that investors are now betting the central bank’s policy committee will make another cut at its scheduled meeting later this month.
"“The Fed is likely to cut again, but how soon remains the question,” said Esty Dwek, head of global market strategy at Natixis Investment Managers."
"She added that other central banks “are likely to follow suit, even if their firepower is more limited.”"
"“The one-two punch thrown on Tuesday by the big Fed rate cut and the Biden win last night has put a floor under the stock market for now,” said Chris Rupkey, chief financial economist at MUFG Union Bank."
“The coronavirus market sell-off looks to be stabilising.”
"Some analysts predicted that the Fed’s move could prompt monetary and fiscal easing measures across Asia, where markets were mixed on Wednesday."
The Hang Seng index closed lower while China’s CSI 300 index gained 0.6 per cent.
"In South Korea, the Kospi gained 2.2 per cent after the country’s finance minister proposed extra spending of almost $10bn to offset the effects of the outbreak."
"On Tuesday, Australia’s central bank cut rates to an all-time low; on Wednesday the S&P ASX/200 fell 1.7 per cent."
"Traders were looking to potential stimulus measures in China, where the Covid-19 virus originated and which is home to the most cases."
"Becky Liu, head of China macro strategy at Standard Chartered, said the prospect of any co-ordinated easing by G7 nations would pressure Beijing to cut rates more quickly to prevent the renminbi from strengthening too much."
"The price of Brent crude dropped 0.5 per cent to $51.58 a barrel while gold traded slightly lower at $1,635 per Troy ounce."
The dollar gained 0.2 per cent for its rise in five trading sessions and the euro fell 0.4 per cent to $1.1133.
The 10-year US Treasury yield hit a record low and stocks tumbled after an  emergency rate reduction by the Federal Reserve failed to ease fears that the spread of the coronavirus would push the economy into a recession.
"The Fed cut its policy rate 50 basis points to 1-1.25 per cent on Tuesday after bond yields had been grinding lower for days, but investors responded by turning up the heat on the US central bank to do even more to soften the blow from the outbreak."
"The 10-year Treasury yield dropped 16bp to 0.999 per cent, falling below 1 per cent for the first time."
The yield on the policy-sensitive two-year note slid 20bp to 0.705 per cent.
Yields fall when prices rise.
"In Asian trading, the yield on 10-year US Treasuries fell another 3 basis points to 0.968 per cent."
"“This really puts pressure on [the Fed’s] next meeting — a lot of people in the market want another [quarter-point] cut coming now,” said JJ Kinahan, chief market strategist for TD Ameritrade."
The benchmark S&P 500 index fell 2.8 per cent.
Stocks initially rose following the central bank’s
"unscheduled cut, only to reverse course after Jay Powell, Fed chair, appeared reluctant to lower rates even further."
“We like our current policy stance . . . 
"but we are prepared to use our tools appropriately,” he said at a press conference on Tuesday."
"In Asian, futures trading to a rebound of 1 per cent for the S&P 500 when Wall Street opens on Wednesday."
The Fed last slashed interest rates by half a percentage point in October 2008 at the depths of the financial crisis.
It did so twice — early in the month and again at its scheduled meeting later in October — and stocks slid both times.
"Tech stocks and financials were the hardest-hit sectors in the market, with Bank of America off 5.5 per cent."
"Allen Tischler, senior vice-president in Moody’s Financial Institutions Group, said the rate cut “is a credit negative for US banks, exacerbating downward pressure on net interest margins and profitability”."
"The cut was “designed to add confidence but has had the opposite effect,” said James Smigiel, head of the portfolio strategist group for SEI Investments."
"The drop in stock prices and bond yields indicates the yield on the 10-year Treasury could fall further, he said."
“The market is marching toward zero.”
The falls came after stocks on Monday had erased some of last week’s steep losses on the prospect of co-ordinated policy action from the world’s big economies.
"Earlier on Tuesday, central banks in Australia and Malaysia cut interest rates, the  Bank of Japan injected liquidity into the country’s financial system for a second day, and the Bank of England’s governor said the  bank stands ready to support the economy."
"Following a conference call on Tuesday, policymakers from the G7 countries  issued a statement in which they pledged action to be taken individually by each country, without detailing specific measures."
"“We reaffirm our commitment to use all appropriate policy tools to achieve strong, sustainable growth and safeguard against downside risks,” the statement said."
"Despite the flurry of optimism, some investors have questioned the limits of monetary policy in responding to a global health crisis."
"“If you want to fix your health by going to a bank, you’ve got a problem,” said Davide Serra, founder of London-based investment group Algebris, which manages around $13bn in assets."
"“The last 10 years’ addiction to what central banks are going to do is, in my view, short-sighted.”"
He said he had been buying protection against falling prices in stocks and high-yield bonds.
"“The pandemic risk is real, it is serious,” said Mr Serra."
"“Who is in charge here is the WHO [World Health Organization], not the central banks.”"
Several analysts advised caution in chasing short-term rallies.
"“Questions still remain about how policy rate cuts can help the economy if quarantines and travel barriers are introduced,” said Seema Shah, strategist at Principal Global Investors."
"“Certainly, rate cuts will not help restock emptying grocery shelves."
"Monetary policy is hopeless when supply simply cannot feed demand,” she added."
The Europe-wide Stoxx 600 index closed 1.4 per cent higher.
"In Asia, optimism early in the trading day faded."
Topix closed down 1.4 per cent after having been up 1.7 per cent.
"Gold rose nearly 3 per cent to $1,635 per troy ounce."
"Oil clawed back earlier losses, with Brent crude climbing 0.2 per cent to $51.91 a barrel."
"Analysts have also warned that stimulus measures in China, where the outbreak began and which is home to most Covid-19 infections, could prove anticlimactic."
"“It is premature to expect an imminent fiscal stimulus from China,” said Zhou Hao, an economist at Commerzbank."
“The enthusiasm in the financial markets due to China’s stimulus hope is probably overdone.”
Mr Zhou said it was unlikely Beijing would launch any large-scale stimulus until it was clearer how much damage had been done to the economy by the coronavirus.
"The annual meeting of China’s legislature has been delayed due to the epidemic, further clouding the outlook for such measures."
Asian stock markets including Japan and mainland China were little changed on Wednesday as investors waited on signs of further stimulus measures in response to the coronavirus outbreak.
Additional reporting by Laurence Fletcher in London and Hudson Lockett in Hong Kong
How far will it spread?
How dangerous is the coronavirus and how does it spread?
"US stocks ended a seven-day losing streak, rising 4.6 per cent in the biggest one-day gain in 14 months on expectations central banks will step in to soften the adverse economic impact of the global coronavirus outbreak."
"The rebound pulled the benchmark index out of correction territory, and leaves it 8.8 per cent below its February 19 peak."
The gains accelerated during the afternoon following reports G-7 finance ministers and central bankers would hold a teleconference Tuesday to discuss their response to the coronavirus outbreak.
"Wall Street was led higher by technology stocks, while investors also waded in to buy beaten-up discretionary names."
"The Nasdaq Composite rallied 4.5 per cent, while the Dow Jones Industrial Average jumped 5.1 per cent."
"The sharp moves came after the Bank of Japan, in the wake of soothing statements from the Federal Reserve on Friday, said it would provide ¥500bn ($4.62bn) in short-term liquidity to banks and a record ¥100.2bn in purchases of exchange traded funds."
"After Wall Street’s closing bell, the European Central Bank said it was “closely monitoring” the coronavirus outbreak and its implications for the economy and monetary policy."
"“We stand ready to take appropriate and targeted measures, as necessary and commensurate with the underlying risks,” the bank said in a statement."
"Expectations that the Fed could cut interest rates as soon as this month, have helped push bond yields sharply lower in recent days as prices for government debt soared."
"The yield on the benchmark 10-year US Treasury bond struck a record low on Monday, just above 1 per cent, but reversed course to be up 2.6 basis points to 1.15 per cent after Wall Street’s closing bell."
"European stocks flicked back into positive territory, shaking off steep earlier declines."
"The broad Stoxx 600 index closed 0.1 per cent higher, while the FTSE 100 was up by 1.1 per cent."
"Asian stocks rallied overnight, with China’s CSI 300 index closing up 3.3 per cent in its best one-day performance since May."
"“We haven’t seen this level of volatility in a long long time,” Liz Young, director of market strategy for BNY Mellon Investment Management, said."
“People who were worried about things being too calm and complacent can stop worrying.”
"The latest wave of buying came after newswires reported that finance ministers from major economies will speak on Monday, alongside their respective central bank governors, to discuss their response to the crisis."
French finance minister Bruno Le Maire said the response would be “as co-ordinated as possible”.
Italy has already said it would inject €3.6bn into its economy to mitigate the impact.
"“What has happened over the day is that investors have realised that monetary policy is not going to make a difference,” said Kasper Elmgreen, head of equities at Amundi."
“What could make more of a difference is if governments started a significant fiscal expansion.”
"Traders are seeking to determine how far central banks and governments can prop up financial markets, which last week suffered a heavy decline while the disease, which originated in China, spread more forcefully around the world."
"The Bank of England said it was working with the Treasury, the Financial Conduct Authority and its international partners “to ensure all necessary steps are taken to protect financial and monetary stability”."
The Bank of Japan also vowed to fight the economic effects of coronavirus.
"In an emergency statement, governor Haruhiko Kuroda promised to inject liquidity into markets and hinted at raising asset purchases, indicating the central bank is moving into crisis mode."
"The US Federal Reserve has also hinted at support, signalling that it was prepared to consider cutting rates in response to the virus’s “evolving risks”."
But economists and market analysts say it is hard to determine how much monetary support would alleviate the pressure.
“Central banks cannot cure the virus.
"They cannot force people to spend,” said Paul Donovan, chief economist at UBS Global Wealth Management."
"“However, central banks can help companies with cash flow problems, or whose debt service costs are challenging if demand weakens."
"Central banks exist to solve liquidity and credit problems, should those arise.”"
"Any optimism over the prospect of co-ordinated international action to fight the disease was tempered as the OECD warned global growth could halve this year from its previous forecast, and by Chinese manufacturing data that showed factory activity in February plunging to an all-time low."
Brent crude added 5.7 per cent to $52.64 a barrel.
Additional reporting by Robin Harding in Tokyo and Richard Henderson in New York
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The yield on benchmark US government debt fell to its lowest on record and stocks tumbled more than 3 per cent as American health officials warned of the potential for “severe” disruptions to daily life from the spread of the coronavirus.
"The warning from the Centers for Disease Control and Prevention, which also said it was preparing for person-to-person transmission in the US came as the number of Covid-19 cases around Europe and the Middle East jumped, including further deaths from the disease in Italy."
"The yield on the benchmark 10-year US Treasury sank as much as 5.5 basis points to 1.3155 per cent, which surpassed the old record intraday low from July 2016 by a quarter of a basis point."
Yields remain on track to close at a record low.
The S&P 500 closed 3 per cent lower.
"It was the first time since the devaluation of China’s currency in August 2018 that the US equities benchmark posted back-to-back drops of 3 per cent or more, and followed Monday’s 3.4 per cent tumble, which was the biggest drop in two years."
"The index was down for a fourth consecutive session, the longest losing streak since August."
The Nasdaq Composite dropped 2.8 per cent while the Dow Jones Industrial Average fell 3.2 per cent.
"Concerns about the outlook for global growth hit oil markets, with the price of Brent crude, the international benchmark, down 2.9 per cent at $54.71 a barrel, having fallen 3.8 per cent in the previous session."
"Sentiment swung on a near-hourly basis through the European trading day, with the Stoxx Europe 600 closing 1.8 per cent lower and on track to bring its losses for the week to near 5.5 per cent."
Investors have been shaken by the virus’s rapid spread through countries thousands of miles from the outbreak’s source in China.
"Italian authorities said the latest number of confirmed infections was 283 by midday local time, while a hotel on the Canary Islands has been quarantined after an Italian doctor tested positive for the disease."
"Japan earlier urged companies to adopt remote working, stagger shifts and hold online meetings to reduce the spread of the illness in the country."
"Japanese equities caught up with the global sell-off as the benchmark Topix fell 3 per cent as traders returned from a three-day weekend, while the yen, a popular haven currency, strengthened 0.6 per cent to ¥110.10 per dollar."
"In Asian trading on Tuesday, South Korea’s Kospi index recovered by 1.2 per cent."
"Washington and Seoul said on Tuesday that they were considering scaling back joint military exercises in South Korea, one of the countries worst hit by the virus outside of China."
Hong Kong’s Hang Seng index carved out a 0.3 per cent gain even after Standard Chartered said the city
’s economy would be hit harder by the coronavirus than it was by the Sars 2003 outbreak.
China’s offshore traded renminbi weakened 0.2 per cent to 7.0128 per US dollar.
Additional reporting by Leo Lewis in Tokyo
"US stocks closed at record highs, following their European peers, as investor concerns over the coronavirus receded amid hopes the rate of infections is slowing."
All three of Wall Street’s main equities gauges closed at record highs on Wednesday.
"The S&P 500 gained 0.6 per cent, the Nasdaq Composite added 0.7 per cent and the Dow Jones Industrial Average rose 0.7 per cent."
"In Europe, the Stoxx Europe 600 index closed 0.6 per cent higher to a record high, following a strong session in Asia and Tuesday’s batch of record high closes for Wall Street."
The index tracking Europe’s biggest companies notched its sixth day of gains out of seven.
"Craig Nicol, a strategist at Deutsche Bank, said one reason for the fresh optimism was that there has been an “encouraging sign that the virus outbreak might be plateauing in China” after Hubei province, the outbreak’s epicentre, recorded its lowest level of overnight cases this month."
"Kit Juckes, strategist at Société Générale, drew a similar conclusion: “There’s a growing view in financial markets that there’s light at the end of the tunnel as the growth in new cases in Hubei slowed for a second day.”"
"Global markets have raced higher in recent sessions as investors bank on the virus’s economic impact being a short shock that is largely contained to the Asia-Pacific region, and that central banks stand ready to act in the event of a wider hit."
"“Markets are not as complacent as they look,” Barclays European equity strategists wrote in a note on Wednesday."
"While European and US markets have hit records in recent sessions, Asian stocks are still off their January highs, while oil is trading more than 20 per cent off its highs this year and the dollar has rallied."
"“The resilient equity market seems at odds with the virus threat, but beneath the surface, flight to safety is evident,” Barclays said."
"In a report released overnight, S&P Global said it expects there to be “a short-term effect” on Chinese and global growth."
"We expect there will be a short-term effect on China’s and global GDP growth, as well as some economic cost for industries most exposed to Chinese household spending and the increasing containment measures more broadly."
"In another sign of decreasing global concern, traditional haven assets have struggled."
"The gold price was down 0.1 per cent at $1,566.45 per troy ounce and the yield on the benchmark US 10-year Treasury rose 4 basis points to 1.6299 per cent as investors moved out of the debt."
The yield had touched as low as 1.5 per cent at the end of January at the height of market concerns over the virus.
Brent crude was up 3.7 per cent and back above $56 a barrel.
"US stocks closed at a record highs, taking their cue from overseas markets that rallied hard on reports by Chinese media — since played down by the World Health Organization — that a cure for the coronavirus may soon be developed."
"The S&P 500 closed 1.1 per cent higher, the first time since September the index has gained by more than 1 per cent in two consecutive sessions."
"More broadly, it was also the benchmark’s first three-day winning streak since mid-January and leaves it up 3.4 per cent for 2020."
The Nasdaq Composite climbed 0.4 per cent to a record high.
"Although the Dow Jones Industrial Average fared best, jumping 1.7 per cent, it closed just shy of its mid-January peak."
"Giving Wall Street support from the outset were data that revealed private-sector payrolls rose by a forecast-busting 291,000 in January and a survey from the Institute for Supply Management that showed the large US services sector grew at a faster pace last month compared with December."
"The coronavirus outbreak, which began in the Chinese city of Wuhan, continues to spread, with the number of cases rising on the mainland and in countries around the world."
"Although companies say it is too early to estimate the financial impact of the disease and how their supply chains will be affected, investors have shrugged off the uncertainty and snapped up stocks."
"The data helped prop up the dollar index, pushing it 0.3 per cent higher to a two-month high of 98.288."
"The more bullish mood saw investors selling haven assets, such as government bonds."
That pushed the yield on the benchmark 10-year Treasury 5.2 basis points higher to 1.6508 per cent.
Chinese media yesterday suggested “a major breakthrough” in the scramble to find a cure for the disease.
"The WHO later downplayed the significance of the report, insisting there remain “no known effective therapeutics” against the new strain of coronavirus."
The organisation also launched a preparedness and response plan to address the spread of disease and sought $675m in donations.
"In Europe, the broad Stoxx 600 gained 1.2 per cent, while Germany’s Dax gained 1.5 per cent and London"
’s FTSE 100 added 0.6 per cent.
"In Asia, China’s Shanghai Composite closed 1.3 per cent higher and the Hang Seng added 0.4 per cent."
"US stocks joined global peers and rallied on Tuesday, while government bonds fell, as investors bet the impact from the deadly coronavirus will not be enough to knock the world economy off course."
"Wall Street’s major bourses were all back in positive territory for the year, with the S&P 500 rising 1.5 per cent in morning trade."
That put it on course for its biggest one-day rise since early August and added to the previous session’s gains.
The Nasdaq Composite added 1.6 per cent.
"Chinese stocks rose a day after suffering their biggest sell-off in more than four years, as Beijing stepped up efforts to defend the economy against the spread of the disease."
"Government bonds slipped, with the yield, which moves inversely to the price, on the benchmark 10-year US note up 8.8 basis points to 1.606 per cent as investors moved out of the traditional safety play."
Investors have struggled to price the potential impact of the virus on the global economy.
"Stocks fell sharply at the end of last week, but some economists have said the sell-off has presented a buying opportunity."
"Trevor Greetham, head of multi asset at Royal London Asset Management, said he has started to add to equity positions in multi-asset funds."
"“It usually pays to buy when others are panicking,” he said."
“Our investor sentiment indicator is registering its first contrarian buy signal since August.”
"Economists at Morgan Stanley said that while the global economic cycle could be disrupted by the virus, “it should not derail the global recovery”."
"Equities rose sharply in Europe, with the composite Stoxx Europe 600 up 1.6 per cent to put it on course for its best day of the year."
The benchmark CSI 300 of Shanghai- and Shenzhen-listed shares closed 2.6 per cent higher on Tuesday after the Chinese central bank announced a new cash injection to support the country’s financial system.
"The People’s Bank of China said it would provide an additional Rmb500bn ($71bn) of banking liquidity thorough reverse repurchase agreements, a measure designed to push down interbank lending rates."
"On Monday, the CSI 300 fell as much as 9 per cent as traders returned from an extended lunar new year holiday."
That fall came despite the PBoC pouring in more than $170bn in additional liquidity as it sought to cushion the blow from the coronavirus epidemic.
"The index ended the day down nearly 8 per cent, its worst one-day performance since August 2015."
One trader at a brokerage in Shanghai reported signs on Monday that the so-called national team of Chinese state-run institutional investors had bought stocks to help support the market.
"After the market closed on Monday, state media said the team — a group of Chinese insurers with Rmb100bn in assets — was ready to step in."
This lifted sentiment on Tuesday.
"Markets were encouraged by the central bank’s decision to set the daily fixing for the onshore-traded renminbi stronger than the important 7-to-the-dollar mark, higher than its closing level the previous day."
Traders said the move indicated the PBoC’s intention to support the Chinese currency.
The onshore renminbi is permitted to trade within a band that extends 2 per cent to either side of the central bank’s daily midpoint.
"The coronavirus outbreak has killed 425 people and there are more than 20,000 confirmed infections in China."
"It has shut down swaths of the country’s supply chain, prompting concerns of an impact on economic growth, which is already at a 30-year low."
Equities across Asia made gains.
Hang Seng closed 1.2 per cent higher despite the city reporting its first coronavirus death.
Topix index was up 0.7 per cent.
"Brent crude, the international oil benchmark, was flat at $54.47 a barrel after falling into a bear market on Monday on concerns the coronavirus outbreak could hit global demand."
The pound rebounded through a key level yet was still the worst-performing major currency since the UK left the EU at the end of January.
"Sterling flirted around the $1.30 mark on Tuesday, recently up 0.1 per cent at $1.3006, yet failed to recover fully from its previous day’s drubbing."
"It had breached $1.30 in early trading, touching as low as $1.2942, to take it to its pre-election levels."
"Against the euro it was up a similar 0.1 per cent, with €1 recently buying 84.97p."
"The currency has dropped 1.5 per cent over the past two trading days, returning to its level before Boris Johnson’s Conservatives won a resounding victory in the December 12 general election."
Tuesday’s move makes it by far the worst performer this month on Bloomberg’s world index of major currencies.
"“The market is too long and the underlying trade concerns are real,” said Kit Juckes, a strategist at Société Générale."
"“If we see the pound against the euro near 90p or against the dollar at $1.28 or below, it will be in the next few weeks or months,” he said."
“Better news for the currency grows slowly over a longer timeframe.”
Britain on Friday evening became the first EU member to exit the bloc and has now begun the journey of disentangling itself from nearly half a century of membership.
"UK construction purchasing managers’ index rose to an eight-month high of 48.4 in January from a month earlier, easing the persistent decline in activity as client demand and business optimism improved, Tuesday’s"
IHS Markit/Cips figure was higher than economists’ expectations in a Reuters poll.
A reading below 50 indicates a majority of businesses reporting falling output compared with the previous month.
"Meanwhile, Britain’s public finances face a £12bn deficit by 2022-23, instead of the £5bn surplus laid out in the Conservative’s election manifesto, according to Financial Times calculations."
"Brussels and London set out on Monday their visions of the future relationship, with Michel Barnier, the EU’s chief Brexit negotiator, making it clear"
"that access to the bloc’s market would come with tough conditions attached, particularly in terms of Britain’s adherence to EU rules."
"Mr Johnson insisted there was “no need for a free trade agreement to involve accepting EU rules on competition policy, subsidies, social protection, the environment, or anything similar any more than the EU should be obliged to accept UK rules”."
"London’s benchmark FTSE 100 share index rose 1.2 per cent in mid-morning trading, while the composite Stoxx 600 rose 1 per cent."
"US equity markets wiped out their gains for the year on Friday, following European and Asian shares lower as concern escalated about the impact of the coronavirus on global growth."
"The death toll from the epidemic had risen to 213, Beijing said, with another 9,811 confirmed cases worldwide and a further 15,000 suspected."
"The US announced restrictions on entry to the country for foreigners who have recently travelled to China, and airlines cancelled flights to China."
"The US equity benchmark, the S&P 500 index, closed down 1.8 per cent and the Dow Jones Industrial Average fell more than 2 per cent."
Both registered their biggest weekly percentage declines since August.
Weighing on European stocks alongside coronavirus fears was economic data
" that showed the eurozone’s fourth-quarter growth in 2019 was only 0.1 per cent, below expectations of 0.2 per cent."
"Caterpillar, the world’s biggest construction and mining equipment maker, cast a further shadow, after it reported lower sales for the past quarter and forecast worse than expected earnings for this year."
Strong earnings from Amazon limited the decline of the tech-weighted Nasdaq Composite index to 1.69 per cent.
"The coronavirus outbreak will reduce US economic growth by 0.4 percentage points in the first quarter in the face of declining numbers of tourists from China and exports to Asia, according to Goldman Sachs economists."
"“The market reaction may deepen further if the virus spreads further,” said Kristina Hooper, chief global market strategist for Invesco."
“The most recent revelation of new infections in China and elsewhere suggests that the market will be faced with further downside risks.”
"With Friday’s drop, the S&P 500 wiped out its gains for 2020, having been up 3.1 per cent at its highest close earlier this month."
"The benchmark index is now down 0.2 per cent year-to-date, while the Dow is down 1 per cent and the Nasdaq Composite’s"
2020 gain has been trimmed to 2 per cent.
"Bourses in Paris and Frankfurt earlier closed down more than 1 per cent, while the Stoxx Europe 600 was 1.1 per cent lower, leaving the continent-wide benchmark down 3 per cent for the week."
"Eurostat data revealed the eurozone ended last year with a whimper, as the French and Italian economies both shrank unexpectedly, denting hopes that the region was poised to rebound from its recent sluggish performance."
"Government bonds in the eurozone extended their gains this week following the disappointing growth data, pushing yields to fresh lows for the year."
"The yields on the 10-year German Bunds and UK gilts were down 2 basis point to minus 0.42 per cent and 0.53 per cent, respectively."
US Treasury yields also sank.
"The yield on the benchmark 10-year Treasury note fell to 1.50 per cent, the lowest since October."
"The 30-year Treasury bond yield fell below 2 per cent, the lowest since September."
Bonds had already rallied significantly in recent days as fear over the spread of coronavirus fuelled demand for haven assets.
"Traders were pricing in at least one rate cut by the Federal Reserve in July, with indications of another rate cut increasing for later this year."
“The market impact of the coronavirus outbreak in China . . . 
"increasingly resembles last year’s trade-war-driven turmoil in May and August,” said Jonas Goltermann at Capital Economics."
"“But unless the fallout from the epidemic escalates significantly, it is hard to see the sharp falls in bond yields persisting.”"
Worries surrounding the coronavirus have consequently hit Asian markets.
Hong Kong’s Hang Seng closed down 0.5 per cent on Friday while South Korea’s
Kospi ended its session 1.3 per cent lower.
Additional reporting by Peter Wells
"Wall Street staged a late comeback on Thursday and ended higher, bucking a sharp sell-off in global equities, while China’s currency weakened to touch a key level as fresh concerns over the coronavirus outbreak rippled through markets."
US stocks fluctuated between losses and gains for most of Thursday but ended modestly higher.
"The S&P 500, which had fallen as much as 0.9 per cent earlier in the session, ended up 0.3 per cent."
Gains of 1.3 per cent in financials and 1.1 per cent in consumer staples offset declines in the communication services sector.
"The Nasdaq Composite rose 0.3 per cent to 9,298.93."
The gains in the US contrasted with the sharp risk-off sentiment in Europe and Asia.
"In Europe, the Stoxx 600 index which tracks the region’s biggest companies shed 1 per cent, following a sharp sell-off in Asia."
The World Health Organisation declared the coronavirus outbreak an international public health emergency.
The WHO also said “there is no reason for measures that unnecessarily interfere with international travel & trade” but signalled it stepped up efforts to combat the virus by declaring an emergency.
"The Wuhan-linked virus has killed 170 people in China and spread to more than 7,800 people."
US health officials on Thursday confirmed the first person-to-person transmission of the virus.
"“In our base case, we expect the outbreak of the virus not to cause a global economic slowdown,” Mark Haefele, global chief investment officer at UBS, said."
"“Assuming successful containment, we expect growth will subsequently rebound in future quarters due to pent-up demand and potential government stimulus.”"
"Earlier on Thursday, the offshore renminbi, which trades in major hubs outside mainland China, dropped below Rmb7 to the US dollar for the first time this year."
"It has tumbled more than 2 per cent since January 20, and slipped to as low as Rmb7.0036 against the dollar, its weakest level since December, before recovering slightly."
"“Fears over the spread of coronavirus and its likely human and economic impact are rising,” said Richard McGuire, a strategist at Rabobank, who warned that any attempt to quantify the long-term market reaction was “fraught” with difficulty."
"Stock markets across Asia fell, led by a nearly 5 per cent fall for Taiwan’s Taiex index as traders returned from holiday."
Tech stocks with heavy exposure to China
"were the hardest hit as Foxconn, the world’s largest contract electronics manufacturer, fell by 10 per cent, its largest one-day drop in 20 years."
"Hang Seng fell 2.6 per cent, Japan’s"
Topix index ended the day down 1.5 per cent and the Kospi in South Korea shed 1.6 per cent.
Assets seen as havens in times of market stress gained.
The Swiss franc and Japanese yen rose while government bonds rallied.
Oil prices pulled back with Brent crude down 1 per cent to $59.18 a barrel.
"Investors have struggled to price the effects of the outbreak, with Asia bearing the brunt of the negative sentiment and past sell-offs in Europe and the US followed by sharp rebounds."
"But the impact of the virus is spreading, with airlines suspending routes, tech groups and automakers closing factories and warnings that China’s economic growth could be slashed."
"“In a scenario of widespread infection, the virus could materially weaken economic growth and fiscal positions of governments in Asia,” rating agency S&P Global said in a report on Thursday."
Commodities prices have come under heavy selling pressure amid growing concern the outbreak of the Sars-like virus will hit China’s economy.
"A Goldman Sachs index of commodities prices has dropped 6.4 per cent since January 17, when headlines about the virus began to stretch across international media."
"Copper, an industrial metal that is seen by many investors as an economic bellwether, has declined for 12-straight sessions, the longest sell-off on Bloomberg records of trade on the London Metal Exchange going back to 1986."
Additional reporting by Adam Samson in London
"US stocks bounced back a day after suffering their deepest losses in nearly four months, as investors were put at ease by signs of US economic resilience and efforts to contain the rapidly spreading coronavirus."
"Wall Street’s S&P 500 rallied 1 per cent on Tuesday led by shares in technology and financial companies, recovering a large chunk of the prior day’s 1.6 per cent slide."
"The tech-heavy Nasdaq Composite was up 1.4 per cent, with Apple up over 2 per cent ahead of its quarterly earnings report."
The Dow Jones Industrial Average was up 0.7 per cent.
"American consumers grew more confident this month than economists anticipated, according to a survey from The Conference Board."
"Optimism over the labour market supported consumer confidence and will prevent the economy from slowing in early 2020, said Lynn Franco, senior director of economic indicators at the group."
"Data showing that US orders for long-lasting goods rebounded in December also brightened the mood, even though new orders for non-defence capital goods excluding aircraft — considered a gauge of business investment — fell."
"Across the Atlantic, the composite Stoxx Europe, which tracks the continent’s 600 largest listed companies, rose 0.8 per cent on Tuesday."
"A day earlier it fell 2.3 per cent, its worst one-day loss since early October on heightening concerns over the coronavirus outbreak."
"During a meeting with the head of the World Health Organization, Chinese president Xi Jinping said the country would defeat the “devil” coronavirus and share information about the outbreak in a transparent manner, according to state media."
"“The belief that low rates can and will smooth over in the deepest potholes in the road ahead for financial markets is deeply ingrained,” said Kit Juckes, a strategist at Société Générale."
"“But there will be an economic impact from the virus outbreak, even if we don’t yet know how long it will last and therefore how big the economic hit will be.”"
"The death toll from the coronavirus outbreak has risen to more than 100, and the number of people infected jumped by almost half."
"Hong Kong has said it will close its high-speed rail link and halve the number of flights with mainland China, as it seeks to isolate itself from the disease."
Asian shares tumbled on Tuesday as they caught up with stocks elsewhere.
Markets had been mostly closed on Monday for a regional holiday.
"Shares in South Korea, Singapore and Australia all fell."
"“Should the incidence of infections escalate, it could also have economic consequences, as the Sars epidemic of 2003 demonstrated,” said Atsi Sheth, a managing director at Moody’s."
"“The fear of contagion could dampen consumer demand, and affect tourism, travel, trade and services in affected countries.”"
Hong Kong’s stock exchange will reopen on Wednesday while markets in mainland China do not return from the lunar new year holiday until Monday.
Shanghai has ordered companies not to reopen until February 9.
"In a statement published on Tuesday, China’s securities regulator instructed securities and futures traders to “actively guide investors to rationally, objectively analyse the impact of the outbreak and adhere to the concepts of long-term and value investment”."
The weakness across many of the region’s markets came as Chinese state media confirmed the death toll from the pathogen had risen to more than 100.
"Most of the dead were in Wuhan and the surrounding province of Hubei, the outbreak’s epicentre."
"Seoul’s benchmark Kospi index closed down 3.1 per cent, with stocks that are exposed to a probable fall in spending by Chinese tourists as a result of the virus among the hardest hit."
"AmorePacific, South Korea’s largest cosmetics company, dropped 8.5 per cent while duty-free chain Hotel Shilla tumbled almost 10 per cent."
Smartphone and chip manufacturer Samsung fell more than 3 per cent.
In Sydney the S&P/ASX 200 index slipped 1.8 per cent as energy and mining stocks sold off on concerns over the pathogen’s impact on Chinese demand.
"Commodities-focused companies fell in Tokyo, too, where the Topix shed 0.6 per cent."
Singapore’s FTSE Straits Times dropped 1.9 per cent.
The yield on the 10-year US Treasury rose 4.4 basis point as investors moved out of the relative safety of government debt.
Gold was down 0.9 per cent.
"Brent crude rose 0.6 per cent to $59.66 a barrel, erasing earlier losses."
Investors in the US were looking ahead to the conclusion on Wednesday of the Federal Reserve’s policy meeting.
The central bank is expected to keep interest rates unchanged after three cuts in 2019.
Donald Trump tweeted that “the Fed should get smart & lower the Rate to make our interest competitive with other Countries which pay much lower”.
“There is almost no inflation-this is the time (2 years late)!”
the president wrote.
"The S&P 500 rebounded to close modestly higher after the World Health Organization said it was “too early” to declare the spread of coronavirus a global emergency, allaying fears over a virus that has sparked growing global alarm."
"Earlier, shares in mainland China and Hong Kong sank after authorities quarantined the Chinese city at the centre of the outbreak."
"US stocks closed near session highs with the benchmark S&P 500 gaining 0.1 per cent, led higher by shares in industrials and real estate."
"The Dow fell 0.1 per cent, while the Nasdaq Composite advanced 0.2 per cent."
"China’s benchmark CSI 300 index closed 3.1 per cent lower, its worst one-day performance since May, in the final session before the week-long lunar new year holiday."
"Hang Seng fell 1.5 per cent after the city confirmed its second case of the coronavirus, while China’s currency weakened against the dollar."
"Europe’s Stoxx 600 index fell 0.7 per cent, as luxury goods makers who are heavily reliant on Chinese sales slipped, with Burberry, Richemont and LVMH each down more than 2 per cent."
"Investors have spent the week trying to price the economic impact from the virus, which has evoked memories of the 2003 Sars outbreak."
Stocks had rebounded in the previous session on hopes Beijing was mounting an effective public health response.
"“With valuations elevated, asset classes are already vulnerable to shifts in sentiment,” said Seema Shah, chief strategist at Principal Global Investors."
Global markets fell on Thursday as Chinese authorities scrambled to contain the virus at a time when hundreds of millions of people are travelling domestically and abroad for the lunar new year.
More than 600 people have been infected by the virus and 18 are dead.
"On Thursday, transport networks in Wuhan were shut in an attempt to limit the pathogen’s spread."
"Authorities later extended similar restrictions to Huanggang city, south-east of Wuhan, and have cancelled large public events in Beijing."
"“Rather than viewing this move as promising to limit the spread of contagion, the market is judging it as reflective of the severity of the threat,”"
strategists said in a note to clients.
“What makes this concerning . . . 
"is that nobody really knows exactly how this is going to turn out,” Timothy Moe, chief Asia Pacific equity strategist at Goldman Sachs, said."
He added that the longer-term effect on markets was “really going to be contingent upon how far and fast this propagates and how the medical community is able to combat it”.
China’s onshore exchange rate for the renminbi weakened 0.5 per cent to Rmb6.935 against the dollar.
"Investors shrugged off an agreement between Washington and Beijing to pause their trade war, with China’s renminbi virtually unmoved as the country’s equity market edged lower."
"In early European trading on Thursday, the onshore traded Chinese currency was little changed against the dollar and the country"
’s CSI 300 stock benchmark finished the day down 0.4 per cent.
"The muted market reaction came after the US and China signed a so-called “phase one” trade deal, signalling a cooling off in trade hostilities."
The renminbi was a significant point of contention between the countries.
"Earlier in the week, the Trump administration removed its designation of China as a “currency manipulator” — a tag that led to volatile trading of the renminbi over the past few months."
But was given minimal space in the 86-page English-language text of the trade agreement and
analysts said the agreement contained no new major commitments from China on how it manages its currency.
"Julian Evans-Pritchard, senior China economist at Capital Economics, said the deal was “mostly a rehash of existing commitments”."
"The agreement also left open the possibility of Beijing intervening in currency markets through its state-run banks, he added."
Such interventions do not appear in official data released by the Chinese government.
"“If it’s just a matter of them publishing in more detail their official forex position, that won’t necessarily prevent them from intervening behind the scenes,” Mr Evans-Pritchard said."
"Aside from agreeing to existing commitments made to the IMF and as members of the G20, the deal declared that both sides “shall refrain from competitive devaluations and not target exchange rates for competitive purposes, including through large-scale, persistent, one-sided intervention in exchange markets”."
"“There is really almost nothing new in the currency provisions,” said Brad Setser, a former US Treasury official now at the Council on Foreign Relations, on Twitter."
“China has agreed to disclose material that it is already disclosing.”
"The US Treasury branded China a “currency manipulator” after the renminbi slipped past the key seven to the dollar mark in August, a label that sent the currency on its biggest monthly rout in more than 25 years."
"As negotiations improved towards the end of 2019, the renminbi began a steady rally that was capped by Washington’s withdrawal of the manipulator label."
Strategists are not convinced the rally will last.
Capital Economics forecasts that the Chinese currency will fall by about 4.5 per cent against the dollar this year.
"The onshore renminbi exchange rate — which trades 2 per cent in either direction of a daily midpoint set by China’s central bank — was at trading Rmb6.8845 to the dollar on Thursday, 7.4 per cent weaker than it was before US tariffs were first imposed on Chinese goods in 2018."
"At Rmb6.864, the offshore renminbi rose just 0.1 per cent against the dollar on the day."
Sterling has fallen below $1.30 for the first time in 2020 on swelling expectations that the Bank of England could cut interest rates as soon as this month.
"The pound fell 0.7 per cent to $1.2970 in morning trading on Monday, leaving it more than 2 per cent lower since the start of the year and on track for its fifth consecutive day of losses."
"Sterling fell 0.6 per cent against the euro, leaving £0.8565 required for a unit of the shared currency."
Monday’s drop accelerated after fresh figures showed that the UK economy contracted 0.3 per cent in November.
The shape of monetary policy has overtaken political risk as a key driver for the currency since the beginning of 2020.
Two monetary policy committee members have already suggested they could vote to cut rates as soon as this month if data do not show the economy is picking up.
"Over the weekend, Gertjan Vlieghe, an external monetary policy committee member, told the Financial Times he needed to see an “imminent and significant improvement in the UK data to justify waiting a little bit longer,” and on Friday, Silvana Tenreyro told a conference she could also vote for a rate cut “in the coming months”."
Outgoing governor Mark Carney also last week knocked sterling after suggesting that more stimulus could be on the cards.
"Large exchange-rate moves over the past week are evidence the market has built up significant positive bets on the pound since the December’s general election, said Adam Cole, chief currency strategist at RBC Capital Markets."
Those bets are now looking vulnerable.
"“The balance of risks is that those positions unwind as the market prices in a greater risk of a January rate cut,” Mr Cole said."
"At the most recent meeting in December, the rate setters voted 7-2 against cutting rates."
"Last week, market participants saw just a 5 per cent chance of a rate cut in January, judging from swaps data compiled by Bloomberg."
"On Monday, that probability shot up to 52 per cent."
Markets are also fully anticipating a rate cut by August.
"This shift is also reflected in UK government bonds, which have rallied on the prospect of lower interest rates."
"The yield on the 10-year gilt fell to 0.74 per cent on Monday, compared with more than 0.8 per cent last week."
"Lee Hardman, a currency analyst at MUFG, said: “The UK rate market has been underpricing the risk of a BoE rate cut and will need to continue to adjust to price in a higher risk as soon as at the end of this month.”"
The signs of a shift in policy mean that data between now and late January will be scrutinised.
"January 24 is likely to be a pivotal day, with a series of forward-looking PMI surveys due for release."
The pound’s weak start to the year has come even as investors begin to move back into unloved UK assets.
More than $10bn has been poured into sterling assets over the past three months as the threat of a no-deal Brexit has evaporated and a measure of political stability has returned.
"A total of $9.1bn has returned to UK equities since the week ending October 9, while bonds have seen a more modest $1.7bn of inflows, according to data compiled by Goldman Sachs."
"Most of those inflows have come from funds domiciled in the euro area, while flows from other regions have not shown the same persistence."
"The fresh investor interest has come after Boris Johnson’s government struck a surprise exit deal with the EU in early October, and then won the ability to implement it in the subsequent general election."
"The pound rose more than 10 per cent between early October and the Conservatives’ election victory in mid-December, but has since given up some of those gains as the prime minister has indicated he will seek to wrap up talks on the UK’s future relationship with the EU within the next year and questions over monetary policy have emerged."
"The Goldman data also showed that investors are still underweight the UK, despite the fresh surge of interest."
"“We have a cautious tactical view on the pound due to the risk that disappointing data in the coming weeks could raise the odds of easing by the Bank of England,” the US bank’s currency strategists said."
"“But if the domestic activity data hold up reasonably well, further inflows into the UK should support the pound deep into 2020.”"
— Tommy Stubbington contributed to this article.
"Wall Street’s main equities gauges hit record highs on Thursday, with Middle East tensions easing and the prospect of a Sino-US “phase"
one” deal on track to be signed next week.
A relief rally began on Wednesday when US President Donald Trump said Iran seemed to be “standing down” following missile strikes against US military bases in Iraq.
"The risk of overt confrontation between Washington and Tehran now seemed minimal “even if the longer term risks of asymmetric warfare are unknown”, said John Hardy, head of FX strategy at Saxo Bank."
All three major US gauges closed at — and notched intraday — record highs.
"The S&P 500 finished 0.7 per cent higher, led by gains across the technology sector."
The tech-heavy Nasdaq Composite gained 0.8 per cent.
"The Dow Jones Industrial Average tacked on 0.7 per cent, and was within a whisker of the 29,000 threshold during intraday trade."
The advance on Wall Street followed reports
China’s trade negotiators were scheduled to travel to Washington next week to sign a preliminary “phase-one” trade agreement with the US.
"In Europe, Frankfurt’s Xetra Dax rose 1.3 per cent while the continent-wide Stoxx 600 gained 0.3 per cent."
"Demand for haven assets, which rises in times of stress, eased off."
"The price of gold fell 0.2 per cent to $1,553 an ounce, while the Japanese yen was 0.3 per cent weaker against the dollar."
"The removal of several market headwinds allowed investors to “focus upon more secular concerns regarding the need to generate returns in a world beset by low safe haven yields”, added Rabobank analysts."
Oil stabilised during the US session with trade optimism bolstering hopes for stronger demand.
"Brent crude, the international benchmark, was down fractionally at $65.41 a barrel while WTI, the US marker was flat at $59.81 a barrel."
Asian markets also gained on Thursday.
"Nikkei 225 Average jumped 2.3 per cent, while Hong Kong’s Hang Seng index rose 1.7 per cent and the CSI 300 index of stocks listed in Shanghai and Shenzhen gained 1.3 per cent."
"Oil prices and global stock markets stabilised, with US stocks reapproaching record territory, after an initial jolt of volatility as investors bet an Iranian missile strike against American forces in Iraq would not escalate towards a broader conflict in the Middle East."
"Brent crude slipped 4.2 per cent to $65.44 a barrel during afternoon trade in New York on Wednesday, having fallen from an earlier spike to as high as $71.75 in the Asian session as investors gauged the consequences of the Iranian action and the likelihood of a US response."
The reversal pulled the price of oil below levels seen just prior to the American strike that killed Qassem Soleimani.
"US stocks surged to record intraday highs, with the benchmark S&P 500 jumping as much as 0.9 per cent in mid-afternoon trading, after early morning futures pointed to a sharp decline."
"The index ended the day with a 0.5 per cent rise, paring gains after reports of rocket fire in Baghdad’s Green Zone."
"The Nasdaq Composite, up 0.7 per cent, closed at an all-time high."
"President Donald Trump said in remarks at the White House that Iran’s attack resulted in no casualties and minimal damage to US military bases in Iraq, and added that Tehran “appears to be standing down”."
"The US will “immediately” impose additional economic sanctions on Iran, Mr Trump said during the press conference on Wednesday morning."
"On Tuesday night, the president tweeted “all is well!”"
"in the aftermath of the strikes, while Iran’s supreme leader said the attack was a “slap” in the face for the US but fell short of making further threats of escalation."
"“As long as the US does not respond to Iran’s most direct attack since the seizing of the US Embassy in Tehran in 1979, tensions should gradually ease and appetite for risk should improve,” said Piotr Matys, a senior emerging markets strategist at Rabobank."
"“However, it is still too early to declare with a high degree of confidence that the conflict is over."
The risk of a very dangerous spiral of tit-for-tat remains elevated and every single step from both sides could prove critical.”
European markets also recovered.
"The composite Stoxx 600 index closed 0.2 per cent higher, amid gains for major bourses across the continent."
"Shares in state oil company Saudi Aramco hit a new low of 34 riyal, the lowest level since the group floated on Saudi Arabia’s stock market last month, as regional markets fell."
"Markets across the world were jolted after Tehran’s Revolutionary Guard said it fired “tens of rockets” at facilities in Iraq including the Ain Assad base, which hosts US troops."
"The attack was retaliation for a US drone strike that killed Soleimani, head of Iran’s elite Quds force responsible for overseas military operations, and marked a serious escalation in the confrontation between Iran and the US."
"However, investors were reassured by an absence of US casualties and the measured tone of the official responses."
"Mr Trump said on Twitter that “assessment of casualties & damages [are] taking place now” and “so far, so good!”"
following the attack.
"Mohammad Javad Zarif, Iran’s foreign minister, tweeted that Iran does “not seek escalation or war, but will defend ourselves against any aggression”."
“We knew some kind of retaliation was going to happen . . . 
"so this is not overly shocking,” said Jim Paulsen, chief investment officer at Leuthold Group."
“I hate to say it
"but there are no casualties as of yet,"
so right now I would say the markets won't be facing too much selling pressure.”
Investors had sought safer segments of the markets in response to news of the missile attack.
"The price of gold, seen as a haven during times of uncertainty, climbed to a near seven-year high, rising more than 2 per cent to $1,610 per troy ounce."
"In the US afternoon it was trading back at $1,557, a loss of 1.1 per cent."
"The yield on 10-year US treasuries was up 4 basis points at 1.8650 per cent after earlier hitting a one-month low, while the Japanese yen was 0.6 per cent weaker versus the dollar after rising early in the day."
"Japan’s Topix stock index shed 1.4 per cent, while Hong Kong’s Hang Seng slipped 0.8 per cent."
China’s CSI 300 of Shanghai- and Shenzhen-listed stocks was down 1.2 per cent.
"“The major risk is that we continue to see a tit-for-tat pattern which escalates into a greater conflict,” said Chris Gaffney, president for world markets at TIAA Bank."
“I expect [markets] to recover quickly from any knee-jerk selling as long as there are no additional military actions.”
"But some analysts warned that any further escalation could mean Brent crude prices would keep pushing higher, to $75 per barrel."
"“Depending on any potential further actions by Iran, which is likely, or a likely retaliation by the US, the price may hover around these levels or hike further to $80 a barrel and beyond,” said Iman Nasseri, managing director for the Middle East with energy consultancy FGE."
"Reporting by Philip Georgiadis, Andrew England and David Sheppard in London, Daniel Shane in Hong Kong, and Jennifer Ablan, Colby Smith and Matthew Rocco in New York"
Global markets wavered while oil gave back some of its sharp gains as investors reassessed the likelihood of a direct confrontation between the US and Tehran.
"Wall Street’s S&P 500 fell 0.3 per cent on Tuesday, while the tech-heavy Nasdaq Composite was fractionally lower."
Investors parsed data showing stronger growth in the  US services sector last month and a  narrower trade deficit in November.
Asian stocks rose as investors’ appetite for risk improved following two days of losses.
"Japan’s Nikkei rose 1.6 per cent, largely recovering the previous session’s sharp fall, while Australia’s S&P/ASX 200 also outperformed with a gain of 1.4 per cent."
"Europe’s broad Stoxx 600 index climbed 0.3 per cent, although markets in France and the UK erased earlier gains to close lower."
"Germany’s Dax rose 0.8 per cent, below session highs."
Brent crude fell 0.9 per cent to trade at $68.27 a barrel.
It has gained nearly 3.5 per cent this year on fears over Middle East supply disruptions.
"“The market continues to await any signs or hints on how Iran may retaliate to last week’s US air strike,” Warren Patterson, head of commodities strategy at ING, said."
"Mr Patterson noted the US State Department has warned Saudi oil facilities are at risk of attack, while there are also worries over Iraqi supply after President Trump waded into a confrontation with Baghdad over the future of US troops in the country."
"In a  chaotic afternoon in Washington on Monday, the US denied it is pulling its forces out of the country after a leaked letter emerged indicating preparations for a withdrawal."
"“There’s been no decision whatsoever to leave Iraq,” said Mark Esper, the US defence secretary."
"Mr Trump said in a tweet he discussed oil prices, among other topics, with Saudi Arabia’s deputy defense minister Khalid bin Salman during a meeting at the White House."
"Strategists at Goldman Sachs said they remain “mildly pro-risk” in asset allocation looking ahead to 2020, following a year which was “a bull market in everything”."
"“The recent developments in the Middle East as well as the US elections are likely to keep the markets’ focus on geopolitical risks, which might weigh further on investor sentiment.”"
"Haven assets were steady, with sovereign bond yields hovering in a tight range as a rally in government bonds ran out of steam."
"Gold, which has been trading around seven-year highs on the increased geopolitical tensions, was up 0.4 per cent."
"“With a near-term hard Brexit scenario significantly reduced and the signing of a ‘Phase 1’ trade deal between the US and China looking likely on 15 January, we now see how the US-Iran relationship unfolds as the largest macro driver of rates in coming weeks,” RBC strategist Peter Schaffrik said."
The price of gold rose to its highest level in nearly seven years and global equities slid as tension in the Middle East fuelled demand for safe places to warehouse cash.
"Investors moved into assets seen as havens on Monday as they awaited any Iranian response to the US killing of a senior Iranian commander, sending the Japanese yen higher and extending a sell-off in global stock markets."
"Gold rose as much as 2.3 per cent to $1,580 a troy ounce, its highest level since April 2013, before trimming those gains to be up 0.9 per cent during afternoon trade in New York."
The rise in the precious metal’s price initially boosted the shares of producers.
"Newmont Goldcorp climbed 1.1 per cent and London-listed Polyus International advanced 2.3 per cent, but Harmony Gold gave up a gain of as much as 6 per cent and closed 0.1 per cent weaker, while Barrick Gold shed 1 per cent."
"“Markets tend to overreact to geopolitics when trading is thin, as it has been during the post-holiday period, but investors are right to fret about what is happening in the Middle East,” said Natasha Kaneva, commodities analyst at JPMorgan."
"“Gold is the favoured haven to preserve assets and purchasing power especially in times of stress in other markets,” George Gero at RBC Wealth Management said."
Crude oil hit a three-month high.
"The price of Brent crude rose as much as 3.1 per cent to trade above $70 a barrel, the highest level since an attack on a Saudi oil facility last year before giving up some of their gains."
Brent has climbed more than 5 per cent since US air strikes on Friday.
"Wall Street staged a late rally, shaking off the negative lead from European and Asian equity markets."
"The S&P 500 fell as much as 0.6 per cent before trimming its losses to close 0.4 per cent higher, while the Nasdaq Composite ended 0.6 per cent higher."
"The Cboe’s volatility index, or Vix, ended 1.2 points lower at 13.85, reversing an advance earlier in the session."
It still sits below its long term average of roughly 20.
"In Europe, the composite Stoxx 600 was down 0.4 per cent."
"Topix was the worst performing benchmark in Asia as it fell 1.4 per cent after coming back online following the holiday season, its steepest one-day drop since early October."
Relations between Washington and Tehran soured further over the weekend as Donald Trump warned Iran would be hit “harder than they have ever been hit before” if the country retaliates to the killing of Qassem Soleimani.
"In a series of increasingly bellicose tweets, the US president said he would respond “perhaps in a disproportionate manner” if Iran hits American targets."
"Ayatollah Ali Khamenei, Iran’s supreme leader, on Friday vowed to take “tough revenge” for Soleimani’s death and over the weekend hundreds of thousands of Iranians gathered in Iran’s holiest city to mourn Soleimani."
Tehran also said it would not abide by any of its commitments to the 2015 nuclear accord following the killing of its top commander.
President Trump tweeted on Monday: “IRAN WILL NEVER HAVE A NUCLEAR WEAPON!”
"“We’re left waiting to see if we get an aggressive response from Iran with the whole Middle East likely feeling vulnerable,” Deutsche Bank strategist Jim Reid said."
President Donald Trump also threatened neighbouring Iraq with sanctions “like they’ve never seen before” if it expels American troops in retaliation for the assassination in Baghdad on Friday.
Analysts at Goldman Sachs and UBS both said gold was likely to be a better bet for investors than oil if geopolitical tensions worsen.
"“We believe that the current risk premium embedded in Brent prices is already elevated, with an actual supply disruption now necessary to sustain oil prices,” said Jeffrey Currie, global head of commodities research at Goldman Sachs"
"“In contrast, history shows that under most outcomes gold will probably rally to well beyond current levels.”"
"Over the past month, gold has risen by more than $100 an ounce, helped by a lower US dollar and increased demand from investors."
A weaker dollar is a positive for gold because it makes the metal cheaper for buyers holding other currencies.
"Gold-backed exchange traded funds added more than 48,000 ounces to their holdings on Friday, taking purchases so far in 2020 to almost 173,000 ounces."
"The total amount of gold owned by ETFs now stands at a two-month high of 81.6m ounces, according to Bloomberg."
"“Gold and silver prices are enjoying a strong seasonal rally that had looked quite unlikely until late last year,” Richard Hatch, analyst at Berenberg, said."
Saudi Aramco shares have dropped more than 10 per cent from their peak as the Kingdom’s markets have been hit by growing jitters over the deteriorating situation in the Middle East following the US assassination of a top Iranian military commander.
The state oil company’s shares fell 1 per cent on Monday following a 1.7 per cent fall on Sunday.
"The slump has left Aramco’s shares trading at 34.2 riyal, the lowest level since the group floated on Saudi Arabia’s stock bourse last month."
"Saudi Aramco shares popped as high at 38.7 riyal on December 12, its second day of trading, briefly giving the sprawling energy group a valuation above the $2tn mark that had been sought by Crown Prince Mohammed bin Salman."
"While the shares remain above the 32 riyal flotation price, they are off 12 per cent from their mid-December high."
This gives the company a valuation of $1.8tn.
"Saudi Arabia’s markets have sustained a hit after a broad drop in emerging market asset trigged by the US assassination last week of Qassem Soleimani, an senior-ranking Iranian general."
The country's Tadawul stock index has dropped 2.3 per cent since the start of the year.
"At the same time, Saudi Arabia’s international bonds have come under modest pressure while the cost to insure against a debt default has risen."
"The yield on a 10-year US dollar-denominated bond issued last year as risen 0.11 percentage points in the first few days of 2020, leaving it at 2.96 per cent, the highest level in a month."
"The five-year credit default swap spread — a measure of the perceived risk of holding Saudi debt — has risen to 62 basis points, a three-week high."
Analysts are now closely watching to see whether Iran retaliates against the US move.
"Donald Trump has already warned Tehran that if it responds, the US will hit Iran “harder than they have ever been hit before”."
Saudi Arabia is one of Iran’s major regional rivals and an ally of the US.
Growing tensions between the US and Iran has brought the spectre of a potential attack on the country’s oil infrastructure back to the forefront.
Tehran was blamed for a drone strike on Saudi Aramco in September that temporarily knocked half the Kingdom’s crude output.
"Charles Robertson, head of macro-strategy at EM specialist Renaissance Capital, said market participants were nervous over a potential Iranian strike on Saudi Arabia’s oil assets."
"“Iran hit Saudi Aramco refineries in 2019, and could do so again in 2020,” he said."
“The markets are probably right to price in a few per cent off Saudi Aramco given the risk of another attack.”
"Still, Paul McNamara, an EM-focused fund manager at GAM in London, described the falls in Saudi markets as “mild”."
He said the decline was less about specific fears over Saudi Arabia and more of a result of the broad drop across emerging markets.
"MSCI’s broad EM stock index has dropped 1.4 per cent in the past two trading days, while the yield on a composite index of EM debt compiled by Barclays is effectively unchanged for the year to date."
Global stocks rallied on the first trading day of the year with Wall Street closing at a record high after China’s central bank moved to improve economic growth by pumping $115bn into the country’s financial system.
"The S&P 500 closed 0.8 per cent higher to a record 3,257.85 led by gains in technology stocks and with Apple trading above $300 a share for the first time providing a highlight among the big names."
"A 1.3 per cent increase pushed the Nasdaq Composite to a record high as well, while the Dow Jones Industrial Average climbed 1.2 per cent."
"Treasuries rallied, with the yield on the US 10-year down 3.5 basis points at 1.8754 per cent."
Yields move inversely to price.
"And the dollar index, a gauge of the buck against a weighted basket of peers, climbed 0.4 per cent, eyeing its best day since early November."
Wall Street tracked gains in Asia and Europe.
"Chinese stocks led the advance on New Year's Day, with the CSI 300 of Shanghai- and Shenzhen-listed companies rising 1.4 per cent to hit their highest level since February 2018."
"Hang Seng index gained 1.3 per cent to reach its highest since July, just hours after"
anti-government protests ended in violence.
"The upbeat sentiment came as the People’s Bank of China on Wednesday cut the reserve requirement ratio for commercial lenders across the board by 50 basis points, to release about Rmb800bn ($114.9bn) of fresh liquidity into the banking system ahead of the Chinese new year later in January."
"Meanwhile, a survey showed continued growth in China’s manufacturing sector."
"Analysts said the PBoC’s move, which had been expected, would reduce banks’ funding costs and free up credit for private companies and small businesses."
"European markets rose, with the Stoxx 600 adding 0.9 per cent."
The stock market gains were driven by rallies in London’s
"FTSE 100, Frankfurt’s Dax 40 and Paris"
"Cac 40, which were up 0.8 per cent, 1 per cent and 1.1 per cent respectively."
"The German 10-year Bund’s yield, which moves inversely to the price, was up 0.5bp in late US trade."
"The MSCI emerging markets index was up 1.2 per cent, putting it on track to close in a bull market with a gain of just over 20 per cent since an October 2018 low."
"Chinese stocks, which in 2019 enjoyed their best performance in five years, were buoyed after US President Donald Trump this week said that he will sign a “phase one” deal alongside Chinese officials in Washington on January 15."
That could signal a truce in the long-running trade conflict.
"“I expect near-term positive momentum for Chinese equities as investors react positively to two catalysts this week: the RRR cuts and the signing of the phase one deal,” said David Chao, Asia-Pacific global market strategist at fund manager Invesco."
Data released on Thursday indicated continued momentum in China’s manufacturing sector.
"The Caixin-Markit China manufacturing purchasing managers’ index survey for December came in at 51.5, firmly above the 50-point level that indicates growth in the sector."
"The reading was slightly down from 51.8 in November, the"
 in three years.
"“The [prospect of a] phase one trade deal between China and the US has sent out positive signals,” said Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group."
"“There is room for a recovery in business confidence, which should be able to help stabilise the economy.”"
"’s manufacturers have been badly hit by the US-China trade war, but the Caixin-Markit PMI index highlighted an improvement in business confidence."
"China’s official manufacturing PMI, which surveys larger, state-owned companies, held steady at 50.2 in December, according to the National Bureau of Statistics."
"In the US, fresh labour market data showed US job cuts fell to their lowest since July 2018 in December."
"Investors now look ahead to the release of the minutes of the Federal Reserve’s December monetary policy meeting as well as US earnings season, which kicks off in less than two weeks."
Sterling has begun the new decade on the back foot as some strategists played down the currency’s 2020 prospects with predictions of some tortuous months of trade negotiations with the EU.
"The pound on Thursday shed 0.6 per cent of its value against the dollar, recently trading at $1.3171."
"Thursday’s fall follows a familiar trend: the currency has slipped in the first major trading day of every year since 2013, except for in 2018."
"The currency rallied as much as 1.1 per cent late on December 31, rising as high as $1.3283 on Tuesday."
"That late rally was the biggest percentage rise since December 13, the day it emerged that Boris Johnson had won a thumping majority in the House of Commons."
"The currency rose nearly 4 per cent against the dollar in 2019, only its second annual rise in six years."
"“In the UK, the year is unlikely to bring much reprieve from Brexit-related news,” said Jane Foley, head of foreign-exchange strategy at Rabobank."
“Trade negotiations between the UK and the EU will dominate much of the domestic political landscape this year.”
"Ms Foley sees the pound trading at $1.30 over the next three months, testing $1.36 over the next 12."
"“If talks are difficult, a ‘no-deal’ Brexit would still be a prospect for the UK at the end of 2020,” Ms Foley said."
“This could bring strong downside potential for the pound and could also act as a drag on the euro.”
"Lee Hardman, currency analyst at MUFG, added: “Pound volatility has eased recently but remains higher than in other major currencies reflecting in part ongoing uncertainty over various outcomes of trade negotiations between the UK and the EU this year.”"
"Against the euro the pound rose 6.3 per cent last year, its first annual rise against Europe’s single currency since 2015 and its biggest since 2014."
"Sterling was recently down 0.4 per cent against the euro, trading at €1.1768."
That makes €1 worth 84.94p.
US and European equities up more than a quarter for the year
Nasdaq index falls shy of record-equalling 12th consecutive gain
Sterling bounce gaining strength
"Financial markets are enjoying some holiday cheer thanks to rising hopes that the global economy has turned a corner, with European equities nudging higher and the US stock market nearing its biggest annual gain in over two decades."
"While growth continues to be sluggish in most major economies, markets have been buoyed throughout the year by signs that a downturn will be averted, along with apparently better prospects of a trade deal between Washington and Beijing."
"Central banks, too, have provided renewed monetary stimulus, sending asset prices higher."
"“It’s a Goldilocks environment for stocks,” said Kristina Hooper, chief global markets strategist at Invesco."
“The trade deal is the icing on the cake.”
"Analysts on Wall Street have cautioned that the big gains of 2019 will be hard to sustain next year, but investors have kept markets simmering over the thin trading sessions following Christmas — a period marked in 2018 by an unusual sell-off."
"The Euro Stoxx 50 index closed 0.2 per cent higher on Friday, helped by gains from the French and German stock markets."
That extended gains for the eurozone’s leading blue-chip index to 6 per cent in the fourth quarter and to 26 per cent for the year to date — on course for its biggest annual gain since the introduction of the euro in 1999.
"Friday’s moves higher were primarily driven by growth-sensitive sectors such as industrials, materials and consumer goods, underscoring investors’ sense that some of the gloom earlier this year was overdone."
"“What a difference a year makes,” said Peter Tchir, a strategist at Academy Securities."
“After last year’s volatility we are back to one of those year-ends where it seems like both bulls and bears are content to let markets meander.
"Makes for a boring market to analyse, but a good market to enjoy some time with friends and family.”"
US stock market rally
"Strong though it is, the European stock market recovery of 2019 is eclipsed by the US equity market, which is now on the cusp of its best yearly performance since 1997, when the dotcom bubble was inflating."
"The S&P 500 traded flat on Friday but inched marginally above Thursday’s closing price to set a new record of 3,240 points, extending its 29.3 per cent gain so far this year."
A strong showing in the final trading sessions of the year could help the US market
pip the 29.6 per cent gain of 2013.
"The Dow Jones Industrial Average also set a record close, gaining 0.1 per cent to close at 28,645 points, eclipsing the 28,621 level set on Thursday."
The activity was not enough to send the Nasdaq Composite to new highs.
"The technology-heavy index fell 0.2 per cent on Friday, ending a hot streak of positive returns."
"The run of 11 consecutive daily returns fell one shy of its longest run on record, last reached in July 2009."
"Despite the loss, the index has returned 35.7 per cent this year."
"Other international stock markets have also enjoyed a strong end to the year, with the Hong Kong stock market climbing 1.3 per cent on Friday, South Korea"
Kospi nudging 0.3 per cent higher and emerging markets as a whole rising 0.7 per cent.
Bonds mixed; sterling climb continues
"Government bond yields were a mixed bag on Friday, mostly treading water at around their pre-Christmas levels."
"The 10-year Treasury, Gilt and Bund yields were at 1.87 per cent, 0.75 per cent and minus 0.26 per cent, respectively."
"Sterling’s post-election revival continued, with the UK currency climbing 0.6 per cent on Friday to trade at about $1.3074."
"Brent crude gained 0.4 per cent to trade at $68.16 a barrel, while aluminium and iron ore also gained ground."
Tech-heavy Nasdaq on best run since July 2009
"Gold breaks $1,500 mark after multisession rally"
Brent crude hits highest level since September’s drone attack spike
Wall Street hit fresh highs on Thursday over raised hopes that an interim trade deal between Beijing and Washington was still on course to be signed in January.
"“The deal is done,” said Donald Trump on Christmas Eve."
“It’s just being translated right now.”
"The day after the president's remarks, it was reported that a Chinese foreign ministry spokesman, Geng Shuang, had said the two sides were in close touch about a signing ceremony."
The anticipation of a ceasefire to the protracted trade war helped the three major US stock indices reach new records.
"The Nasdaq climbed 0.8 per cent to 9,022 points, pushing the index beyond the 9,000 milestone for the first time, with the technology-heavy benchmark having its 11th consecutive day of positive returns.  "
This is its best run since a 12-day stretch in July 2009.
"The performance was boosted by a 4.5 per cent jump in Amazon shares, after it reported a bumper holiday sales season albeit without details."
"The S&P 500 rose 0.5 per cent to 3,239 in New York, eclipsing Monday’s record close of 3,224, while the Dow Jones Industrial Average gained 0.4 per cent to hit 28,621, edging past the prior high-water mark of 28,551 set on Monday."
"Adding to the upbeat mood was data from the US Department of Labor, which revealed that US jobless claims had fallen 13,000 to a seasonally adjusted 222,000 in the week ending December 21."
“The number of Americans made jobless by their employers dropped back . . . 
to more normal levels showing the economy
"’s record run isn’t done yet,” said Chris Rupkey, chief financial economist at MUFG Union Bank."
"The lift in market sentiment led to a modest sell-off in core government bonds, with the yield on the 10-year US Treasury rising 7 basis point to 1.89 per cent."
"A month-long bounceback in oil continued with Brent crude, the international benchmark, up 0.9 per cent to $67.79 a barrel, its highest level since mid-September when Saudi Aramco oil-processing facilities were attacked by drones, sparking fears of supply shortages."
"WTI, the US marker, rose 0.8 per cent to $61.61 a barrel."
Gold is another commodity that has rallied strongly this week.
"The precious metal rose 0.8 per cent to break through the $1,500-an-ounce mark, capping three days of significant rises since Monday."
Markets in Europe and parts of Asia are closed on Thursday.
Additional reporting by Richard Henderson in New York
"US stocks traded serenely through a holiday-shortened Christmas Eve session, in contrast to the turmoil one year ago, holding on to gains that have made this the best year for equities since 2013."
"The technology-focused Nasdaq market finished the day 0.1 per cent higher, setting a new record and capping 10 straight days of gains, matching its best run since the summer of 2017."
"The S&P 500 index closed the day flat after an initial gain of 0.1 per cent, meaning the benchmark has returned 28.6 per cent so far this year — not far from the 29.6 per cent annual gain of 2013 and the 31 per cent of 1997."
"Risers were led by blue-chips including chipmaker AMD, which was boosted by a broker upgrade."
"Traders on Wall Street ended the day early, with the stock market closing at 1pm New York time, and an hour later for bond markets."
"The “Santa rally” could well extend into 2020, said Edward Moya, senior New York-based analyst at Oanda, a foreign-exchange specialist."
"Investors believe the US Federal Reserve will hold interest rates steady next year, he said, while “credit markets are healthy, the consumer is strong and some of the key headwinds in 2019 are becoming tailwinds”."
"Analysts note that the baseline is flattering: markets sold off heavily during the fourth quarter of 2018, as investors began to fret that the Fed had tightened monetary policy too much, too soon."
But a renewed burst of stimulus this year from the central bank — under the urging of US president Donald Trump — put a rocket under all sorts of assets.
"Bonds were boosted, too, before paring gains towards the end of the year."
"The US 10-year Treasury was trading at a yield of 1.902 per cent on Tuesday, down from 2.68 per cent at the turn of the year."
Yields move inversely to price.
"“2019 was the year where everything worked — stocks, bonds, gold, even bitcoin,” said Nicholas Colas, co-founder of DataTrek Research, in a note to clients."
"European stock markets were mostly flat on Tuesday, on thin trading volumes."
"The pound steadied, rising very slightly against the US dollar to $1.295, after a tumble of about 3 per cent over the past week."
"That fall — the worst stretch for sterling in more than three years — came after traders reassessed the risks for the currency, which had risen after the emphatic victory for Boris Johnson’s"
Conservatives in the UK general election.
"Gold climbed against the dollar, on track for its best year since 2010, when it rose 30 per cent."
Gains so far this year come to 16 per cent.
"Bitcoin roughly doubled in price over the year, to about $7,380."
"In Asia, Chinese stocks saw some relatively solid gains on Tuesday of about 0.7 per cent, as premier Li Keqiang played host for trade talks with Japanese prime minister Shinzo Abe and South Korean president Moon Jae-in."
"The Nikkei 225, the Japanese benchmark, closed fractionally higher."
"Masatoshi Kikuchi, chief equity strategist at Mizuho Securities, noted that recent days have seen a strong run of initial public offerings, as companies including WILLs, a corporate investor relations support provider, and Space Market, a platform for renting unused real estate, have traded much higher than their offering prices."
"“The success of these IPOs demonstrates that investors are attracted to start-ups that are changing Japan’s socio-economic structure,” he said."
The US stock market will be closed on Wednesday for Christmas.
Thursday and Friday are regular trading days.
Global stocks remained close to record highs as trading dwindled in the run-up to the Christmas holidays and some investors took profits on gains made earlier in the month.
"China announced on Monday it would cut import tariffs on a range of products, including frozen pork, avocados and some kinds of semiconductors."
"Over the weekend, US president Donald Trump said the US would very shortly sign a “phase one” trade agreement with China."
The signing is pencilled in for January.
"Net long positions in the dollar halved last week, hitting their lowest level since mid-June, according to Rabobank’s Commitment of Traders report, as optimism about a trade deal rekindled demand for riskier assets."
"Brent crude continued last week’s upward trajectory, adding 0.7 per cent to reach $66.60 a barrel."
"US stocks closed modestly higher with the S&P 500 index of blue-chips rising 0.1 per cent, a gain mirrored by the FTSE All-World stock index, which sent the benchmark above Friday’s record high."
It has risen 3.2 per cent since the start of December and 23 per cent over 2019.
Japan’s Nikkei was relatively flat on Monday after it reached a 14-month high on Friday.
It is up 2.3 per cent since the start of the month.
"Chinese stocks were down by their biggest amount in six weeks, after the government announced it would cut its investments in some chipmakers."
"The pan-European Stoxx 600 index remained flat, after ending last week up 1.6 per cent."
"The only big report expected this week is US data on personal consumption expenditure for November, due to be released on Friday."
"The UK’s FTSE 100 closed 0.54 per cent higher, notching up a nine-day rally and adding to a five-month high."
"The domestic FTSE 250 added 0.8 per cent, for three straight sessions of gains."
"In part, that reflects the latest tumble in the pound, following one of its worst weeks of the year last week."
It dropped another 0.4 per cent against the dollar to a low of $1.2943.
It also tumbled 0.7 per cent against the euro to €1.1668.
"The pullback, though likely exaggerated by threadbare pre-holiday trading conditions, illustrated that an ugly exit for the UK from the EU remained a pressing concern for UK markets."
"“PM [Boris] Johnson is still using the threat of a no-deal Brexit as a negotiating tactic in the forthcoming trade talks with the EU,” wrote analysts at Rabobank."
“This is likely to ensure that Brexit remains a driving factor for the pound.”
The pound fell anew on Thursday and is now on track for its worst week of the year as traders price in renewed Brexit uncertainty over the next 12 months.
Sterling was trading 0.2 per cent lower at $1.3050 in the wake of the Bank of England’s widely expected decision to leave interest rates on hold.
Against the euro it fell 0.3 per cent to trade at €1.1735.
"The central bank said it expected gross domestic product to rise “only marginally” in the fourth quarter of 2019, and that it was too early to tell how developments on Brexit will feed into the economic outlook."
"The pound has fallen more than 2 per cent against the dollar and euro this week, leaving it on track for its worst week against the single currency since July 2017, and close to its biggest weekly drop against the greenback this year."
The currency’s sharp fall has dispelled expectations that a Conservative election victory could provide a period of market stability.
"Sterling shot to $1.35 on Thursday evening as an exit poll gave the first indication of the Conservative party’s decisive election victory, but has since given up all of those gains as Mr Johnson pledged to outlaw any extension to the UK’s post-Brexit transition period at the end of next year."
"“We doubt such a promise is realistic given the mammoth task of bilateral negotiation ahead,” said strategists at Pictet Wealth Management, who expect the deadline to be extended."
Mr Johnson’s brinkmanship leaves markets facing another year with the threat of a disruptive EU exit hanging over the currency.
"While wrapping up a basic trade deal within 12 months is possible, EU officials have warned that crucial issues, such as market access for services, may only be tangentially treated in any initial trade deal."
UBS Wealth Management forecasts sterling falling to $1.15 if the trade talks fail and the UK reverts to a WTO-style trading relationship with the bloc at the end of 2020.
"But, the world’s largest wealth manager said in a note to clients on Thursday morning that this scenario is not its base case."
“Prime minister Johnson has a powerful incentive to avoid the economic disruption that a no-deal Brexit could produce.”
"Chief investment officer Mark Haefele said he remains positive on the currency, and sees the pound’s fair value against the dollar at higher than $1.50."
“Exchange-rate drops into the lower end of the $1.30 to 1.40 range can be used to build exposure to sterling.”
"Investors had also used the brief bounce to $1.35 to take profits following the pound’s surge higher from $1.20 earlier in the autumn, according to one foreign-exchange sales trader."
Sterling fell again on the heels of its biggest tumble in a year after the recently installed UK government signalled that the end of 2020 is a hard deadline for London and Brussels to strike a new trading partnership.
The pound has shed as much as 3.3 per cent since it soared to a 19-month high of $1.3514 set last week when it became clear Boris Johnson would win the biggest majority in a general election since Margaret Thatcher in 1987.
"Sterling was trading early on Wednesday at $1.309, down 0.3 per cent — adding to a 1.5 per cent tumble in the previous session."
Mr Johnson will this week publish Brexit legislation that would prohibit him from extending the standstill transition period covering relations with Brussels beyond December next year.
That potentially would create a cliff-edge scenario at the end of next year if no deal is in place.
Analysts at RBC Capital Markets predict “the spectre of a no-deal Brexit (or at least no-trade deal Brexit) to make a return in the second half of 2020.
For markets that means that the latest optimism will be damped which should be reflected in the pound but also
[will] keep the Bank of England in limbo and thus stay its hand.”
"As sterling gives back its recent gains, Ulrich Leuchtmann, the head of foreign exchange research at Commerzbank, calls it Mr Johnson’s conquistador strategy."
Nonetheless he believes that British prime minister will “once again act in a ‘reasonable’ manner”.
"“Without a deal sterling would depreciate massively,” he said on Wednesday in his note to investors."
“This scenario cannot be excluded; and therefore a considerable risk premium on sterling positions is justified.”
"S&P Global meanwhile late on Tuesday revised its UK outlook to “stable” from “negative”, affirming its double-A rating on the economy."
"“While uncertainty remains about the UK’s future relationship with the EU, we expect that the UK will ultimately seek an extension to the transition period beyond December 2020,” S&P said late on Tuesday."
US stocks withstood a choppy session to close — by slim margins — at record highs in the wake of China announcing it agreed a gradual reduction in tariffs as part of an interim trade deal between Beijing and Washington.
The S&P 500 finished higher by 0.01 per cent to notch its first back-to-back record close this month.
"The benchmark jumped as much as 0.5 per cent to a record intraday high as Chinese trade negotiators conducted a press conference in Beijing, revealing the developments they said were designed to boost confidence in global markets."
The index struggled to hold those gains and swung in and out of negative territory throughout the rest of the session.
"The Nasdaq Composite finished 0.2 per cent higher, while the Dow Jones Industrial Averaged gained just 0.01 per cent."
"The two gauges both notched up intraday record highs, but only the tech-heavy Nasdaq managed to register a new peak closing level."
"On Thursday, the S&P 500 and Nasdaq both closed at record highs after President Donald Trump tweeted that a trade deal with China was “VERY close”."
"Government bonds rallied, pushing yields lower, having been weaker overall through Asian and European trading."
"The yield on the benchmark 10-year US Treasury was down 7.2 basis points at 1.8191 per cent, walking back from a one-month high on Thursday."
"The dollar index, tracking the greenback’s gains against a basket of global currencies,   trimmed earlier declines to sit 0.2 per cent lower for Friday’s session."
"Strength in the British pound, as UK Prime Minister Boris Johnson’s"
"Conservative party secured a crushing general election victory, was a primary contributor to the buck’s weakness."
Sterling was up 1.3 per cent at $1.3335 in US trade.
"It gained as much 2.7 per cent to more than $1.35 during Asian trading hours after exit polls suggested the Conservative party was in the box seat, and reinforcing Mr Johnson’s resolve to take the UK out of the EU in January."
"London’s FTSE 100 closed 1.1 per cent higher, as did Europe’s broad gauge of equities, the Stoxx 600."
Dax added 0.5 per cent and France’s
Cac 40 rose 0.6 per cent.
"US stocks jumped, pushing the S&P 500 and Nasdaq Composite to record closing highs, after Donald Trump spurred investor hopes a “BIG DEAL” on trade between the US and China was close."
"Shortly after opening bell on Thursday, the president wrote in a tweet: “Getting VERY close to a BIG DEAL with China."
"They want it, and so do we!”"
"Although investors’ hopes for a trade deal have been dashed numerous times this year, Mr Trump’s latest tweet arrived days before a December 15 deadline that could see a new round of tariffs imposed upon Chinese imports."
Global stocks came under pressure earlier in the week on reports Washington and Beijing may not have been so close to an agreement.
"Stocks trimmed their advance through the middle of the day, but an afternoon rally saw the major indices close near their session highs."
The S&P 500 finished 0.9 per cent higher while the Nasdaq Composite added 0.7 per cent.
"The Dow Jones Industrial Average rose 0.8 per cent, but still sitting a handful of points away from its November 27 peak."
That helped push the MSCI All World index 0.8 per cent higher to a new peak.
Equity market strength came despite the impending deadline for Washington and Beijing to firm up a “phase one” trade deal that would halt the imposition of additional US tariffs on billions of dollars of Chinese goods such as smartphones and toys.
“Looking at the current price action . . . 
"you don't get that impression that investors even remotely think the US will impose December tariffs, which could derail a trade deal,” said Stephen Innes, chief Asia market strategist at broker AxiTrader."
"Government bonds sold off, pushing yields higher."
"The yield on the benchmark 10-year US Treasury was up 10.7 basis points to 1.8974 per cent, while that on the policy-sensitive two-year Treasury rose 4.7bp to 1.6643 per cent."
"On Wednesday, the Federal Reserve held interest rates steady, as Wall Street expected, after delivering cuts at each of its previous three meetings and signalled it would keep policy on hold through 2020."
Investors were also emboldened by the central bank’s upbeat assessment of the US economy.
Stocks across Europe were supported as the European Central Bank kept interest rates unchanged and stuck to its bond-buying programme.
"The Stoxx 600 was up 0.3 per cent, while Germany’s Dax added 0.6 per cent and France"
’s Cac 40 rose 0.4 per cent.
"In the UK, the FTSE 100 closed 0.8 per cent higher against the backdrop of the UK general election."
The pound sat 0.2 per cent weaker against the dollar.
"Sterling had been as much as 0.3 per cent firmer against the dollar at $1.3229, its highest since March as traders bet the ruling Conservative party would secure a majority in Thursday’s vote."
"However, investors are braced for potential volatility in the coming hours."
"“In the event of a black swan election result, sterling is likely to give up recent gains and suffer a heavy sell-off as traders unwind their positions,” said Margaret Yang, an analyst at broker CMC Markets."
"“However, the likelihood for that to happen remains very low.”"
"Mr Trump’s tweet helped reverse gains for the pound and many other major currencies, though."
"The dollar index, tracking the greenback against a basket of global peers, swung to be up 0.2 per cent to 97.29."
"In thin trading, Hong Kong’s Hang Seng closed 1.3 per cent higher, marking the benchmark’s second positive day in a row."
"The index’s top performers included Apple supplier AAC Technologies — up 3 per cent — and insurer AIA, which added 2.5 per cent."
"Elsewhere in Asia, South Korea’s"
Kospi gauge of blue-chips was 1.5 per cent higher.
"China’s CSI 300 of Shanghai- and Shenzhen-listed shares slipped 0.3 per cent, while Japan’s Topix was down 0.1 per cent."
"Wall Street began the week on the back foot, slipping for the first time in four days as investors grew antsy about the US-China trade war ahead of a fresh round of tariffs scheduled to take effect on Sunday."
The S&P 500 ended the day 0.3 per cent lower having spent much of the session in the red.
"Modest gains for consumer staples and real estate were offset by steeper declines for healthcare, tech and utilities."
"The Dow Jones Industrial Average declined 0.4 per cent, while the Nasdaq Composite fell 0.4 per cent."
The moves followed a sharp rally in US equities on Friday following a blockbuster jobs report and come as investors watch for any signs of progress on trade talks between the world’s two largest nations.
The US is set to impose a fresh round of tariffs on Chinese imports on December 15.
"In related news, Beijing has ordered government offices and public institutions to remove foreign computer equipment and software within three year, echoing a similar effort by the Trump administration."
"Elsewhere in markets, Treasuries were mixed with the yield on the US 10-year down 1 basis point to 1.8329 per cent, while that on the two-year was up 0.02 basis points to 1.6232 per cent."
Yields move inversely to price.
"The dollar index, a gauge of the buck against a basket of weighted peers, was 0.1 per cent lower, down for the seventh time in the past nine sessions."
"Investors also await the Federal Reserve’s monetary policy decision on Wednesday, when policymakers are expected to leave interest rates unchanged, effectively marking an end to the mid-cycle policy adjustment that began over the summer."
"Other key events on investors’ minds this week include a general election in the UK, which has implications for when and how the UK exits the EU as well as an interest rate decision from the European Central Bank."
Wall Street rallied and US Treasuries sold off on Friday as traders cheered reports showing the economy added jobs in November at the quickest pace in 10 months and consumer sentiment improved.
"Wall Street marched higher, taking the three major benchmark indices closer to record territories with the S&P 500 up 0.9 per cent and turning positive for the week."
"The Dow Jones Industrial Average gained 1.2 per cent for its biggest one-day gain since early October, while the Nasdaq Composite gained 1 per cent."
Despite Friday’s gains both indices were modestly lower for the week.
Demand for haven assets waned.
"Treasuries sold off with the yield on the policy-sensitive two-year Treasury note up 3.5 basis points to 1.6169 per cent, while that on the 10-year climbed 4.7 bps to 1.8415 per cent."
Yields move inversely to price.
"The dollar index, a gauge of the buck against a weighted basket of peers, climbed 0.3 per cent and was on track for its first gain since before the Thanksgiving holiday."
"Despite Friday’s gain, recent softness left the buck down 0.6 per cent for the week, its biggest such loss in 5 weeks."
"Hiring had been expected to rebound last month as General Motors employees returned to work, but Friday’s report showed non-farm payrolls increased by 266,000 and blew past economists’ expectations."
"Moreover, October’s wage gains were revised higher; though last month’s average hourly earnings were slightly below expectations."
US president Donald Trump tweeted “GREAT JOBS REPORT!” and also pointed to the “record numbers” on Wall Street this year.
"Adding to the upbeat tempo in markets was a report from the University of Michigan that showed consumer sentiment exceeded forecasts in December, hitting its highest level in seven months."
"The data suggest the American economy is on firmer footing in the final quarter of the year, which would allow the Federal Reserve to hold interest rates steady when it delivers its monetary policy decision next week and possibly in coming months."
The fading prospects of a rate cut pushed gold prices lower with the precious metal falling 1.1 per cent today to leave it down 0.3 per cent for the week.
Still some economists cautioned against reading too much into Friday’s data.
"“Despite today’s blowout number, the US economy is experiencing a slowdown and we expect this to be reflected in weaker payrolls gains in coming months,” James Knightley, economist at ING, said."
He added that a weak global growth environment and uncertainty around the US-China trade war has made US businesses more cautious “and already resulted in two consecutive quarters of falling capital expenditure”.
"Meanwhile, Ian Shepherdson, economist at Pantheon Macroeconomics, called it an “outlier report” and said he still expects growth in the final quarter of the year to be “soft”."
"US stocks bounced back on Wednesday, while Treasury yields also rose, as reports China and the US could be close to a trade deal breathed new life into risk assets."
"The S&P 500 closed 0.6 per cent, after losing a cumulative 1.5 per cent in the prior two days amid heightened trade tensions globally."
"The Nasdaq Composite was up 0.5 per cent, aided by gains in semiconductor shares."
The Dow Jones Industrial Average jumped 0.5 per cent.
"European markets also recovered, with the continent-wide Stoxx 600 snapping four straight days of losses with a rise of 1.2 per cent."
Markets are still highly sensitive to the contours of the trade dispute between the world’s two largest economies.
"On Wednesday, Bloomberg reported Washington and Beijing are moving closer to agreeing the amount of tariffs that would be removed in any “phase one” deal."
"The CBOE Volatility Index, dubbed Wall Street’s “fear gauge” dropped 7 per cent, while government bond yields rallied as investors moved out of debt."
The yield on the benchmark 10-year US Treasury was recently 6.3 basis points higher at 1.7723 per cent
Wednesday’s optimistic report helped turn round market sentiment.
Asia-Pacific stocks had slipped after comments from US president Donald Trump suggested he is in no rush to strike a deal with China.
"Australian equities posted the biggest fall in the region, with the S&P/ASX 200 sliding 1.5 per cent to a near two-month low as miners dropped."
China is a major market for Australian commodities.
"Mr Trump declared on Tuesday he was prepared to wait until after the US presidential election next year to reach a trade deal with China, claiming there was no deadline for an agreement."
"“In some ways I like the idea of waiting until after the election,” he said on a visit to London, a day after threatening tariffs on Europe and announcing an increase in tariffs on steel and aluminium from Brazil and Argentina."
"US markets were also pressured earlier this week by a downbeat reading on factory activity, adding to concerns over a contraction in the manufacturing sector."
"On Wednesday, the Institute for Supply Management’s index tracking the vast services sector showed growth cooled in November versus the prior month, though measures for employment and new orders strengthened."
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Markets were jolted after Donald Trump suggested a trade deal with China could be delayed until after the US presidential election in November next year.
"US stocks staged an afternoon recovery but ultimately closed lower, backing up from declines on Monday that were the biggest in two months."
US government bonds jumped the most in four months.
"Speaking in London during a press conference with Nato secretary-general Jens Stoltenberg, Mr Trump said he had “no deadline” for getting a deal done, adding: “In some ways I think it’s better to wait until after the election.”"
"The S&P 500 closed 0.7 per cent lower on Tuesday, following a 0.9 per cent on Monday."
It was down as much as 1.4 per cent at its session low.
The Nasdaq Composite sank 0.6 per cent and
the Dow Jones Industrial Average fell 1 per cent.
Treasuries surged as investors sought the relative safety of government debt.
"The yield on the benchmark 10-year US Treasury was down 12 basis points at 1.717 per cent, lining yields up for their biggest one-day drop since early August, according to Refinitiv pricing."
They had been down as much as 14.3bp at their session low.
The yield on the policy-sensitive two-year Treasury fell 7.6bp to 1.538 per cent.
"Charlie Ripley, senior investment strategist for Allianz Investment Management, said Tuesday’s developments were"
a reminder downside risks still remain for asset markets.
“The narrative on trade has quickly been turned upside down as negative headlines on tariffs have ignited a risk averse tone in the markets.
"Where it once looked like a trade agreement between the US and China was progressing, investors are seeing a different picture portrayed today,” he said."
"China’s currency also slipped directly following Mr Trump’s comments, as did European stocks."
"The continent’s broad Stoxx 600 was down 0.6 per cent, France’s"
Cac 40 sank 1 per cent and London’s
FTSE 100 tumbled 1.8 per cent.
Germany’s Dax eked out a 0.2 per cent advance.
"The offshore renminbi, the version of the Chinese currency which international investors can access outside of China, weakened 0.4 per cent to 7.0681 to the dollar."
"Gold, seen as a haven asset sought out by investors in times of market turbulence, traded 1 per cent higher."
“The China trade deal is dependent on one thing: Do I want to make it?” said Mr Trump.
We’re doing very well with China right now
and we can do even better.”
"The comments come as Mr Trump reignites global trade tensions more broadly, reimposing tariffs on some metal imports from Brazil and Argentina and threatening to impose duties on French products."
"“As we get closer to the December 15 deadline for new tariffs being imposed on China, risk markets will likely become increasingly nervous as each day passes if we get no news confirming either a date to sign a phase one deal or a delay in these tariffs being imposed,” Mohammed Kazmi, portfolio Manager at UBP, said."
"Separately, Beijing also upped the trade war ante as it retaliated against Mr Trump’s decision to sign legislation supporting protesters in Hong Kong by barring US navy ships from visiting the territory and slapping sanctions on four non-governmental organisations."
Mr Trump said that signing the legislation did not increase the chances of agreeing a so-called “phase one” trade deal.
Asia-Pacific stocks closed down in earlier trading.
Hang Seng ended the session down 0.2 per cent having slid as much as 1.4 per cent earlier.
The CSI 300 of Shanghai- and Shenzhen-listed stocks finished up 0.4 per cent after recovering from an early fall.
Tokyo’s Topix lost 0.5 per cent.
"Stocks in the US and Europe registered their biggest one-day drop in two months, and the dollar its largest in three, after weak readings on factory activity and Donald Trump"
’s move to reimpose tariffs on metals exports from Brazil and Argentina weighed on sentiment.
"The S&P 500, Dow Jones Industrial Average and Nasdaq Composite all fell by the most since October 8, closing lower by 0.9 per cent, 1 per cent and 1.1 per cent, respectively."
"Volatility, as measured by the Vix, jumped to its highest in seven weeks."
"Europe’s broad Stoxx 600 index finished 1.6 per cent lower for its biggest drop since October 2, while Germany’s Dax fell 2.1 per cent and France’s"
Cac 40 was off 2 per cent.
London’s FTSE 100 dropped 0.8 per cent.
Stocks in Asia were buoyed earlier on Monday by data that showed China’s manufacturing sector expanded at its fastest pace in three years in November.
European equities initially followed suit and opened higher.
But the mood soured after data showed manufacturing activity in the bloc contracted for a 10th consecutive month in November.
"There was some cause for optimism, though, as this was an improvement from October’s reading and a sub-index measuring output, regarded as a proxy of economic health, improved."
Concerns about the global trade war were reignited after Mr Trump tweeted before the US market opened that Washington would reimpose tariffs of 25 per cent on imports of steel and aluminium from Brazil and Argentina.
"US stocks opened higher, but were soon pushed deep into the red after data showed the contraction in the domestic manufacturing sector worsened in November."
The greenback turned further south after the factory data.
"The dollar index was down 0.5 per cent at 97.83 in afternoon trade, facing its biggest drop since early September."
"Hugh Gimber, global market strategist at JPMorgan Asset Management, said investors had grown increasingly confident in recent weeks that the worst of the US’s manufacturing slowdown was in the past, helping push Wall Street to record highs."
“Today’s decline in the US ISM manufacturing print is materially below expectations and stands at odds with the recent improvement in the US PMI data.
"A weak employment component is of particular concern given the importance of the US labour market to the health of the overall US economy,” he said."
"Andrew Hunter, chief US economist at Capital Economics, said there was evidence the downturn would soon bottom out and pointed to “a tentative improvement in some of the global manufacturing surveys, particularly in China.”"
"US government bonds remained weaker overall in today’s session, but slightly trimmed some of those declines following the domestic manufacturing data."
"The yield on the 10-year US Treasury, which rises as bond prices fall, was up 4.8 basis points to 1.8241 per cent."
Yields on European and UK government bonds were broadly flat.
"It was Wall Street’s first full day of trade since Wednesday, when all three of the main equities gauges closed at record highs."
The stock market was shut on Thursday for Thanksgiving and had a truncated session on Black Friday.
Highly rated government debt and other havens like gold dropped after upbeat data on China’s sprawling factory sector reinforced expectations that a global growth slowdown will not morph into recession.
US and German sovereign bonds on Monday recorded their sharpest rises in yield in three weeks as investors shifted into riskier assets.
"The 10-year Treasury yield climbed 0.07 percentage points to 1.847 per cent, with the equivalent Bund yield up by the same margin to minus 0.289 per cent."
"Gold was also under pressure, slipping 0.5 per cent to $1,455 a troy once, as the pan-European Stoxx 600 advanced 0.4 per cent."
"MSCI’s broad measure of Asian stocks outside Japan inched up 0.3 per cent, while S&P 500 futures pointed to gains of around 0.4 per cent for Wall Street’s main stock barometer."
Analysts said a duo of surveys showing Chinese factory executives taking on a more optimistic outlook had boosted sentiment across global markets.
"The official Chinese purchasing manager’s index, released at the weekend, showed the country’s manufacturing industry returned to growth in November, with industry participants pointing to growth in production and new orders."
A private poll pointed to the swiftest rate of expansion for the sector in three years.
"“Stronger-than-expected PMIs in China have contributed to lift investors’ mood,” said Chiara Silvestre, economist at UniCredit."
"The brighter data from China, the world’s biggest emerging market, underscore how the mood among traders and investors has improved after concerns over the potential for a global recession this summer sent traders piling into the perceived safety of government bonds."
"“We believe that after a globally synchronised slowdown over the past 18 months, global growth is now bottoming out well short of recession territory and will get back on track early next year,” said Quinn Brody, macro strategist at Deutsche Bank."
"“While activity may slow a bit further from its current levels in the near term, we are optimistic when looking forward several quarters.”"
He added that risks stemming from the US-China trade war and concerns over a chaotic no-deal Brexit had eased and “the possibility of a radical policy shift to the far-left in the US and the UK after their respective elections seems remote.”
Economic data releases have improved significantly since the late summer; Citigroup’s economic surprise index registered negative 11 at the end of last week from lows near negative 28 in August — suggesting a slowdown in rate of disappointing reports on the world economy.
"Global stock markets are on track to post a strong performance this year with MSCI’s broad index of developed and emerging market stocks up 20 per cent for the year to date, rebounding from a fall of 11 per cent in 2018."
"Meanwhile, investors have begun pulling out of top-rated bonds after a rush into the asset class earlier this year sent the stock of negative-yielding debt surging to a record of $17tn in August."
The value stood at $12tn as of Friday.
This week is on track to be the sleepiest for the euro since the currency was founded.
"Over the past five days, the difference between its highest and lowest points against the dollar has been a mere 0.38 per cent, marking the quietest stretch for the euro since it was introduced in January 1999, Refinitiv data show."
Thanksgiving week is typically quiet for currencies trading as Wall Street hunkers down for turkey feasts and relaxation.
But this week’s lack of activity echoes a low-volatility trend that has taken hold in several major currencies this year.
Six of the quietest 20 weeks on record have all been this year.
"The euro-dollar pair is the most actively traded on the foreign exchange market, accounting for some $1.6tn in turnover — 24 per cent of total volume — on an average day, Bank for International Settlements data show."
"But the euro’s range for this year, $1.0877 to $1.1570, is the lowest on a percentage basis in the history of the currency."
"In options trading, where investors hedge against or speculate on moves in currencies, the situation is similarly tame."
"Expectations for volatility over the next month for the euro are at the lowest on record, according to Bloomberg data."
"“The market has never before expected such small fluctuations in the euro-dollar spot [price] over the coming months as it does now,” said Thu Lan Nguyen, analyst at Commerzbank."
Ms Nguyen said cautious optimism over US-China trade talks has meant “markets are becoming increasingly relaxed”.
"She added: “Only an unexpected escalation of the conflict, which makes an increase in tariffs likely, is likely to jolt the market out of its lethargy.”"
"Barclays analysts noted that in addition to “uncertainty” over the Sino-American trade situation, a “lack of new signals from global data and monetary policies are likely to keep market conviction low” over the next several weeks."
The release on Friday of preliminary eurozone inflation figures highlights the lack of enthusiasm across currencies trading desks.
"The report, which was released at 10am London time, is generally one of the key economic events of the month because the European Central Bank explicitly targets inflation of close to but under 2 per cent."
"The data showed the rate of price growth accelerated to 1 per cent this month, up from 0.7 per cent in October and exceeding economist expectations of 0.9 per cent."
"However, traders watching a chart of the euro could be forgiven for missing the tiny move in the currency, which slipped 0.05 per cent during the following hour."
“As the economic environment is unlikely to be strong enough to see inflation move sustainably towards 2 per cent over the course of 2020 . . . 
"the forward guidance in place since September could keep ECB president Christine Lagarde’s first full year in office somewhat dull”, said Bert Colijn, senior economist at ING."
Asian stocks fell on Friday as investors braced for retaliation by China after US president Donald Trump signed into law a bill backing Hong Kong’s anti-government demonstrators.
"In afternoon trading, Hong Kong’s benchmark Hang Seng index sank 2.1 per cent — its biggest fall in two weeks — and China’s CSI 300 of Shanghai- and Shenzhen-listed shares shed 1.3 per cent."
Kospi fell by a similar amount as the country
"’s central bank shaved its growth and inflation forecasts for the year, while holding its benchmark lending rate at 1.25 per cent."
"Japan’s Topix slipped 0.5 per cent after industrial production in October shrank by the most in almost two years, underscoring how the economy has been buffeted by US-China trade tensions."
"Traders in the region were on edge after Mr Trump this week signed two US bills seen as supporting Hong Kong’s pro-democracy protesters, defying calls from China to block the legislation and putting the territory’s special trade status at risk."
"Investors are “concerned about what retaliatory action China might take against the US for signing the Hong Kong bill and whether that will derail the trade talks” between Beijing and Washington, said Andrew Sullivan, director of stock broker Pearl Bridge Partners."
A new round of US-imposed tariffs on $156bn of Chinese goods is set to come into force on December 15 if negotiators do not finalise a so-called “phase one” trade deal.
"“Traders are probably getting a tad jittery” about that date, said Stephen Innes, head Asia market strategist at broker AxiTrader."
"Among the biggest decliners in Hong Kong stocks were drugmakers CSPC Pharmaceutical and Sino Biopharmaceutical, which fell by 11.1 per cent and 5 per cent respectively."
The weakness came after international pharmaceutical companies agreed to slash the prices of dozens of drugs in China.
"On Friday, it was reported Chinese authorities said they would speed up a procurement programme that has pushed down prices of generic drugs."
"Traders across Asia also lacked any cues from Wall Street, which was closed overnight for the US Thanksgiving holiday, and liquidity was thin."
"US treasuries were flat, with the yield on 10-year government bonds steady at 1.765 per cent."
S&P 500 futures were pointing to losses of 0.3 per cent when Wall Street opens for a half-day of trading on Friday.
"In precious metals, gold was on track for its worst month in three years."
"The metal, seen as a haven in times of uncertainty, has shed 3.6 per cent in November as investors had become more upbeat on the prospects of the US economy and the potential for a resolution to the US-China trade war."
Sterling was on track for its first one-day gain in a week as Boris Johnson’s
Conservatives consolidated their lead in the opinion polls at the halfway point of the UK’s general election campaign.
"The pound rebounded 0.4 per cent against the dollar, setting it up for its first daily rise since Monday a week ago."
"Against the euro the UK currency in early Monday trading was heading for its biggest advance in a fortnight as it added 0.4 per cent to trade at €1.1692, making €1 worth 85.51p."
"The FTSE 100 unusually moved in the same direction as the currency, climbing 0.8 per cent early on Monday for its second consecutive rise."
"Often, the multinational-heavy index declines when the pound rises, since many companies listed on the benchmark exchange earn much of their earnings overseas."
"“Sterling volatility has been relatively contained,” said a UBS note to investors late on Friday."
"“Indications that the Conservative government will emerge the winner has generally sent sterling ticking higher, and vice versa.”"
"All the parties have now unveiled their manifestos, with Sunday being the turn of the Conservatives to show their hand in the election campaign."
They launched a low-risk prospectus aimed at power and protecting their double-digit lead in the opinion polls.
The latest Financial Times poll of polls showed the Tories pulling ahead with a 14-point lead at 43 per cent over the opposition Labour party.
Polls show the two main parties squeezing the smaller parties.
"UBS economist Dean Turner and strategist Daniel Trum added: “In our view, all credible outcomes point to minimal risk of a no-deal Brexit in the first half of 2020."
We retain our bullish medium- to long-term view on sterling versus the US dollar due to attractive valuations and structural factors.”
"They added a note of caution however, with three weeks still to go to the December 12 general election."
"“Tactical voting, varying turnout rates, and voters seemingly disenchanted by the options they are being presented with could yet lead to a surprise result.”"
The Swiss bank expects the pound to “settle” in a $1.26-$1.32 range over the next couple of months.
Global shares enjoyed strong gains on Monday amid renewed optimism of a breakthrough in the US-China trade dispute.
"Europe’s major stock bourses rose in early trading, with the composite Stoxx 600 index up 0.7 per cent, which puts it on track for its largest one-day rise in three weeks."
"In Hong Kong, the city’s benchmark Hang Seng index added 1.5 per cent."
"The gains came after Beijing on Sunday issued guidelines on strengthening intellectual property safeguards in the world’s second-biggest economy, describing the measures as “the biggest incentive to boost China’s economic competitiveness”."
Beijing’s alleged theft of foreign intellectual property and other industrial policies that favour local companies have been a  sticking point in resolving trade tensions between Washington and Beijing.
"“This is a critical area of trade negotiations with the US,” said UBS’s Paul Donovan."
The move has raised investor hopes the world’s two largest economies could finalise a long-awaited “phase one” trade deal.
A new raft of US tariffs on Chinese goods is due to kick in on December 15.
"Over the weekend, US national security adviser Robert O’Brien said an initial agreement is still possible this year."
“Both sides need the deal but neither wants to be seen to be compromising.
"One can only hope that both see reason,” said Andrew Sullivan, Hong Kong-based director at broker Pearl Bridge Directors."
"Traders were also on Monday weighing the implications of local election results in Hong Kong, in which pro-democracy parties romped to a landslide victory after months of protests in the Asian financial centre."
"About 3m people voted in the elections, roughly double the turnout in the 2015 ballot, in what has been viewed as a referendum on Carrie Lam’s leadership of Hong Kong through its political crisis."
"Mr Sullivan said that the result would likely pile further pressure on Ms Lam and the government, which have been reluctant to concede to protesters’ demands."
"Elsewhere in Asia, Japan’s Topix added 0.7 per cent, while China’s CSI 300 index of Shanghai- and Shenzhen-listed companies rose 0.7 per cent."
"Yields on US 10-year Treasuries were steady, while S&P 500 futures were pointing 0.2 per cent higher for when Wall Street begins trading on Monday."
Stocks across Asia fell on Thursday as investors’ concerns mounted over a possible setback in a resolution to US-China trade tensions and Congress passing a bill that supports protesters in Hong Kong.
"At the close of trade, Hong Kong’s Hang Seng index was the hardest hit."
"It lost 1.6 per cent, eroding the gains made earlier in the week."
China’s CSI 300 dropped 0.5 per cent and Japan
Topix ended the day 0.1 per cent down.
Traders said the weakness followed a report that the “phase one” trade deal between Washington and Beijing might not be signed until next year as Chinese negotiators pushed for a broader rollback of tariffs.
Investors’ appetite for risk was also dulled as the US House of Representatives on Wednesday passed legislation supporting anti-government demonstrators in Hong Kong.
"The bill, which has not yet been signed by President Donald Trump, would require Washington to review the Chinese city’s special trade status annually."
"Bloomberg later quoted Liu He, China’s top trade negotiator, who said he was “confused” over US trade demands, but “cautiously optimistic” on the phase one deal."
"“Sentiment remains exceptionally cautious amid heightened trade uncertainty around [the bill], potentially complicating the US-China trade outlook,” said Stephen Innes, chief Asia market strategist at broker AxiTrader."
“The question now is whether it’s possible to compartmentalise the Hong Kong bill away from the ‘phase one’ deal.”
The latest escalation in trade frictions between the world’s two largest economies raises the prospect of more tariffs on $156bn worth of Chinese consumer goods coming into force on December 15.
"“Those tariffs, if implemented would take us into new territory for this trade war and, moreover, threaten the US consumer,"
"the main support for the US economy right now,” said Robert Carnell, chief Asia-Pacific economist at investment bank ING."
"Trade uncertainty also permeated through Australia and South Korea, with equity markets there closing down 0.7 per cent and 1.4 per cent, respectively."
"Overnight on Wall Street, the S&P 500 closed 0.4 per cent lower on concerns over the trajectory of trade negotiations."
"In late-morning trading in New York on Thursday, it was 0.3 per cent down."
European markets fell in morning trading after comments from President Donald Trump knocked previous optimism that the global trade picture was improving.
"Mr Trump threatened to escalate the trade war with China in a speech last night, and said US tariffs on Chinese goods would be “raised very substantially” if no truce was reached with officials in Beijing."
"The composite Stoxx Europe 600 was down 0.6 per cent, with drops across major continental bourses."
"FTSE 100 fell 0.6 per cent, while the Cac 40 in Paris was 0.5 per cent lower."
Frankfurt’s trade-sensitive Dax 30 was down 0.8 per cent.
Futures trade pointed to losses of around 0.4 per cent for the S&P 500 at the open in New York.
"“President Trump struck a hawkish note on trade,” said RBC Europe’s macro strategists in a note."
Neil MacKinnon at VTB Capital said the “erratic nature” of the US-China trade news flow has now become commonplace.
"“Investors would prefer to see hard evidence of a rollback in tariffs on China as well as a pullback in the US tariff net, especially against the EU.”"
"In Asia, Hong Kong’s Hang Seng fell 1.8 per cent as the city faced a third day of major protests."
The index has fallen nearly 4 per cent so far this week.
"Shares listed in Hong Kong had been attempting a tentative rebound until this week, rising more than 6 per cent since the start of November."
In currencies the pound was flat against the dollar at $1.2850 and also against the euro at €1.1666.
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Gold was trading close to its lowest level in three months on Tuesday as an upbeat mood prevailed in global markets.
The precious metal has been one of the best performing commodities of 2019 but it dropped 3.7 per cent last week investors rediscovered their animal spirits amid easing geopolitical tensions and signs of stabilisation in the global economy.
"“Equities are gaining and safe haven assets are under pressure, as the market has moved into risk-on mode, with the twin headwinds of trade and Brexit risk perceived to have eased,” said analysts at Morgan Stanley."
President Donald Trump is due to speak on Tuesday and could provide further detail on the progress of trade negotiations with China.
"Gold was trading at $1,454 a troy ounce on Tuesday, more than 6 per cent below the six year peak it reached in September."
"For most of this year investors and central banks have been steadily accumulating gold, its appeal burnished by the huge stock of bonds trading at negative yields."
"However, its lustre has started to fade as several big banks, including JPMorgan and Citi, have turned negative."
"“With speculative long positions near record highs and the [US] Federal Resource now on hold, gold may be vulnerable to correction if we see further improvement in growth and/or easing of geopolitical risks,” JPMorgan said last week, as it moved to an “underweight” recommendation in gold."
"Meanwhile, nickel was headed for its worst run a year, on concern about slowing demand in China and a pick-up in supplies."
"It fell 1 per cent to $15,430 a tonne."
"The metal, which is used to make stainless steel, rose to a five-year high above $18,000 in September after Indonesia announced plans to ban ore exports."
"“After the suspension two weeks ago, Indonesia has allowed exports to resume from nine companies — at least until 1 Jan 2020, when the broader export ban comes into force,” said Morgan Stanley."
"“The partial lift of the suspension, plus rising China imports from elsewhere (imports from New Caledonia, Australia and the Philippines gained 13 per cent month-on-month in September), supports our view that China will have sufficient ore inventory to maintain a nickel pig iron production through 2020 at around 500,000 tonnes.”"
Stocks in Hong Kong suffered their biggest one-day drop in more than three months on Monday as fresh protests saw a demonstrator shot by police and chaos across the city’s transport network.
"The benchmark Hang Seng closed 2.6 per cent lower amid a strike by anti-government protesters and disruptions to transport networks in the Chinese territory, which has been rocked by months of sometimes violent political unrest."
"Police confirmed live fire was used and one man had been shot in Sai Wan Ho, a neighbourhood on Hong Kong island, in an incident that was filmed and circulated on social media."
"A separate video that also went viral online, showed what appeared to be protesters dousing a man in liquid and then setting him on fire."
"Property and retail stocks were among the names hardest hit on Monday, with Swire Pacific, New World Development, Sun Hung Kai Properties and Wharf Real Estate Investment all shedding between 4 and 7 per cent."
The 2.6 per cent drop in the benchmark was the steepest since early August.
49 of the Hang Seng
’s 50 stocks were down on the day.
Companies across the city have been slammed by a slump in tourism and retail sales partly caused by five months of protests and political deadlock.
"Business activity in the territory fell at its sharpest pace in more than two decades in October, data showed last week."
"Andrew Sullivan, a director at broker Pearl Bridge Partners, said investors were concerned about ramifications for Beijing’s trade talks with Washington as a result of developments in Hong Kong."
"“When you see somebody being shot on video and it is going viral, it puts [President Trump] in an awkward position,” he said."
“The concern is: What is the reaction going to be out of the US?”
"Mr Sullivan, whose commute into Hong Kong’s business district on Monday took about two hours longer than usual due to the protests, said markets were beginning to speculate about potential intervention by the Chinese military and the cancellation of local elections scheduled for November."
Either could further dent confidence in Hong Kong’s future as a global finance hub.
"The Hang Seng, the world’s worst-performing equity market in the third quarter, rallied 9 per cent between early October and early November as investors lined up bets that protests would fizzle out."
"“The striking thing is how strong the market has been,” said Richard Harris, a veteran investor in the city and founder of Port Shelter Investment Management, noting that Monday’s serious clashes came after months of simmering unrest."
“I was a buyer until today.”
"The Hong Kong market, home to a number of China-focused stocks, was also hit by comments from Mr Trump over the weekend suggesting he had not yet agreed to remove tariffs on Chinese goods."
Apple supplier AAC Technologies dropped 4 per cent.
Concerns over the trajectory over the trade war and its impact on the world’s second-biggest economy also reverberated through mainland China’s equity markets.
"The CSI 300 of Shanghai- and Shenzhen-listed stocks fell 1.8 per cent, in what is also the benchmark’s biggest one-day fall since August."
"Gerry Alfonso, director of research at broker Shenwan Hongyuan Securities, said selling has also been exacerbated by Alibaba’s Singles’ Day, as retail investors offloaded shares to take part in the world"
’s biggest online shopping extravaganza.
"That has “added a lot of pressure on the market,” he added."
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"Wall Street’s major bourses were mixed on Wednesday, as investors digested a report that a preliminary trade deal between the US and China may have to wait until next month."
"The S&P 500 rose 0.1 per cent, clawing back midday losses to reapproach its record high set on Monday."
"The Dow Jones Industrial Average shed a fraction of a point, while the Nasdaq Composite dropped 0.3 per cent after they set fresh all-time highs on Tuesday."
A report from Reuters said a meeting between Donald Trump and Xi Jinping may be delayed until December as talks between the world’s two largest economies continue.
"The “phase one” trade pact was previously expected to be signed at a summit of Asia-Pacific leaders in Chile this month, but the event was cancelled."
European shares showed lacklustre moves across the major bourses.
"The broad Stoxx 600 was up 0.2 per cent, Germany’s Dax gained 0.2 per cent, while the UK"
FTSE 100 was up 0.1 per cent.
"Asian shares have powered ahead in recent sessions on an improving narrative regarding trade and the global economy, with the MSCI Asia ex-Japan index reaching a six-month high this week."
"However, that moment fizzled out somewhat on Wednesday."
China’s CSI 300 of Shanghai- and Shenzhen-listed stocks ended 0.5 per cent lower as the renminbi weakened back below the seven per dollar mark.
The currency on Tuesday had strengthened past the key level as the US weighs rolling back tariffs on Chinese imports.
"“As far as markets are concerned, a lot of upside has clearly already been priced in” regarding trade, said Robert Carnell, Asia-Pacific economist at ING."
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"The S&P 500 fell from record highs on Thursday, tracking global stocks lower as fresh concerns over trade tensions between the US and China and a weak regional manufacturing report hit investor sentiment."
"A day after the Federal Reserve cut interest rates and signalled it was done easing monetary policy for the time being, the S&P 500 ended 0.3 per cent lower, paring losses that saw it down as much as 0.8 per cent earlier in the day."
Materials and industrials led the broad-based declines on the benchmark index.
The Nasdaq Composite was down 0.3 per cent.
"Meanwhile, Treasuries extended their post-Fed rally with the yield on the US 10-year down 11 basis points to 1.6858 per cent and that on the two-year down 10.8 basis points to 1.5219 per cent."
Yields move inversely to price.
"On the eastern shores of the Atlantic, the Stoxx Europe 600 reversed earlier gains to trade 0.5 per cent lower, while Germany’s Dax fell 0.3 per cent and the UK"
FTSE 100 was off 1.1 per cent.
The change in sentiment came as mostly positive earnings were overshadowed by fresh questions over a long-term trade deal between the world’s two key economies.
"Bloomberg reported Chinese officials have warned they will not move on their key priorities in the trade dispute, and added they are concerned over President Donald Trump’s decision making."
Further weighing on sentiment was a report showing a gauge of manufacturing activity in the midwest fell to its lowest level since 2015.
"The euro, meanwhile, was little changed as data showed the eurozone growth rate held steady in the third quarter, against expectations it would decline."
"On a busy day for earnings in the region, Fiat Chrysler shares rose 8.2 per cent after it agreed to pursue an auto megamerger with Peugeot’s owner, while online fashion retailer Zalando fell around 7 per cent after reporting results."
"On Wednesday, the Federal Reserve cut its benchmark interest rate by 25 basis points, in its third such cut this year."
"While chair Jay Powell indicated that the uncertain economic outlook justified the latest round of easing, he added that the possibility of a preliminary US-China trade deal and the fading prospect of a no-deal Brexit could increase business confidence, raising the odds of a pause in rate cuts."
"Mr Powell “seems relatively certain about a trade deal”, said Paul Donovan, chief economist at UBS Global Wealth Management."
Expectations of better trade were part of the Fed
’s moves last night
", Mr Donovan said — “although the upside from a trade deal is likely to be limited.”"
Mr Donovan also noted the cancellation of the APEC Summit in Chile due to civil unrest.
President Trump and his Chinese counterpart
"Xi Jinping were expected to finalise phase one of a possible trade deal at the event, but Mr Trump tweeted this morning the two countries were working on finding a new venue for the signing process to take place."
"“They can still do a trade deal elsewhere, but markets now have less certainty over timing,” he said."
There were few major moves in Asia-Pacific bourses.
"Japan’s benchmark Topix rose 0.1 per cent, while China’s CSI 300 of Shanghai- and Shenzhen-listed stocks fell 0.1 per cent."
"Official Chinese data showed the factory sector contracted by more than expected in October, while Hong Kong government figures have confirmed the city is in a recession for the first time in a decade."
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"US stocks finished higher, overcoming a sluggish start to the day as investors processed warnings on the outlook from a number of bellwether companies."
"The S&P 500 closed 0.3 per cent higher, while the Nasdaq Composite added 0.2 per cent."
"The session was off to a shaky start after industrial stalwarts Caterpillar and Boeing delivered underwhelming third-quarter results, with the former cutting its outlook for the year."
"Late on Tuesday, Texas Instruments reported results and a forecast that was softer than expected and stirred concern among broader chipmakers."
"It was the worst performer in the S&P 500 today, down 7.5 per cent."
"US government bonds were flat, with the yield on the benchmark 10-year Treasury down steady at 1.7642 per cent."
"That followed mild gains overall for Europe, where the broad Stoxx 600 was rose 0.1 per cent, France’s"
Cac 40 fell 0.1 per cent and Germany’s
Dax shed rose 0.3 per cent.
"London’s FTSE 100 led gains in the region, up 0.7 per cent a day after UK lawmakers voted for the first time for a Brexit deal when they backed Boris Johnson’s agreement with the EU."
"The pound edged back from the highs of the week but still hovered not that far off its best level since May, leaving it 0.3 per cent higher to $1.2915."
"Late on Tuesday, parliament supported the prime minister’s deal to withdraw the UK from the EU, but then voted against an accelerated timetable for its departure."
A general election is back on the agenda.
Against the euro the pound was at €1.1597.
"The pound has risen to as high as €1.1660 over the past few days, the highest level since May 8."
"“While there are a number of hurdles still to be overcome, there is a feeling that a majority now exists for the deal,” said Rob Carnell, chief Asia-Pacific economist at ING."
"In Asia, Japan’s Topix was the only major index in positive territory, rising 0.6 per cent."
SoftBank reversed earlier losses with a 0.9 per cent gain after the board of real estate company WeWork backed a takeover by the Japanese technology and telecoms conglomerate.
"Meanwhile, Hong Kong’s Hang Seng index fell 0.8 per cent after it was reported that Beijing was seeking to replace the territory’s under fire chief executive Carrie Lam on the back of months of political unrest."
The CSI 300 benchmark of Shanghai- and Shenzhen-listed names edged 0.6 per cent lower.
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US stocks staged a late session sell-off as the Trump administration’s decision to impose visa restrictions on Chinese government officials connected to the mass detention of Uighurs in western China revived concerns about trade tension between the world’s two biggest economies.
That took investors’ focus off
"Jay Powell, who shortly before the visa news, announced that the Federal Reserve would resume purchases of Treasuries in an effort to prevent a repeat of the recent disruption in short-term lending markets."
"The late tumble saw the S&P 500 finish 1.6 per cent lower, the fourth move of 1 per cent or more in either direction — or its third 1-plus per cent drop — in the space of six sessions."
The Nasdaq Composite shed 1.7 per cent and the Dow Jones Industrial Average was down 1.2 per cent.
"The broader fall came against the backdrop of declining borrowing rates as investors, unnerved by another flare-up in US-China trade tension, sought the relative safety of government debt."
"Fed chairman Jay Powell’s comments prompted a rally for shorter-term government debt instruments, though."
The yield on the policy-sensitive two-year Treasury was down 3.8 basis points at 1.4255 per cent.
The yield on the benchmark 10-year was down 1.7bp at 1.5357 per cent.
"US-China trade talks are scheduled to resume on Thursday, with analysts remaining dubious on the likelihood of a game-changing outcome."
"“We see some possibility of a truce, but a comprehensive trade deal remains unlikely,” BlackRock said in a note."
"The Trump administration said late on Monday it will restrict companies from exporting American-made goods to 28 more Chinese entities, in an announcement that came three days before the visit of Liu He, Beijing’s chief trade negotiator with the US, to Washington."
"Mark Haefele, chief investment officer at UBS Global Wealth Management, said he expects “only modest progress” in the talks."
"“Given the recent deterioration in economic data, we retain a tactical underweight position in equities while awaiting the result,” he said."
"Data released before the Wall Street open showed US core producer prices fell in September by the most in more than four years, giving the Federal Reserve more flexibility on monetary policy at its late October meeting."
"In Europe, the broad Stoxx 600 benchmark and Germany’s Dax were each down 0.9 per cent, while France"
’s Cac 40 shed 0.9 per cent.
’s FTSE 100 was down a relatively milder 0.4 per cent.
"Sterling weakened 0.5 per cent against the euro, hovering just off the threshold of 90p per €1, or €1.1150 per £1, as hopes of a Brexit deal at next week’s EU summit fizzled."
Boris Johnson’s allies admitted on Tuesday that any hopes the UK will strike a deal with Brussels at the meeting were effectively dead.
Asian markets rallied overnight.
China’s CSI 300 was up 0.6 per cent on its return following a week’s holiday.
"In Hong Kong, the Hang Seng index was also 0.3 per cent higher, rising from a five-week low despite four days of often violent protests after the city’s chief executive invoked a colonial era emergency law to ban demonstrators from wearing face masks."
"Kospi rose 1.2 per cent, and technology shares outperformed across Asia, after Samsung’s third-quarter results beat forecasts."
The Turkish lira remained under pressure after US President Donald Trump threatened to  “obliterate”
Turkey’s economy if the country launched any operation in Syria that he considered to be “off limits”.
The currency was hovering at its weakest in more than a month at TL5.8356 against the US dollar.
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Wall Street ended in the red having spent most of Monday fluctuating between losses and gains as investors refocused on US-China trade tensions ahead of a meeting between the two countries later this week.
"The S&P 500 shed 0.5 per cent with communications services the only major sector in the black, while energy was the biggest loser with a decline of 0.9 per cent."
Meanwhile the Nasdaq Composite ended 0.3 per cent lower.
"Both indices had come off their lows to trade as much as 0.3 and 0.4 per cent higher respectively, but failed to hold on to those gains."
"Treasuries sold off with the yield on the US 10-year up 4.4 basis points to 1.5580 per cent, while that on the two-year was up 6.6 basis points to 1.4638 per cent."
Yields move inversely to price.
"The choppy moves in equities came amid reports the Chinese Commerce Ministry is prepared to a deal with the US on parts of negotiations both sides agree upon, and that they are prepared to set out a timetable for harder issues to be worked out next year."
Stocks had come under pressure earlier in the day following a report Beijing is reluctant to agree to a broad deal with Washington and that the scope of topics for any potential agreement have narrowed considerably in recent weeks.
Trade negotiators from both sides are set to resume talks in the US capital from October 10.
“The US has indicated that it wants a broad-based deal.
"Nothing is yet in the bag, and optimism on trade has proved time and again to be misplaced,” wrote economists at ING."
Investors will also watch speeches from central bankers that include the Federal Reserve’s Jay Powell and Bank of England’s Mark Carney for further insight into the direction of monetary policy.
"Relatively soft non-farm payrolls at the end of last week have reinforced market expectations for imminent US interest rate cuts, Rabobank said."
The Stoxx Europe 600 reversed early losses to end 0.7 per cent higher by late morning on Monday.
"On an otherwise quiet day for economic data, figures showed German industrial orders have continued their decline, dropping by 0.6 per cent in August from the previous month."
"Elsewhere in markets, the Turkish lira took a beating after Donald Trump threatened to “obliterate” Turkey’s economy."
"Elsewhere in Asia, Japan’s benchmark Topix was flat, while equity markets in Hong Kong, which was rocked by further political unrest over the weekend, and mainland China remained closed for a holiday."
"Sterling was down 0.3 per cent at the $1.2297 mark, as markets digested the likelihood of the UK and EU agreeing a Brexit deal."
"Boris Johnson on Sunday urged the EU to compromise on a Brexit deal, as he insisted the UK would leave the bloc without an agreement if necessary on October 31."
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An afternoon rally handed the S&P 500 its biggest one-day gain in nearly two months as the latest US jobs figures helped allay concerns about a domestic and global slowdown that have been brewing for most of the week.
The S&P 500 finished 1.4 per cent higher on Friday in a broad-based rally that lifted all sectors.
It was the benchmark’s largest one-day rise since mid-August.
The Nasdaq Composite and Dow Jones Industrial Average each closed 1.4 per cent higher.
"That trimmed the S&P 500’s weekly decline to 0.3 per cent, recovering some of the ground conceded earlier in the week when soft economic data triggered a sell-off across global stock markets."
It was still the index’s third consecutive weekly drop.
"The gains in equities came in the wake of non-farm payroll data this morning that showed 136,000 jobs were added in September, from an upwardly-revised 168,000 in August, and the unemployment rate fell to 3.5 per cent — its lowest in 50 years."
"The annual pace of wage growth cooled, though."
Government bonds were mixed on Friday afternoon.
"The yield on the benchmark 10-year US Treasury was down 1.4 basis points at 1.5204 per cent, but the policy-sensitive two-year Treasury was weaker, with its yield up 1.6bp to 1.4016 per cent."
“Markets tend to like economic data that’s not too hot and not too cold.
"Today’s payrolls report fits that criteria,” said Jai Malhi, global market strategist at JPMorgan Asset Management."
"“With the lowest unemployment rate in 50 years the latest jobs report provides investors with some comfort that growth is slowing, not stalling.”"
Mr Mahi said the data are likely to “keep the US Federal Reserve on its current dovish path that has supported risk assets so far this year”.
"The chances of an interest-rate cut from the Federal Reserve at its next meeting in October stood at about 75 per cent today, having been just over 82 per cent yesterday."
"Last Friday, options markets had priced in a 43 per cent chance of a cut in October, but investors ramped up bets the Fed would be forced to cut rates — flying in the face of the central bank"
’s forecasts — after a string of disappointing readings this week on the manufacturing and services sectors of numerous advanced economies.
"Gold, seen as a safe haven in times of turmoil, shed early gains to be flat at $1,504.63 an ounce."
"Elsewhere in markets, European stocks finished higher, with the composite Stoxx 600 up 0.7 per cent, Germany’s Dax up 0.7 per cent and the Cac 40 in Paris up 0.9 per cent."
"In London the FTSE 100 finished 1.1 per cent higher, but still chalked up its biggest weekly fall in a year."
"In earlier trading, Hong Kong-listed equities fell as the city’s political crisis deepened, with chief executive"
Carrie Lam invoking emergency powers to ban protesters from wearing face masks.
"The territory’s Hang Seng index was down 1.1 per cent, with new data showing business confidence in Hong Kong had slumped to a seven-and-a-half year low following months of political unrest."
"Meanwhile, Japan’s Topix added 0.3 per cent, while China’s onshore stock market remained closed for a holiday."
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"Wall Street advanced on Wednesday with the S&P 500 closing above 3,000 for the first time since late July as a rally in tech and healthcare boosted US stocks and investors kept an eye on trade developments."
"The S&P 500 was up 0.7 per cent, edging closer to a fresh record high, led by healthcare and tech which were both up more than 1 per cent."
"The Dow Jones Industrial Average rose 0.9 per cent, its sixth consecutive daily rise and its longest winning streak since June."
"Meanwhile, the Nasdaq Composite gained 1.1 per cent, eyeing its first advance in four days."
Apple shares gained more than 3 per cent with the tech company’s market capitalisation climbing back above the $1tn mark on Wednesday as investors cheered its lower-priced iPhone 11 and Apple TV+ subscription.
Investors are also looking ahead to key central bank meetings.
The European Central Bank is expected to cut interest rates and detail plans for stimulus measures when it concludes its meeting on Thursday.
"Next week, investors expect the Federal Reserve to deliver a 25 basis-point rate cut."
"President Donald Trump on Wednesday renewed his attack on the Fed, calling for the “boneheads” at the central bank to cut interest rates to zero or lower."
Trade was also on the agenda as China on Wednesday moved to exempt 16 types of US-exported goods from import tariffs ahead of the latest round of trade talks.
"The State Council’s tax regulator will next look to further expand exemptions on US goods and release follow-up lists when they are ready, it said."
"The moves in US markets followed gains in Europe, where the Stoxx 600 rose 0.9 per cent and the Frankfurt-based Dax added 0.7 per cent, while London’s FTSE 100 climbed 1 per cent."
"Overnight in Asia, the Topix climbed 1.7 per cent, extending the Japanese benchmark’s positive streak into a fifth day."
"Hang Seng gained 1.8 per cent, lifted by a strong showing from banks including HSBC and Standard Chartered and local developer stocks."
"In commodities markets, oil prices fell sharply after a report that Mr Trump discussed easing sanctions against Iran."
"Brent, the international oil marker, reversed its gains and fell 2.1 per cent to $61.08 a barrel, while West Texas Intermediate, the US benchmark, was down 2.4 per cent to $56.03 a barrel."
"Sovereign bonds extended their sell-off, with the yield on the US 10-year up 4.2 basis points to 1.7437 per cent."
The German Bund rose 0.5 basis points to minus 0.562 per cent.
Yields move inversely to price.
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"Gold price could smash records at $2,000"
"Wall Street’s S&P 500 finished fractionally lower and Treasuries sold off following a mixed day in Europe, as investors weighed up signs of stimulus measures in major economies alongside the latest Brexit developments."
"The S&P 500, which had been up as much as 0.4 per cent earlier on Monday, eased just 0.3 index points, leaving it virtually flat for the session."
"Energy was the biggest gainer, up 1.9 per cent, while healthcare was worst off with a 0.6 per cent drop."
"Tech also proved a laggard in the S&P 500, down 0.4 per cent."
"The tech-heavy Nasdaq Composite slid 0.2 per cent, but the Dow Jones Industrial Average carved out a 0.1 per cent advance for its fourth consecutive daily gain."
"In corporate news, AT&T shares jumped 1.5 per cent after activist investor Elliott Management disclosed a $3.2bn stake in the US telecoms group and pushed for a strategic overhaul."
"An advance in bond yields helped send bank shares higher with the S&P 500 financials sector climbing 1.1 per cent, while bond proxies like real estate and utilities were down 0.9 per cent and 0.6 per cent, respectively."
Treasuries sold off as investors weighed up expectations for further rate cuts after Federal Reserve chairman Jay Powell reiterated on Friday the US central bank would “act as appropriate to sustain the expansion”.
His remarks followed US jobs growth that slowed to a three-month low in August.
Investors are already anticipating a 25 basis point rate cut this month.
That saw Treasuries sell off with yields on the US 10-year up 9.4 basis points to 1.6438 per cent and that on the two-year up 6.5 basis points to 1.5928 per cent.
Yields move inversely to price.
"Investors are also closely watching for the latest trade developments, with the US and China agreeing to resume face-to-face talks next month."
Treasury Secretary Steven Mnuchin on Monday said in an interview with Fox Business that the US and China have arrived at a “conceptual agreement” on enforcement systems around intellectual property.
"In the UK, the FTSE 100 fell 0.6 per cent as UK markets braced themselves for more Brexit turmoil."
"Prime minister Boris Johnson held talks with his counterpart in Dublin for the first time, but British and Irish governments said “significant gaps remain” between Mr Johnson and Leo Varadkar, despite some “common ground” being established."
"Mr Johnson will try again to trigger a general election, which opposition MPs are expected to block."
"Downing Street was privately threatening to ignore legislation against leaving the EU without a deal and refuse to seek a delay to Brexit, a move that could prompt an emergency judicial review by the Supreme Court."
Sterling fell as much as 0.4 per cent in early London trading before rebounding sharply for a 0.5 per cent gain.
European stocks were mixed.
The Stoxx 600 was down 0.3 per cent while the Xetra Dax trimmed its early gains following upbeat German exports data and was up about 0.3 per cent.
"Overnight in Asia, China’s CSI 300 of Shanghai- and Shenzhen-listed stocks rose 0.6 per cent, while Tokyo’s"
Topix added 0.9 per cent despite government data showing Japanese growth
slowed to 1.3 per cent in the three months to the end of June.
Kospi gained 0.5 per cent.
Hong Kong’s Hang Seng index finished less than 0.1 per cent lower following another weekend of political unrest in the city.
"On Friday, China said it would loosen curbs on bank lending to provide more economic stimulus amid concerns over flagging growth as a result of the trade war with the US."
"The Chinese government said on Sunday that exports shrank in August, defying analysts’ forecasts."
"Stock markets are “benefiting from the reserve ratio cut but negatively impacted by the poor export figures”, said Gerry Alfonso, executive director at Shenwan Hongyuan Securities."
"In commodities, Brent crude, the international oil marker, was up 1.9 per cent to $62.73 a barrel after Saudi Arabia on Sunday replaced energy minister Khalid al-Falih, one of the most powerful figures in the global oil industry, in a shake-up at the heart of the kingdom’s government."
"Reporting by: Mamta Badkar, Matthew Rocco and Peter Wells in New York, Sarah Provan in London and Daniel Shane in Hong Kong"
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US stocks eked out a slight gain in the wake of a middling jobs report and a decision by China’s central bank easing financial conditions.
"Data showed the US economy added a net 130,000 jobs during August, down from the previous month and fewer than forecast."
"The S&P 500 struggled for traction overall on Friday but managed to carve out a 0.1 per cent gain by the closing bell, having dipped into negative territory during the session."
"Since last Friday, the equities benchmark added 1.8 per cent and chalked up its first back-to-back weekly gain since mid-July."
"The Nasdaq Composite eased 0.2 per cent today, while the Dow Jones Industrial Average added 0.3 per cent."
"Treasuries trimmed declines from earlier in the day, as yields turned lower."
"The yield on the benchmark 10-year bond was down 0.1 basis points at 1.5551 per cent, while that on the policy-sensitive two-year was down 0.6bp at 1.5362 per cent."
"The dollar index, tracking the buck against a basket of global peers, was flat at 98.428."
"The People’s Bank of China, in late Asian trade on Friday, reduced the ratio of reserves that commercial lenders are required to maintain."
"The 50 basis point cut to the reserve requirement ratio, or RRR, is estimated to boost banks’ ability to lend by about Rmb900bn ($126.4bn) in an effort to boost the broader economy."
"Russia’s central bank also cut its benchmark lending rate, by 25 basis points, to 7 per cent."
"Markets in Europe and Asia had already been mostly higher on Friday, tracking Thursday’s strong gain on Wall Street as trade optimism boosted sentiment ahead of US jobs figures."
"Europe’s broad Stoxx 600 gained 0.3 per cent, while Germany’s Dax added 0.5 per cent and London"
’s FTSE 100 added 0.2 per cent.
"In Japan, the Topix gained 0.2 per cent, putting the index on track for its best week in two months."
Hang Seng gained 0.7 per cent lining the index up for its best week in 11 weeks
and China’s CSI 300 was up 0.6 per cent.
The Kospi in South Korea gained 0.2 per cent and the S&P/ASX 200 also rose 0.5 per cent.
News that the US and China would hold trade talks in early October pushed the S&P 500 to a one-month high on Thursday.
"Robert Carnell, ING economist, cautioned that while “talks are better than no talks” the questions to ask are whether US trade negotiators are willing to scale back demands and if China will back down on state-owned enterprises and intellectual property."
He thinks the talks in “October may result in a further increase in tariffs and retaliation”.
"Sterling was steady after Boris Johnson was dealt a blow by his younger brother Jo Johnson’s  resignation, claiming the UK prime minister was not governing “in the national interest”."
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"US stocks fell for the first time in four days, starting September on the back foot as trade uncertainty and the first contraction in America’s manufacturing sector in three years unnerved investors."
"With Wall Street returning from a long weekend, the S&P 500 fell as much as 1.2 per cent before trimming its losses to end the day 0.7 per cent lower."
"The sell-off was led by industrials and tech, down 1.4 per cent and 1.3 per cent respectively."
"Utilities and real estate led the way, with gains of 1.8 per cent and 1.3 per cent."
The Nasdaq Composite was down 1.1 per cent.
Stocks were dealt a blow after data showed the Institute for Supply Management’s manufacturing index fell 2.1 points to 49.1 in August as the US-China trade war weighed on the industrial economy.
"Critically, it dragged the index below the 50 threshold that separates expansion from contraction for the first time since August 2016."
That added to unease across Europe and Asia earlier in the session where investors adopted a risk-off stance amid uncertainty over the next steps in US-China trade tensions and as Brexit turmoil raised the odds of a general election next month.
The moves also followed a report that Chinese and US officials were struggling to set a timetable for further trade talks this month.
The latest batch of tariffs imposed by Washington and Beijing on each other took effect on Sunday.
"Treasuries advanced with the yield on the US 10-year down 3.9 basis points to 1.4674 per cent, while that on the two-year slid 4.4 bps to 1.4620 per cent."
Yields move inversely to price.
"Meanwhile, the dollar index, a gauge of the US currency against a weighted basket of peers, climbed as much as 0.5 per cent to 99.37 — its highest level since May 2017, before trimming some of those gains."
"In Europe, the Stoxx 600 shed 0.2 per cent, while the FTSE 100 was also down 0.2 per cent."
"Sterling fell to $1.1959 in earlier dealings, falling below the $1.20 level for the first time since 2017."
The currency reversed its losses after UK prime minister Boris Johnson’s Conservative party lost its working majority in the House of Commons on Tuesday ahead of a crucial Brexit vote.
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"Wall Street advanced for the third day on Monday while government debt prices pulled back after last week’s rally, with investors squarely focused on monetary policy ahead of the Federal Reserve’s annual economic conference later this week and amid optimism on trade."
"The S&P 500 finished 1.2 per cent higher at 2,923.65 in a broad-based rally led by energy and tech stocks that were up 2.1 per cent and 1.6 per cent, respectively."
The Nasdaq Composite rose 1.4 per cent.
The NYSE Fang+ Index rose 3.1 per cent.
"The moves on Monday were supported by the US commerce secretary’s extension of a temporary reprieve to Chinese telecoms equipment maker Huawei under certain circumstances, amid ongoing tensions between the US and China on trade."
"That followed a tweet by President Donald Trump over the weekend, in which he said, “We are doing very well with China, and talking!”"
referring to discussions on trade.
"Sovereign bonds, which are on track for the best year on a price basis in almost 25 years, came under pressure on Monday."
The US 10-year Treasury yield ticked up as much as 7.1 basis points but at pixel time was up 6.6 bps to 1.6063 per cent.
Meanwhile yield on the equivalent German Bund rose 3.7 bps to minus 0.652 per cent.
Yields move inversely to price.
"On the longer end of the spectrum, the 30-year Treasury yield jumped 8.7 bps to 2.0874 per cent, having fallen last week below 2 per cent for the first time in history."
"Gold, which like sovereign debt is seen as a shelter during times of tumult, fell 1.2 per cent to $1,495.84 per troy ounce."
"Equities across Europe posted solid price increases, with the broad Stoxx 600 gauge rising 1.1 per cent."
"Market barometers in Germany, the UK and France all rose by at least that margin."
"In Asia, MSCI’s measure of stocks outside of Japan jumped 1.2 per cent."
"Hang Seng led the way higher, climbing 2 per cent for its best day in two months, after an estimated 1.7m-strong anti-government protest over the weekend ended peacefully."
CSI 300 rose 2.2 per cent after the country’s
central bank said it would replace its key lending rate with a more-market driven benchmark.
"The gains came after global developed and emerging market stocks shed 5.1 per cent over the past three weeks, according to MSCI’s All-World gauge."
"Central bankers will meet on Thursday in Jackson Hole, Wyoming, against a background of rising fears over slowing global growth and after the US yield curve inverted for the first time in more than a decade, in what is seen as an indicator of a looming recession."
"Jay Powell’s speech will be the “main event”, according to Lee Hardman, currencies analyst at MUFG, who said: “Since the Fed’s last policy meeting at the end of last month, downside risks to the global growth outlook have increased."
It has made the US rate market more confident that the Fed will deliver another rate cut at their next meeting on the 18 September.”
"Despite rising expectations for rate cuts and the recent yield curve inversion, some argue that while a recession risk has risen, “a recession over the next year or so is still not a foregone conclusion”, according to Tiffany Wilding, economist at Pimco."
"“Unlike the lead-up to past US recessions, today’s financial stability risks appear moderate, bank balance sheets are strong, household leverage is manageable, and the personal savings rate is high."
All of these fundamental factors should help buffer an economic downturn.”
"In commodities markets, oil prices rose with Brent crude up 1.9 per cent following an attack on a Saudi Arabian oilfield by Yemen’s Houthi group over the weekend."
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US stocks notched their biggest jump in two months and demand for haven assets retreated after upbeat Chinese trade data soothed investors’ nerves following a tumultuous trading session sparked by mounting fears over global growth.
"The S&P 500 finished the day 1.9 per cent higher, extending Wednesday’s recovery that saw the benchmark come back from a drop of as much as 2 per cent and close up 0.1 per cent."
Thursday’s advance marks the index’s biggest one-day gain since June 4 and puts the gauge back in positive territory for the week.
"The Nasdaq Composite was up 2.2 per cent, while the Dow Jones Industrial Average added 1.4 per cent."
"As investors piled back into stocks, they pulled back from government bonds, pushing yields back up."
Yield on the US 10-year Treasury rose 2.5 basis points to 1.7155 per cent but had traded as high as 1.793 per cent at one point during the day.
Sovereign debt issued by countries ranging from the US to Germany and the UK also took a step back after dramatic price rallies on Monday and Wednesday.
"Global fixed income markets gained more than 1 per cent on a total return basis over the first three days of the week, the second-strongest rise since the start of 2018, according to the broad Barclays index of high-grade debt."
"Trade data released on Thursday by China, showing exports unexpectedly ticked up in July, helped to bolster sentiment, analysts said."
"“Data from China offered some respite to the steady flow of poor economic data that is fuelling the current flight to safety,” said Derek Halpenny, analyst at MUFG."
"Ken Cheung, a strategist at Mizuho Bank, added: “China trade figures in July were encouraging."
This could help ease concerns over China’s growth outlook amid escalating trade war risk.”
"In Europe, German 10-year Bund yields were largely unchanged at minus 0.56 per cent, while the yield on UK 10-year gilts edged up to 0.535 per cent."
Demand for these bonds had been boosted this week both by their so-called haven appeal and also the spectre of further monetary accommodation on both sides of the Atlantic.
Yields move in opposite direction to price.
"Equities in Europe took their cue from their Asian counterparts, enjoying some relief from recent losses."
Europe’s benchmark Stoxx 600 and Germany’s Dax each gained 1.7 per cent and France’s
CAC 40 leapt 2.3 per cent.
London’s FTSE 100 rose 1.2 per cent.
"China’s CSI 300 index of Shanghai and Shenzhen-listed names closed up 1.3 per cent, while Hong Kong’s Hang Seng index ended the day up 0.5 per cent."
"Both the onshore and offshore variants of China’s renminbi strengthened about 0.2 per cent, despite the country’s central bank setting the currency’s closely watched official midpoint below the seven-to-the-dollar point for the first time since 2008."
"However, renminbi “sentiment remains fragile given the elevated trade war risk”, Mr Cheung said."
"Oil clawed back some of its recent losses, with Brent, the international marker for crude, up 2.6 per cent to $57.75 a barrel."
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US stocks closed in positive territory and a government bond rally lost steam on Wednesday as investors pushed back against deepening concerns over the global growth.
"The S&P 500 finished 0.1 per cent higher, fighting back from a decline of as much as 2 per cent soon after the opening bell."
"An afternoon rally for tech stocks also saw the Nasdaq Composite close 0.4 per cent higher, although the Dow Jones Industrial Average settled 0.1 per cent lower."
"A rally in Treasuries, which have benefited both from expectations of looser monetary policy and their “haven” appeal, cooled during the afternoon."
"The yield on the benchmark 10-year note was down 2 basis points at 1.719 per cent but had dropped as much as 11 basis points earlier in the day to 1.593 per cent, its lowest level since October 2016."
"The moves came after central banks in India, New Zealand and Thailand signalled worries over a slowing global economy by cutting interest rates by more than expected on Wednesday."
A steep fall in German industrial production also raised fears that the eurozone’s largest economy could be heading for its first recession in six years.
US Treasury yields have fallen about 40bp this month alone as trade tensions between Washington and Beijing have escalated.
"Asian equities on Thursday were higher, with China’s CSI 300 index adding 1.2 per cent, while Hong Kong’s Hang Seng index was up 0.7 per cent, after Chinese export data in July were better than expected."
benchmark Kospi rose 1 per cent and Japan’s
Topix edged 0.2 per cent higher.
"Oil clawed back some of its recent losses with Brent, the international marker for crude, up 2.6 per cent to $57.70."
"Joachim Fels, global economic adviser at bond manager Pimco, said Treasuries could go negative when the world economy next enters a prolonged slump."
"“If trade tensions keep escalating, bond markets may move in that direction faster than many investors think,” he said."
"German 10-year Bund yields, already well below zero, reversed an earlier decline to be up 0.6bp at minus 0.573 per cent, while UK 10-year gilts fell as much as 8.4bp to touch a fresh record low of 0.431 per cent on Wednesday."
"European stock markets also managed to claw back earlier declines, leaving benchmarks such as Germany’s Dax, France"
Cac 40 and the UK
FTSE 100 up for the day.
Havens remained in demand despite the recovery for stocks.
"Gold was still up more than 2 per cent at more than $1,500 a troy ounce for the first time in six years, while the yen remained firmer against the dollar."
"Brent crude struggled to shake the broader concerns about global growth and hit a 7-month low of $56 a barrel on Wednesday, but recovered some ground to trade 2.8 per cent lower at $57.34 amid reports Saudi Arabia was considering options to stabilise prices."
The overall move into bonds and away from riskier assets comes amid a wave of action from central banks.
"The Reserve Bank of India cut rates by 35bp, a bigger move than had been expected, New Zealand’s central bank aggressively cut its benchmark policy rate to a fresh all-time low, prompting the local currency to fall sharply, and the Thai central bank unexpectedly cut rates."
“These aren’t even terrible economies.
"Not like, say, Germany,” said Kit Juckes, a macro strategist at Société Générale, referencing the German industrial production data."
"Rabobank analysts added: “As trade war tensions rise and the ripples are felt across global markets, overnight saw a further sign that central banks seem fixed on a race to the bottom.”"
"Traders now expect the Fed to cut rates by 110bp from the current level by the end of next year to 1.045 per cent, according to data on the federal funds futures market."
The deep cut to the central bank’s main rate would be in addition to the 25bp reduction agreed by policymakers last week.
Participants in the futures market had been forecasting as recently as April that the rate would finish next year at 2 per cent.
"President Donald Trump continued his criticism of the Federal Reserve on Wednesday, calling for “bigger and faster” cuts."
"Expectations for sharp cuts from the Fed has placed pressure on other central banks, particularly those in emerging markets, to reduce their rates to keep local currencies from appreciating too sharply."
"The market value of outstanding negative yielding bonds is now at a record $15tn, according to Barclays."
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"US stocks have registered their biggest one-day drop of the year and bond yields plunged after China allowed its currency to fall through a key threshold, escalating the trade war between Washington and Beijing and raising concerns about the outlook for global growth."
"In a broad-based sell-off that saw all sectors on Wall Street close lower, the benchmark S&P 500 sank to a two-month low, leaving it down 6 per cent from its record high in July."
"Demand for US government bonds, to which investors typically flock during times of trouble, pushed the yield on the 10-Treasury note sharply lower, and a bond market indicator of recessions flashed its most bearish signal since 2007."
"“If the trade war escalates we may end up talking ourselves into a recession — that is the concern we’re seeing in the markets today,” said Anik Sen, global head of equities for PineBridge Investments."
“There is very little visibility in any of this and that is the frustration because it keeps changing from day to day.”
"A global sell-off began on Monday after China allowed its currency to weaken below Rmb7 to the dollar, resulting in hefty falls for Asian and European stocks and prompting US President Donald Trump to accuse Beijing of currency manipulation."
Declines for US stocks accelerated around midday in New York after it was reported Chinese companies had suspended purchases of agricultural products and that Beijing had not ruled out the possibility of imposing tariffs on US agricultural products purchased after August 3.
"Zippy Duvall, president of the American Farm Bureau Federation, said China"
’s announcement represented “a body blow to thousands of farmers and ranchers who are already struggling to get by”.
"Further souring the mood, Mr Trump said in a series of tweets on Monday that China had “used currency manipulation to steal our businesses and factories, hurt our jobs, depress our workers’ wages and harm our farmers’ prices."
His remarks come at a time of strained trade relations between Washington and Beijing.
Both sides again arrived at an impasse during negotiations last week and last Thursday’s announcement that new tariffs would be placed on $300bn of Chinese goods next month.
"The S&P 500 closed 3 per cent lower, its biggest one-day drop since December 4 and sixth consecutive session of declines — marking its longest losing streak in 10 months."
"The Dow Jones Industrial Average shed 2.9 per cent, and the Nasdaq Composite dropped 3.5 per cent, their biggest respective falls since December."
"The Russell 2000, which tracks small-cap stocks that are more exposed to the domestic economy, dropped 3.2 per cent on Monday, leaving it down about 15 per cent from its peak last August and in correction territory."
"The Cboe’s Vix, a measure of volatility nicknamed Wall Street’s “fear gauge”, jumped above 23 points for the first time since mid-May."
Government bonds extended a recent rally that has taken place against a backdrop of confusion about the Federal Reserve’s outlook for interest rates and the Trump administration’s tariffs announcement last week.
"US government debt climbed sharply in price, leaving the 10-year Treasury yield down 12 basis points at 1.735 per cent on Monday."
Last week saw the biggest weekly decline for 10-year yields since 2012.
The 10-year yield has fallen about 80bp since the start of May as concerns over trade and signs of a slowdown in the global economy have built.
"The moves in the bond market, with longer-term borrowing costs dropping even further below short-term ones, resulted in the difference between the yields on 3-month and 10-year Treasuries falling to its most negative since April 2007."
The inversion of this yield curve has preceded every US recession of the past 50 years.
"“There is a risk that there is a bit of codependency with Trump’s rhetoric surrounding trade,” said Mark Cabana, rates strategist at Bank of America Merrill Lynch."
"“The more the Fed eases, the less economic impact will be felt and the more emboldened Trump feels to ratchet up trade tensions."
"It puts the Fed in a bind, and they will continue to be pushed around by trade uncertainty.”"
"The drop for US stocks, which took their cue from European and Asian bourses, came after last week’s 3.2 per cent fall in the MSCI"
All-World stock index — the heaviest retreat since the market ructions of late 2018.
"’s FTSE 100 was down 2.5 per cent, France’s"
CAC 40 shed 2.2 per cent and Germany’s
Dax declined 1.8 per cent.
"MSCI’s broad index of Asian stocks outside Japan fell 2.9 per cent, with Japan"
Topix sliding 1.8 per cent.
"Traders priced in further stimulus measures from the US Fed, with futures trade suggesting the central bank’s main rate will be 1.03 per cent at the end of 2020, 19bp lower than expected on Friday."
"That means market participants are now forecasting 100bp of rate cuts by December next year, after the Fed last week cut rates by 25bp in the first such reduction since the financial crisis."
"Across the Atlantic, the yield on the UK’s benchmark 10-year government bond struck a historic low, breaching a trough it hit in the wake of the 2016 referendum on the UK leaving the EU."
It fell as much as 5.9bp to 0.49 per cent.
"In Germany, the 10-year Bund yield struck a record low, falling as much as 4.7bp to minus 0.53 per cent."
The drop in China’s renminbi to under 7 per US dollar also cascaded into other major emerging market currencies.
"South Korea’s won was among the worst hit, sliding 1.4 per cent against the dollar, while other actively traded currencies like South Africa"
’s rand were also under pressure.
"Robert Carnell, head of Asia-Pacific research at ING, said China allowing its currency to fall below Rmb7 was probably a “deliberate decision, and part of what we imagine will be a concerted series of steps aimed at pushing back at the latest US tariffs”."
"Japan’s yen, which tends to rise during times of strife as domestic investors pull money back from global markets, strengthened 0.5 per cent against the dollar to ¥106.08."
"In commodities, gold rose 1.5 per cent to $1,461.60 an ounce as traders sought havens while global oil marker Brent crude was down 3.4 per cent at $59.84 a barrel."
"Additional reporting by Leo Lewis in Tokyo, Edward White in Seoul and Richard Henderson in New York"
"Momentum from another record close on Wall Street ebbed for European stocks on Thursday, while government bond markets continued to rally, pushing the yield on Germany’s benchmark"
Bund deeper into record negative territory.
"The demand for the debt, seen as Europe’s safest, sent its yield down to as low as minus 0.409 per cent, meaning any investor holding the paper until maturity faces a loss."
"US markets are closed to mark Independence Day, leaving the US 10-year Treasury yield at 1.9532 per cent, a three-year low, on the prospect of a July interest rate cut from the Federal Reserve."
"The ability of Wall Street to stay at its peaks when traders return from the July 4 holiday will in part depend on the hotly anticipated June non-farm payrolls report, to be released on Friday."
"In a preview of that report, data published by ADP on Wednesday showed private sector hiring growing at a slower rate than anticipated."
"The ADP report showed private payrolls increasing by 102,000 last month, from an upwardly revised 41,000 in"
"May. However, that was shy of economists’ expectations for 140,000 jobs, according to a survey of economists by Reuters."
"Expectations for looser monetary policy helped power another record-breaking run for US stocks, with the S&P 500, the Nasdaq Composite and the Dow Jones Industrial Average all closing at record highs on Wednesday."
European markets were more muted.
"Frankfurt’s Xetra Dax 30 ticked up 0.1 per cent, with London"
’s FTSE 100 down by the same amount.
"Nonetheless, the Europe-wide Stoxx 600 has gained almost 2 per cent this week, with hopes for dovish central bank policy stoked after Christine Lagarde was nominated to be the next president of the European Central Bank."
Investors expect her tenure will extend the era of ultra-loose monetary policy seen under outgoing president Mario Draghi.
The international index held steady on Thursday.
"“The market has become super-hopeful that the Federal Reserve will be able to act quickly enough to stave off a US recession, leading to the big price gains across many assets or, as dubbed by some, ‘the rally of everything’,” said Koon Chow, strategist at UBP."
"“But while monetary policy can do a lot to help distressed global markets, its ability to solve the macro problems of our day are limited."
"Fed cuts can’t do much to solve trade tensions, kick start global capex, boot up the very weak automobile or tech sector, or get President Trump to play nice with China or the eurozone.”"
There were bigger moves for Asian stocks.
Topix rose 0.7 per cent with gains across the board while Australia’s S&P/ASX 200 added 0.5 per cent.
"However, optimism faded in Hong Kong, with the Hang Seng index down 0.2 per cent."
’s CSI 300 also lost gains to fall 0.7 per cent overall.
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US stocks closed at record highs on Wednesday as part of a global rally for both equities and bonds as investor cheered the prospect of looser monetary policy at the world’s major central banks.
"In a truncated Wall Street session ahead of the Independence Day holiday, the S&P 500 finished at its highest levels of the day, rising 0.8 per cent."
"The benchmark now sits fewer than five points away from crossing the 3,000 mark for the first time."
"Other major indices also hit new highs, including the Dow Jones Industrial Average, which closed up 0.7 per cent, and the Nasdaq Composite, which rose 0.8 per cent."
"The ability of Wall Street to stay at the new highs when traders return from the July 4 holiday will depend on the hotly anticipated June non-farm payrolls report, to be released on Friday morning."
"In a preview of that report, data published by ADP on Wednesday showed private-sector hiring growing at a slower rate than anticipated."
"The ADP report showed private payrolls increasing by 102,000 last month, from an upwardly revised 41,000 in"
"May. However, that was shy of economists’ expectations for 140,000 jobs, according to a survey of economists by Reuters."
"Moves in the bond market were spurred by expectations for looser monetary policy at central banks, while weak data and concerns about underlying economic growth also boosted demand for safer assets."
"In particular, investors were assessing the nomination of Christine Lagarde, the managing director of the International Monetary Fund, as the next president of the European Central Bank."
Ms Lagarde is largely seen as an advocate of outgoing ECB chief Mario Draghi’s stimulus policies.
"The yield on the 10-year US Treasury was down 2.4 basis points at 1.9532 per cent, but had earlier traded below 1.95 per cent for the first time in nearly three years."
"The yield on 10-year German Bunds fell to a fresh record low, down by as many as 3.4 basis points to minus 0.399 per cent, while yields on UK government debt also pushed their way to multiyear lows as Bank of England governor Mark Carney struck a cautious tone in a speech."
"“While Christine Lagarde may implement small changes at the margin, we expect her to continue the ECB’s super-accommodative ways,” said David Lafferty, chief market strategist at Natixis Investment Managers."
"The Europe-wide Stoxx 600 gained about 0.9 per cent to reach its highest level since June 2018, with consumer stocks setting the pace and offsetting declining energy stocks, which struggled as Brent crude bounced back only modestly after posting its biggest fall in a month in the previous session."
Frankfurt’s Xetra Dax 30 rose 0.7 per cent and London
’s FTSE 100 added ⅔ of 1 per cent.
"Oliver Blackburn, a portfolio manager at Janus Henderson Investors, said: “Markets are likely to be relieved that the hawkish Jens Weidmann [president of Germany’s Bundesbank] has missed out on the [ECB] role.”"
"Investors were also continuing to measure comments from Mark Carney that “a global trade war and a no-deal Brexit remain growing possibilities not certainties”, leading to deepening expectations that the BoE could consider cutting rates, rather than looking to an increase as its next policy move."
UK government debt passed notable milestones during the wider rally for sovereign bonds as the BoE governor’s
words continued to resonate and
more weak UK data added to the picture.
"The composite purchasing managers’ index showed a contraction for June, reading under 50 at 49.7."
"The yield on 10-year gilts fell to its lowest since September 2016, down 5.6 basis points to 0.667 per cent, leaving it under the BoE’s base interest rate of 0.75 per cent."
"The pound fell 0.1 per cent to $1.2572, the lowest since mid-June and almost 5 per cent under a recent peak in May."
Japan’s yen was 0.1 per cent stronger at ¥107.81 per dollar and gold
"trimmed declines to be down 0.1 per cent at $1,417.55 an ounce."
US stocks pulled back for a second straight day as traders weighed trade tensions against tame inflation data that could bolster the case for interest rates cuts by the Federal Reserve.
The S&P 500 dropped 0.2 per cent on Wednesday.
"The benchmark was dragged lower by energy shares, which fell in unison with oil prices, and the financial sector, whose profits would come under pressure from lower interest rates."
Technology shares also contributed to the sell-off amid ongoing concerns over global trade.
"US consumer prices came in below analyst expectations, strengthening the market view there is room for the Fed to cut rates if the economic outlook deteriorates."
The consumer price index rose 1.8 per cent last month from a year ago.
That compares with the 2 per cent pace recorded in April and expectations for a 1.9 per cent increase.
"The numbers “will only fuel the market clamour for interest rate cuts,” said James Knightley, chief international economist at ING."
"US government debt rallied, sending yields lower."
The yield on the 10-year Treasury note fell more than 2 basis points to 2.1187 per cent.
"The yield on the more policy-sensitive 2-year Treasury hit 1.8827 per cent, down 3.7 basis points."
"Traders have ramped up their expectations for multiple rate cuts this year in response to US-China tensions and slowing global growth, but some analysts have questioned whether market expectations are overblown."
"Pimco US economist Tiffany Wilding said she does not expect a rate cut in June, but a 50 basis point cut is possible in July if downside risks to the economy escalate."
The inflation print helped cap losses in global equities on a trading day which had otherwise been dominated by a sharp fall in oil prices.
"Brent crude fell 3.7 per cent to $59.97 a barrel, its first close below $60 since January, while West Texas Intermediate slipped into a bear market after a report showed US crude stockpiles increased last week."
"Oil has fallen 19.6 per cent since late April, having rallied from $50 to $75 between January and April."
"The index tracking the Stoxx 600 European oil and gas sector fell 2.2 per cent, with BP down 2.9 per cent, Total falling 2.7 per cent and"
Eni slipping 1.6 per cent.
The Stoxx 600 dipped 0.3 per cent after clawing back some of its losses following the US consumer price data.
The FTSE 100 was down 0.4 per cent after falling more than 0.9 per cent at its lows.
"Markets in Asia dropped, with China-focused stocks suffering the steepest declines."
Hong Kong equities fell after demonstrators blocked access to the territory’s legislature in protest against a controversial extradition bill.
The Hang Seng declined 1.7 per cent.
"“Investors remain spooked the extradition bill could have far-reaching consequences for attracting overseas talent and does question the viability of Hong Kong as a leading financial hub,” said Stephen Innes, managing partner of Vanguard Markets."
Sterling erased its gains and slipped back below $1.27 after UK MPs voted down a measure that could have paved the way for a vote to block a no-deal Brexit.
"Several analysts warned that if Conservative leadership frontrunner Boris Johnson becomes prime minister, the currency will probably take a leg lower as he has pledged to push Brexit through by the end of October regardless of whether an exit deal is in place."
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"prompted a reversal in Treasuries, which had earlier been boosted by a weaker reading on the US jobs market than Wall Street had expected."
"Chuck Grassley, the Republican chairman of the US Senate Finance Committee, said this morning he thought a deal between the two countries could be announced on Thursday night."
He said Mexican officials would offer a “long list of things” to their US counterparts during talks this week in an effort to avoid the imposition of duties that had been threatened by President Donald Trump.
"The yield on the benchmark 10-year Treasury was up 0.2 basis points at 2.1227 per cent, but had been off by as much as 5.4 bps around 20-month lows, as investors continued to measure conflicting signals sent by bond and stock markets."
"Two-year yields were down 2.8 basis points at 1.8449 per cent, but had dropped as much as 11.5 basis points."
Yields rise as bond prices fall.
"The initial drop in yields followed the release earlier this morning of weak private sector jobs data that, if not a blip, may add to the case for the Federal Reserve to ease monetary policy in an effort to support the US economy."
’s remarks also supported a rally in US stocks.
"The S&P 500 jumped 0.8 per cent, extending gains from its best day in five months."
"The Nasdaq Composite added 0.6 per cent, having gained 2.7 per cent yesterday."
"Tuesday’s rally in stocks followed words from Jay Powell, Federal Reserve chairman, who said the central bank would “act as appropriate to sustain the expansion”."
"That dovishness left the dollar stuck around some of its lowest levels since April, although Senator Grassley’s comments and the subsequent rise in Treasury yields helped the dollar index rise 0.3 per cent today to 97.342."
"European bourses stayed positive as US stocks rose, albeit off their best levels of the day before the jobs data were published."
Frankfurt’s Xetra Dax 30 and London
FTSE 100 were each up 0.1 per cent.
"FTSE MIB bucked the trend, to trade down 0.4 per cent, as investors measured the European Commission’s response to the country’s violation of the bloc’s fiscal rules."
US oil prices slipped into a bear market — defined as a drop of at least 20 per cent from their latest peak — after domestic stockpiles unexpectedly rose to hit a 22-month high.
West Texas Intermediate crude fell 3.4 per cent to $51.68 a barrel.
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"The technology sector dragged Wall Street lower on Monday, pulling the Nasdaq Composite into correction territory."
"Meanwhile, government bonds and other haven assets rose, as escalating economic tensions between the US and China spurred a rush for safety."
"US stocks suffered under the weight of a sell-off in technology shares that fell amid concerns over antitrust scrutiny of industry giants including Alphabet and Facebook, whose shares tumbled 6.1 per cent and 7.5 per cent, respectively."
"Amazon, down 4.6 per cent, and Apple, down 1 per cent, also contributed to the sector’s losses."
The S&P 500 shed gains seen in morning trade to end 0.3 per cent lower.
"The communications services sector, which counts Facebook and Google owner Alphabet among its members, slipped 2.8 per cent."
The information technology sector was down 1.8 per cent.
"The Nasdaq Composite retreated 1.6 per cent, leaving the tech-heavy index more than 10 per cent below its recent peak on May 3 and past the threshold that defines a technical correction."
"Outside of tech, most other sectors fared well, and the blue-chip Dow Jones Industrial Average closed fractionally higher."
"Eight of the S&P’s 11 sectors ended the session in positive territory, led by materials, energy and consumer staples."
Consumer discretionary names were the only others to post red ink.
"Global stocks suffered their worst month of the year in May as trade tensions amplified global growth concerns, sending investors piling into the government bond market."
"US sovereign bonds continued their rally on Monday, with 10-year Treasury yields falling below 2.1 per cent for the first time since 2017."
"The yield on the two-year Treasury, which is more sensitive to monetary policy, shed 9.6 basis points to 1.8477 per cent as St Louis Fed president James Bullard said a cut to interest rates “may be warranted soon” given trade risks and muted inflation in the US."
"China stepped up its counter-offensive in the trade conflict over the weekend, announcing it would establish a blacklist of foreign companies that harm the interest of Chinese groups, while separately state media reported that Beijing was investigating FedEx."
"“The series of actions over the weekend means that China’s ‘long march’ has begun,” said Iris Pang, economist on Greater China for ING."
“We take this seriously.
It means that the trade war has not only become a technology war but also a broad-based business war.”
"On Monday, the stand-off spilled into other sectors, as China’s Ministry of Education issued a warning to students and scholars who plan to visit the US."
"European banks suffered, as low interest rates typically impact their profitability."
"The Stoxx index tracking the sector fell 0.5 per cent, with Deutsche Bank hitting a new record low."
"However, market sentiment improved in Europe overall."
The continent-wide Stoxx 600 recovered from earlier losses to trade 0.4 per cent higher.
"Germany’s Dax rose 0.6 per cent, and the FTSE 100 was up 0.3 per cent."
"Japan’s Topix was down 0.9 per cent to its lowest level since the start of January, while Australia’s S&P/ASX 200 shed 1.2 per cent."
Concerns over trade tensions spread beyond equities markets.
"The yen, which is seen as a haven in times of uncertainty, touched its strongest level against the dollar since mid-January, and gold climbed 1.5 per cent to hit a three-month high."
Investors reacted with dismay at the end of last week when Donald Trump opened up another trade front by threatening tariffs on Mexico over migration.
"Neil Mackinnon, global macro strategist at VTB Capital, said: “Policy volatility translates into market volatility and, not surprisingly, incentivises real-money investors to adopt defensive portfolio decisions.”"
"Weak UK manufacturing surveys barely nudged the Brexit-focused pound, which held above $1.26."
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Wall Street erased early gains to finish in the red while Treasuries rallied on Tuesday following the long weekend as growing trade tensions between the US and China kept investors in a cautious mood.
"The S&P 500, which had climbed as much as 0.5 per cent earlier in the session, called it a day with a 0.8 per cent slide."
"Of the 11 sectors on the S&P 500, only communication services managed to eke out a gain."
Consumer staples and utilities led the laggards with drops of 1.8 per cent and 1.6 per cent respectively.
"Meanwhile, the Nasdaq Composite was 0.4 per cent lower."
"The moves come amid uncertainty about trade after President Donald Trump said during a visit to Japan on Monday the US was not ready to make a deal with China, which elevated concerns over a slowing global economy."
Investors sought safety in Treasuries.
"The yield on the US 10-year slid 6.2 basis points to 2.275 per cent, according to Refinitiv data, hitting its lowest since September 2017."
"Meanwhile, the yield on the two-year slid 4.9 bps to 2.1265 per cent."
Yields move inversely to price.
"Over in Europe, the broad Stoxx 600 index in Europe dipped 0.2 per cent having flicked between gains and losses most of the day, while the FTSE 100 ended the day 0.1 per cent lower."
"Italian assets were under pressure after a victory for the rightwing League party in the European elections, which investors said could embolden its leader and deputy prime minister Matteo Salvini to step up a budget battle with the EU, or push for early elections."
"The FTSE MIB index fell 0.5 per cent, while the sell-off in the benchmark 10-year bond yield, which had risen as much as 5 basis points earlier, eased and was up 1bp to 2.68 per cent."
"Elsewhere in Europe, auto stocks built on Monday’s gains after Fiat Chrysler confirmed it had proposed a €33bn all-share merger with Renault."
The index tracking Europe’s automotive industry was up 0.7 per cent.
"China-focused stocks overcame a slow start, with the CSI 300 and Hang Seng indices rising 1 per cent and 0.4 per cent, respectively."
"The boost came after data showed profits for China’s industrial firms shrank in April, raising hopes of further stimulus, and ahead of a planned weighting increase of Chinese stocks by index provider MSCI after the close of trading on Tuesday."
Japan’s Topix was up 0.3 per cent after slipping into negative territory earlier in the session.
"Carmakers Mitsubishi and Nissan rose 6 per cent and 2.3 per cent respectively after Renault, their alliance partner, announced plans for a merger with Fiat Chrysler on Monday."
Brent crude hovered either side of the $70 a barrel a mark through the day.
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"Stocks bounced back from their worst day in months on Tuesday as President Donald Trump reiterated China still wanted to ink a trade deal with the US, allaying some of the market’s concerns over rising tensions between the world’s two largest economies."
"In a series of tweets on Tuesday morning, Mr Trump said: “When the time is right we will make a deal with China”."
He went on to say of the deal
"“it will all happen, and much faster than people think!”."
"However he also said while his “respect and friendship with President Xi is unlimited”, any agreement must also “be a great deal for the United States or it just doesn’t make any sense.”"
His slightly more optimistic remarks come after China hit back on Monday with its own retaliatory tariffs on about $60bn worth of US goods and sharply escalated the trade war between the two countries.
"On Wall Street, the S&P 500 finished 0.8 per cent higher, pulling back from an intraday rise of as much as 1.5 per cent."
"That recovered about one-third of its 2.4 per cent drop on Monday, its biggest one-day fall since January."
"The Nasdaq Composite was up 1.1 per cent, following its 3.4 per cent fall yesterday, while the Dow Jones Industrial Average added 0.8 per cent."
"Uber, the ride-hailing service, posted its first advance since it floated on the New York Stock Exchange on Friday."
"The stock rose 7.7 per cent today, but remains 11.2 per cent below its $45 offer price."
"Rival Lyft also rose, up 4.9 per cent, but sits 29.8 per cent below its float price in late March."
"While in hot demand amid Monday’s stock market sell-off, Treasuries cooled a touch on Tuesday, pushing yields higher."
The yield on the benchmark 10-year US Treasury was up 0.7 basis points to 2.4121 per cent from yesterday’s six-week low.
London’s FTSE 100 rose 1.1 per cent amid demand for its mining stocks.
’s Xetra Dax 30 added 1 per cent.
"But pressure remained on Asian indices, where weakness continued into Tuesday after Beijing’s retaliation, although China’s currency also found support."
Hong Kong’s Hang Seng index sank 1.5 per cent as traders caught up with the latest trade-related drama following a holiday on Monday.
China’s CSI 300 fell 0.6 per cent
Topix was down 0.4 per cent.
"China’s offshore renminbi suffered its worst day since July on Monday, weakening more than 1 per cent against the dollar."
It was slightly firmer against the dollar on Tuesday.
"Donald Trump confirmed on Monday that he would meet his Chinese counterpart, Xi Jinping, at a G20 summit in Japan next month."
Some think markets could stay volatile in the meantime.
"“Both sides have the incentive to act half-crazy and unpredictable before that in order to cut a better deal,” said Larry Hu, China economist at Macquarie Capital."
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"Global equities were positive as investors worked through more touchstone numbers from the financial sector, with upbeat results from bellwethers among healthcare and consumer stocks also helping."
"Financials were the best-performing sector in the S&P 500, leading Wall Street’s benchmark index 0.1 per cent higher."
First-quarter results from BlackRock and Bank of America helped warm sentiment after a chillier reception over the previous session for numbers from Goldman Sachs and Citigroup.
Johnson & Johnson and United Healthcare Group added to the trend away from banks.
"The spate of earnings on Tuesday continued after the closing bell in New York with results from Netflix, IBM and United Continental."
"The Europe-wide Stoxx 600 added 0.3 per cent, staying on course back toward the eight-month high it touched last week."
Frankfurt’s Xetra Dax 30 rose 0.7 per cent with financial and industrial stocks in demand.
The FTSE 100 gained 0.4 per cent in London.
"There were brisker moves on mainland China, where the CSI 300 closed up 2.8 cent with financial stocks in the lead after the country’s central bank injected liquidity into the market for the first time in 18 days."
Hang Seng ended the day 1.1 per cent higher.
Investors will soon turn their attention to Chinese economic growth figures for the first quarter.
"The numbers, set to be released on Wednesday, will be coming against a backdrop of still ongoing US-China trade talks."
"Economists polled by Reuters  forecast a 6.3 per cent annualised increase in gross domestic product, with the data being closely watched for signs of an improvement in the world’s second-largest economy."
"Gold prices dropped 0.9 per cent, hitting their lowest levels this year, amid gains in equities and the US dollar."
"The dollar index, which measures the greenback against global currencies, was up 0.1 per cent."
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"US stocks nudged their way higher on Thursday, extending their winning streak to a sixth day, as investors focused on the latest round of US-China trade talks."
"Wall Street’s S&P 500 rose 0.2 per cent, led by gains in the materials and energy sectors that offset weakness in technology and utilities."
The rally handed the benchmark its first six-day winning streak since February 2018 and brought it to its highest level in almost six months.
The Dow Jones Industrial Average — boosted by Boeing’s 2.9 per cent gain — was up 0.6 per cent.
The tech-heavy Nasdaq Composite was 0.1 per cent lower.
The moves came as Mr Trump said on Thursday that trade talks with China were going well and as negotiators worked to hash out a final deal on the trade dispute ahead of a meeting between the US president and the Chinese vice premier later in the day.
"Despite the optimism on trade, investors remained on edge after Mr Trump threatened to seal the border with Mexico or impose new tariffs if the country does not do more to stem the flow of migrants and drugs into the US."
European bourses ended mixed on Thursday.
"Frankfurt’s Xetra Dax 30 closed up 0.3 per cent at a new multi-month high, while the Europe-wide Stoxx 600 was 0.3 per cent weaker."
"FTSE 100 fell 0.2 per cent, with the pound within its well-worn trading range— down 0.6 per cent at $1.3079 — as investors kept watch on the UK’s uncertain Brexit politics."
"CSI 300 added 1 per cent ahead of a national holiday, while the Topix in Tokyo eased back from a modest gain to end down 0.1 per cent."
"The euro ticked down 0.1 per cent to $1.1233, taking a knock after further disappointing German economic data."
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"Wall Street sharply trimmed its losses while Treasuries rallied, even as markets in Europe and Asia remained under pressure after data last week stoked fears about the health of the global economy and unnerved investors."
"Following a sharp sell-off on Friday, the S&P 500 spent the bulk of the session in the red but trimmed losses of as much as 0.6 per cent to end the day 0.1 per cent lower — with tech leading the decline."
The benchmark index was in the red for the fourth time in the past five days and
its choppy trade on Monday comes after it shed 1.9 per cent in the prior session in its biggest one-day fall since January 3.
"Meanwhile, the Dow Jones Industrial Average was roughly up 0.06 per cent, while the Nasdaq Composite was down 0.07 per cent."
"On Wall Street, growth fears largely overshadowed news that Robert Mueller did not find the Trump 2016 election campaign conspired with Russia, but left ambiguity around the question of obstruction of justice."
The decline in US stocks follows a bruising trading session in Asia.
"The Topix in Tokyo fell 2.5 per cent, its worst day in three months."
Sydney’s S&P/ASX 200 dropped 1.1 per cent in its biggest one-day fall since early January.
"CSI 300 was down 2.4 per cent, with Hong Kong’s Hang Seng weaker by 2.2 per cent."
"European bourses were not immune, with Frankfurt’s Xetra Dax 30 down 0.15 per cent despite reassuring Ifo business climate data."
"FTSE 100 meanwhile slipped a further 0.4 per cent, adding to its 2 per cent decline at the end of last week."
"The flight from risk kept investors piling into government bonds, pushing yields lower."
"Yield on the 10-year Treasury slid below 2.4 per cent for the first time in 15 months on Monday, but was down about 4.4 basis points to 2.4107 per cent at pixel time."
"Germany’s 10-year Bund yield, which went into negative territory for the first time since October 2016 during the previous session, was down 1.2 basis points to minus 0.029 per cent."
"The yield on the equivalent Japanese note was off 1.4 basis points, at minus 0.094 per cent, after earlier touching its lowest since September 2016."
"Gold rose 0.6 per cent, while Japan’s yen was little changed at ¥109.92"
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Global equity markets took a hit on Friday after a run of weak economic data and a troublesome indicator in the US bond market pointed to a deepening slowdown.
"In the US, all three major stock indices notched their worst performances since January 3 after yields on three-month Treasuries topped those on the 10-year for the first time since August 2007, as government bonds continued to rally on the heels of the Federal Reserve’s"
dovish take on interest rates.
An inverted yield curve is seen as a sign of a coming recession.
Yield on the 10-year note remained higher than that on the two-year.
"But the gap — the one more closely watched by investors — is narrowing, dipping below 10 basis points for the first time this year."
"Heavy declines in the financial and materials sectors pushed the S&P 1.9 per cent lower, near its session lows and clinching a 0.8 per cent drop for the week."
"The Dow Jones Industrial Average lost 1.8 per cent on Friday, and the tech-heavy Nasdaq Composite sank 2.5 per cent."
"The Russell 2000, which tracks small-cap names, was down 3.6 per cent in its worst day since December 4."
"The sell-off followed a downward tilt in Europe, where stocks came under pressure from weak readings on the region’s manufacturing sector."
"The Stoxx 600 index dropped 1.2 per cent, the German Xetra Dax 30 fell 1.6 per cent and London’s"
FTSE 100 was down 2 per cent.
"The rally in government bonds sent benchmark yields to eye-catching lows, as investors moved out of riskier assets and into havens."
"Bunds stood out, with yield on the 10-year German debt falling below 0 per cent for the first time since autumn 2016."
The US 10-year dropped to a 14-month low of 2.418 per cent during the session.
"Gold rose 0.3 per cent to $1,313 an ounce, and the US dollar index strengthened by 0.1 per cent to 96.634."
After trading higher for the session before purchasing managers’ indices for
"Germany, France and the wider eurozone for March were published, the euro was down 0.7 per cent overall at $1.1296."
Sterling recovered — up 0.7 per cent to $1.3199 — after EU leaders agreed to postpone Brexit from next week to at least April 12 at a summit in Brussels.
Concern at the UK government’s ability to get the deal on terms of departure ratified in parliament left investors braced for further volatility.
The pound fell by as much as 1.5 per cent to a low of $1.3003 during the previous session before the extension was granted.
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"What’s it going to be, Japan: shark or mole?"
US stocks erased their early gains to close moderately lower as investors fretted that trade talks with Beijing may have hit a speed bump.
The S&P 500 fell sharply around midday Tuesday after Bloomberg reported of concerns among some US officials that China is pushing back against American demands.
"A separate report from The Wall Street Journal said negotiators will begin a new round of talks next week, and officials aim to reach an accord by the end of April."
"Wall Street’s benchmark index was up as much as 0.6 per cent during the session but closed nearly flat, dropping one-tenth of 1 per cent, a day after notching its highest closing mark in more than four months."
"The Dow Jones Industrial Average fell 0.1 per cent, while the tech-heavy Nasdaq Composite gained 0.1 per cent."
"Trade concerns offset positive momentum as traders focused on the Federal Reserve, which began a two-day policy meeting on Tuesday."
The monetary policy setting Federal Open Market Committee is expected to push back expectations for the pace of its interest rate-tightening cycle.
"European stock markets rallied as investors moved out of the region’s government bonds, sending yields higher, as expectations of a delay to Brexit boosted riskier assets."
"German carmakers picked up the most speed in Europe, helped by upbeat broker comment on the sector from Bank of America Merrill Lynch."
"Frankfurt’s Xetra Dax 30 rose 1.1 per cent, taking to its highest level since October, with Daimler and BMW making the biggest gains, up 3.4 per cent and 2.1 per cent respectively."
"The Stoxx index tracking carmakers rose 2.4 per cent, while the wider Stoxx 600 added 0.6 per cent, extending its 2019 rally toward 14 per cent."
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"US stocks cemented their biggest weekly gain in more than three months and Treasuries rallied following a patch of soft economic data, all against a backdrop of hopes of progress in US-China trade negotiations."
"Wall Street’s S&P 500 resumed its rally, up 0.5 per cent, after a slip on Thursday interrupted a three-day winning streak."
"The benchmark was up 2.9 per cent this week, its biggest weekly advance since late November."
"The S&P has registered a weekly decline just twice this year, as trade optimism and the Federal Reserve’s pledge to be patient on rate rises have lifted sentiment on Wall Street."
"“Next week’s FOMC meeting and a potentially pending resolution to trade frictions between the U.S. and China are likely the macro drivers to watch going forward,” Anthony Saglimbene, global market strategist at Ameriprise, wrote to clients."
"US Treasuries also rallied on Friday, dragging yields lower, following a batch of soft economic data, including industrial production that missed expectations and a gauge of manufacturing activity in New York falling to a 22-month low."
Yields on the 2- and 10-year Treasury hit their lowest since early January.
"Partly hobbled by a resurgent British pound, the US dollar shed about ¾ of 1 per cent this week for its biggest weekly drop since the first week of December."
Chinese state media on Friday reported “substantive progress” on trade talks and Beijing passed a new foreign investment law designed to smooth the way to a new trade deal with the US.
The CSI 300 index tracking Shanghai and Shenzhen stocks closed up 1.3 per cent.
There were solid moves in Europe.
"Frankfurt’s Xetra Dax 30 gained 0.9 per cent, gathering pace as the session developed and reaching its highest level since October."
FTSE 100 was up 0.6 per cent.
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"US stocks ticked lower on Thursday, ending a three-day winning streak that had carried the S&P 500 to its highest level since November."
"Elsewhere, Treasuries slipped and Brent crude faded from a four-month high, slowing a rally for European energy stocks, after talk of a delay to a top-level summit between the US and China hit sentiment."
Reports that a meeting between the presidents of China and the US would be pushed back into April from March — first carried by Bloomberg — were reflected by a range of assets.
"The S&P 500 and tech-heavy Nasdaq Composite were down 0.1 per cent and 0.2 per cent, respectively."
The Dow Jones Industrial Average eked out a gain of less than 0.1 per cent gain on a strong day for shares in Apple and Visa.
The dollar index rose 0.2 per cent to 96.782.
Concern that a delay to a summit could reflect a lack of a breakthrough on trade talks chimed with more bleak data showing the impact of the existing tariffs.
Figures showing industrial output growth in the country falling to a 17-year low preceded a 0.7 per cent fall for mainland China
’s CSI 300.
"Australia’s dollar also fell, tracking the country’s status as a major exporter to China."
"The currency was 0.4 per cent weaker at $0.7066, taking it back towards its lowest levels of the month."
Brent crude declined 0.5 per cent having earlier traded at its highest since mid-November.
The international oil price had been tracking expectations for tighter supply due to supply curbs from Opec and US sanctions on Venezuela and Iran.
"The Europe-wide Stoxx 600 put in a stronger showing, up 0.8 per cent overall, with hopes that disruption from a disorderly Brexit could be avoided after the UK parliament voted against leaving the EU with no deal."
"Most sectors were in the black, led by real estate and household goods.  "
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US stocks bounced back from their biggest weekly drop in three months with their largest one-day gain since January as a burst of merger activity and speculation propped up the market.
"The S&P 500 and Nasdaq Composite, finishing up 1.5 per cent and 2 per cent, respectively, both had their largest advances since January 30, prompting a mild retreat for US Treasuries."
Propping up tech stocks was
Nvidia agreeing on Monday to buy Israeli chipmaker Mellanox Technologies for $6.9bn.
"That helped trigger a rally in rival semiconductor companies, which countered some of the pessimism from late last week after Japan"
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"After starting in the red, the Dow Jones Industrial Average ended 0.8 per cent higher."
"The blue-chip Dow’s early stumble was due to a sharp drop in Boeing shares, after one of the company’s 737 Max 8 jets operated by Ethiopian Airlines crashed on Sunday."
Boeing finished 5.3 per cent lower.
The gains for the broader market follow five straight days of decline for the S&P 500 that were capped last Friday by a disappointing US jobs report.
"With investors in a more upbeat mood today, government bonds sold off, pushing yields higher."
The yield on the benchmark 10-year US Treasury was up 1.6 basis points to 2.6411 per cent.
"On the other side of the Atlantic, European banks bounced higher on speculation of a merger between German lenders Deutsche Bank and Commerzbank."
That helped lift the broad Stoxx 600 off last week’s 12-session closing low.
The pound recovered from a three-week low as investors continued to watch the UK’s fraught Brexit politics.
Sterling’s ability to hold the $1.30 level remained associated with a managed departure from the EU.
"In afternoon trade, it added 0.9 per cent over the session to $1.3139, having been as low as $1.2949 in early trade."
"The strong pound weighed on the dollar, with the DXY index, which tracks the buck against a basket of global currencies including sterling, down 0.1 per cent at 97.176."
"Chinese stock markets swung back into positive territory after tumbling late last week on global growth worries, with the CSI 300 closing up 2 per cent."
Tokyo and Hong Kong posted milder gains.
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"Worries about faltering global growth intensified on Friday after US jobs data significantly missed forecasts, adding to the trend for weak global economic data and deepening concern about the impact of the trade war."
"Global stocks chalked up their biggest weekly drop since early December, while the dour mood sent investors scurrying for the relative safety of government debt, handing US Treasuries their biggest weekly rally in three months."
"On Friday, the dollar took a hit and US stocks fell after non-farm payrolls grew by only 20,000 posts in February, short of forecasts of 180,000."
The index tracking the world’s reserve currency fell by 0.3 per cent after the data.
"The S&P 500 recovered early declines to finish 0.2 per cent lower, but its fifth straight down day represented the index’s longest losing streak since late November."
"Down 2.2 per cent over the past five sessions, the benchmark had its biggest weekly drop since December 21 and has trimmed its 2019 gain to 9.4 per cent."
Treasuries were stronger as yields eased.
The yield on the benchmark 10-year US Treasury was down 0.7 basis points at 2.6303 per cent.
Europe’s Stoxx 600 was down 0.9 per cent after weak German industrial production data followed the ECB’s
cut to its growth forecasts and its return to crisis-era stimulus policy offering cheap wholesale financing to banks to boost lending.
But the biggest moves came on China’s mainland after the steepest decline in exports in three years deepened worries about the toll taken by the trade war on the country’s economy.
"Stock indices there made their steepest single-session fall since October, with the CSI 300 down almost 4 per cent."
The decline reduced its wider year-to-date advance to 21 per cent.
The Shanghai Composite was down 4.4 per cent.
"Hong Kong’s Hang Seng was steadier, falling 1.7 per cent."
"Gold advanced amid the global stock sell-off, up 1.1 per cent at $1,299.46 an ounce."
"Brent crude had been down more than 2 per cent on Friday at a five-session low, as growth concerns hurt sentiment, but managed to trim its decline during the afternoon."
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"US stocks edged moderately lower on Tuesday, but the dollar continued to climb, as investors processed remarks from China’s premier forecasting slower growth in the world’s second-biggest economy."
Trade tensions have cast a shadow over global markets amid concerns that tariffs are taking their toll on economic activity and corporate earnings.
"A breakthrough on trade talks between Beijing and Washington, which could help alleviate global growth concerns, is still yet to come."
The S&P 500 swung between gains and losses in afternoon trade but closed down 0.1 per cent.
It was the second consecutive daily decline for the benchmark index and its fifth drop in six sessions.
"The Nasdaq Composite was slightly lower, falling 0.02 per cent, while the Dow Jones Industrial Average was down 0.05 per cent."
"The slide, which had the industrials, materials and financials sectors worst off, came despite data showing activity in the US’s service sector picked up in February and new-home sales that climbed to a seven-month high in December."
That helped continue an upward trend for the dollar.
The index tracking the world’s reserve currency was up 0.2 per cent at 96.835.
The yield on the benchmark 10-year US Treasury declined 0.1 basis points to 2.7205 per cent.
Stocks in Europe and Asia held their nerve on Tuesday.
"The CSI 300 index of major Shanghai and Shenzhen-listed stocks was up 0.6 per cent, while the Europe-wide Stoxx 600 was up 0.2 per cent."
"The moves came as Chinese premier Li Keqiang, speaking at the country’s legislative session in Beijing, announced a GDP target of 6-6.5 per cent in 2019, lower than the previous year’s target of around 6.5 per cent."
Mr Li also confirmed a series of tax cuts to boost economic growth.
Sterling moved away from $1.32 — a level which depends on the UK avoiding a hard Brexit according to a range of analysts.
"The pound was weaker by 0.1 per cent at $1.3175, around a five-session low, as doubts about the passage of a Brexit deal through Parliament weighed."
"Earlier, the Bank of England took further steps to guard against the dangers of a no-deal departure from the EU."
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"US stocks gave up early gains and finished lower, undoing some of the optimism the US and China will conclude a trade deal later this month that had propped up global markets."
"The S&P 500 ended down by 0.4 per cent, but had been as much as 1.3 per cent lower."
The Nasdaq Composite shed 0.2 per cent.
"Earlier in the day, global stocks rallied on hopes Washington and Beijing will agree on trade."
"Morning declines for Wall Street weighed on European stocks late in their session, though."
"The CSI 300 index of major Shanghai and Shenzhen-listed stocks rose as much as 3.7 per cent, bringing it 29 per cent higher in the year so far, although it pulled back slightly to close up 1.2 per cent."
The advance also comes as China’s annual legislative session opened amid investor anticipation of more supportive policy to combat a slowdown in growth for the world’s second-largest economy.
The greenback was in the spotlight following a weekend speech from Mr Trump in which he reiterated his desire for a weaker dollar and again criticised the Federal Reserve’s monetary policy.
"The DXY index, which tracks the buck against a weighted basket of global peers, was up 0.1 per cent."
"Treasuries firmed as investors favoured the relative safety of government debt, and pushed yields lower."
The yield on the benchmark 10-year US Treasury was down 2.9 basis points at 2.7259 per cent.
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"US stocks followed global equities higher, while Treasuries sold off, as stronger-looking economic data in China and Germany helped assuage the worst of fears about a global slowdown."
"The S&P 500 tacked on 0.7 per cent, buoyed by the healthcare and energy sectors, to register its highest close since November 8."
"Consumer staples, real estate and materials were the lone sectors in the red."
"For the week, it is up 0.4 per cent."
"The Dow Jones Industrial Average rose 0.4 per cent, and the tech-heavy Nasdaq Composite advanced 0.8 per cent."
"With Friday’s gains, the S&P snapped a three-session losing streak — its longest of 2019— that trimmed its February gain to 3 per cent."
"However, the benchmark index was up 11 per cent over the first two months of the year, its best annual start since 1991, amid growing hopes for a US-China trade deal and reduced expectations for interest rate rises by the Federal Reserve."
US data on Friday showed personal spending in December fell more than expected.
"The core personal consumption expenditure index, the Fed’s preferred inflation gauge, remained level at 1.9 per cent growth year-over-year and below the central bank’s 2 per cent target."
"US government bonds were lower, with the yield on the 10-year Treasury note climbing 5.5 basis points to 2.7658 per cent."
"The DXY dollar index, which measures the greenback against a weighted basket of currencies, was up 0.3 per cent."
"Other haven assets, including gold, faded."
The precious metal was down 1.6 per cent.
Stronger appetite for risk came after German retail sales for January rebounded more strongly than expected and the Caixin-Markit China manufacturing purchasing mangers index for February picked up from its January low.
Optimism over trade also supported investor sentiment.
"The US and China had faced a March 1 deadline, but President Donald Trump agreed to delay planned tariff increases, citing progress in the talks."
"In the UK, however, a key survey showed manufacturers’ outlook has taken a severe blow from Brexit uncertainty."
"The Europe-wide Stoxx 600 was up 0.4 per cent, taking its advance for 2019 to 10.8 per cent."
"China’s CSI 300 index rose 2.2 per cent after index provider MSCI lifted the Chinese weighting in its influential emerging markets index, a major step to integrate the country’s domestic stock markets with international capital."
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The S&P 500 notched up its longest losing streak of 2019 as weak economic data earlier in the day pointing to the effects of the trade war on growth took its toll on global markets.
Investors continue to wait for signs of a breakthrough to end the trade impasse.
Data in China showed its factory sector contracted for a third consecutive month in February with the country
’s manufacturing purchasing managers’ index at a three-year low.
"US growth data for the fouth quarter last year looked brighter, coming in at 2.6 per cent, better than the 2.3 per cent forecast."
The S&P 500 ended 0.3 per cent lower and fell for a third consecutive session.
That was its longest losing streak since December 24.
The benchmark gained 3 per cent for February and is up 11 per cent year-to-date.
Sentiment also reflected cautious comments from President Donald Trump’s top trade official over the US-China trade dispute.
Robert Lighthizer said China would need to do more than just buy more US goods before a permanent trade deal can be struck.
Geopolitical developments added to the sense of unease.
"After the summit between the US and North Korea ended abruptly, Seoul’s Kospi fell sharply in late trade to close down 1.8 per cent."
Tension between India and Pakistan also lingered.
"Miners, which depend on China’s growth for much of the demand for the metals they produce, are leading European equities lower."
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Tuesday 22.20 GMT
Lacklustre housing data and cautious Powell weigh on US stocks
Pound near 4-month dollar high as chances of no-deal Brexit seem to recede
"FTSE 100 closes 0.5 per cent lower, hit by pound’s rally"
China equities lose steam after 5.9% surge at start of week
"Lacklustre housing data dragged on Wall Street on Tuesday, damping recent optimism that the US was near to a deal with China to end a trade stand-off."
"US residential housing starts fell 11.2 per cent in December compared with the prior month, its lowest level since September 2016, said the US Commerce Department."
"The news dragged the S&P 500, Dow Jones Industrial Average and Nasdaq indices down 0.1 per cent for the day."
"Meanwhile, December home prices grew at their slowest pace in more than three years, according to the S&P Corelogic Case-Shiller report."
"The group’s national home price index rose 4.7 per cent from the same month a year earlier, the lowest year-over-year rate since September 2015."
A cautious testimony by Jay Powell in front of the US Senate committee did little to improve sentiment across US assets.
"The Federal Reserve chairman repeated his “patient” approach to interest rate changes, vowing to monitor a host of unresolved questions, including the trade negotiations between Washington and Beijing and the direction of Brexit talks."
"Sterling gained more than a cent against the dollar to reach its strongest level since October, as UK prime minister Theresa May raised the prospect of a delay to the UK’s departure from the EU."
"The pound hit $1.3255, up 1.2 per cent from the start of the day."
It also strengthened against the euro — with a unit of the shared currency costing £0.8595.  
The FTSE 100 closed 0.5 per cent lower with major dollar earners under pressure as sterling strengthened.
"Engine maker Rolls-Royce fell 0.2 per cent, while luxury fashion brand Burberry lost 1 per cent."
"Frankfurt’s Xetra Dax 30 was up 0.3 per cent, despite weaker consumer and industrial stocks."
"However, there was relief that BASF’s fourth-quarter earnings were not as bleak as forecast, helping its stock outperform the index with a 4.3 per cent rise, even after a 59 per cent decline in earnings, with its basic petrochemicals operation flagging."
China’s stock markets seesawed between gains and losses a day after their best one-day advance in three years.
"The CSI 300 ended down 1.2 per cent, in a volatile run that followed the previous session’s eight-month highs."
"The choppy performance came after the rally took the index into bull market territory on Monday, an advance fuelled by US President Donald Trump"
’s decision to delay raising tariffs on imports of Chinese goods.
In Hong Kong the Hang Seng index shed 0.7 per cent.
Topix was off 0.2 per cent.
Oil prices rebounded after crude slumped following a tweet on Monday by Mr Trump that called for Opec to “relax”.
"Brent, the international marker, was up 0.9 per cent at $65.36 a barrel, while West Texas Intermediate advanced 0.3 per cent to $55.64."
"The dollar index dipped 0.4 per cent at 96.0666, while the euro was up 0.3 per cent at $1.1390."
Japan’s yen ticked up 0.4 per cent to ¥110.59 per dollar.
Monday 22.49 GMT
Trump delays increased tariffs on $200bn of Chinese imports
Chinese stocks rise almost 6% into bull market territory
Renminbi at 7-month high
US president signals potential meeting with China
S&P 500 up 0.1 per cent on Wall St
Sterling above $1.30 on further talk of delay to Brexit
Oil falls on White House criticism of “high” prices
US stocks rose in Monday trading after Donald Trump said there had been “substantial progress” in Washington’s discussions on trade with Beijing.
"The S&P 500 index added 0.1 per cent to close at 2,796.11, the highest level in more than three months."
But it pared back an initial surge of optimism that sent the benchmark 0.8 per cent higher in mid-morning trading.
The US president suggested a summit with his Chinese counterpart
Xi Jinping could be held at his Mar-a-Lago resort in Florida to “conclude an agreement” if more progress was made.
But he did not give further details on the timing of the new tariff deadline.
"“Many of the issues under scrutiny between the US and China are large, and structural in nature, which always made the 90-day window for negotiations a tough benchmark to meet,” said Jason Pride, chief investment officer of private client for Glenmede."
“It appears serious progress is being made in tackling some of the trade issues identified by the US.”
"The Dow Jones Industrial Average and the Nasdaq Composite joined a bullish S&P 500, rising 0.2 per cent and 0.4 per cent, respectively."
The positive US sentiment extended to European equities.
"Frankfurt’s Xetra Dax 30 added 0.4 per cent, while the region-wide Stoxx 600 was up 0.3 per cent."
"But London’s FTSE 100 underperformed peers, up just 0.1 per cent, as the pound topped $1.31, amid news that an important Brexit vote would be delayed."
Prime Minister Theresa May pushed back the UK parliament’s next big vote on her Brexit deal to March 12.
It was initially pencilled in for February 27.
News of Mr Trump extending the deadline on $200bn of Chinese imports beyond March 1 boosted Chinese stocks and helped the renminbi leap to a seven-month high.
“This week is starting with one of the biggest decoupling moves in many years.
"[But] Chinese sentiment does not seem to be bought to the same degree in Germany and South Korea, markets that have high sensitivity to changing economic activity in China."
As long as we are not seeing those two markets confirming the Chinese sentiment we remain cautious on equities.
"Garnry, Head of Equity Strategy, Saxo Bank"
"China’s CSI 300 index of major companies listed in Shanghai and Shenzhen surged almost 6 per cent, a rise that took it to its highest point since June and marked a gain of more than 25 per cent since January 4."
"That took it into a bull market, defined as a 20 per cent rally from its most recent trough."
The advance in Chinese stocks has also put the CSI 300 on track for its biggest monthly gain since April 2015.
"Equities across much of Asia-Pacific also gained, albeit at a slower pace."
"Off the Chinese mainland, Hong Kong’s Hang Seng rose 0.5 per cent."
Topix was up 0.7 per cent and
the S&P/ASX 200 in Australia was 0.3 per cent higher.
China’s currency jumped to its strongest level against the dollar since July.
"The onshore renminbi, which is constrained by a trading band set daily by China’s central bank, rose as much as 0.6 per cent to Rmb6.6718 to the dollar, before easing to Rmb6.6891."
"The offshore rate, which is not bound by the same trading band, was up 0.4 per cent at Rmb6.6818 to the dollar."
The dollar index was down 0.1 per cent at 96.403.
"Sterling surpassed $1.30 — up 0.2 per cent to $1.3128, around its highest level of the month but off January’s peak — on growing expectations that the UK government would have to delay Brexit, after it postponed another Westminster vote on the government’s terms of departure from the EU."
The euro was flat to $1.1359.
"Oil prices fell after Mr Trump renewed his criticism of what he called high prices, taking to Twitter and calling for Opec to “relax”."
"Brent crude, the international benchmark, was 3.5 per cent lower at $64.80 a barrel while West Texas Intermediate fell 3.2 per cent to $55.43."
Additional reporting by Nicole Bullock in New York
Friday 22.00 GMT
US stocks head higher on trade talk hopes
China curbs hit Australian coalminers
"Europe strong, with major bourses advancing"
"American stocks rose on Friday, in a quiet session marked by cautious optimism about US-China trade talks."
"The S&P 500 index rose 0.6 per cent, while the Dow Jones Industrial Average added 0.7 per cent and the Nasdaq Composite advanced 0.9 per cent."
"President Donald Trump told reporters on Friday it was more likely than not that a trade deal between the two countries would happen, and that the deadline for the talks could be extended."
"Still, investors had to grapple with alarming news on Kraft Heinz."
Its shares plunged 27 per cent after the company took a $15bn writedown and disclosed it was the subject of an investigation by the US Securities and Exchange Commission into its accounting policies in procurement.
Optimism over US-China trade talks helped Asia-Pacific shares turn higher.
"The Hang Seng was up 0.7 per cent, while the CSI 300 index of major Shanghai and Shenzhen stocks fell in early trade before swinging higher to be up 0.3 per cent, as the latest round of trade talks were set to wrap up in Washington."
Europe ended a bullish week strongly.
"The continent-wide Stoxx 600 index was up 0.2 per cent, alongside strong performances from Germany’s Dax, up 0.3 per cent, and France"
"’s Cac 40, which increased 0.4 per cent."
"Confirmation of a meeting between China’s top trade negotiator and the US president came after Mr Trump appeared to offer an olive branch to the Chinese telecoms company Huawei on Thursday, in comments that were seen as laying the ground for a deal to halt the US-China trade war."
"“I want the United States to win through competition, not by blocking out currently more advanced technologies,” he said on Twitter, without referring directly to Huawei."
The US has been lobbying allies to not use Huawei’s next-generation 5G equipment on national security grounds.
Japan’s Topix closed down 0.3 per cent.
"Australian coalminers slipped after China restricted imports of coking coal, citing environmental checks, while Canberra played down concerns the move was politically motivated."
Shares in Whitehaven Coal fell as much as 5 per cent while Coronado Global Resources dropped as much as 6.2 per cent.
"Despite the hit to coalminers, the broader S&P/ASX 200 was up 0.5 per cent, supported by financial stocks."
The yield on the 10-year US Treasury bond fell 4 basis points to 2.65 per cent after word from the semi-annual report to Congress from the Federal Reserve that the central bank did not expect to reduce its balance sheet to levels seen ahead of the financial crisis.
"In currency markets, the dollar index, a measure of the greenback against a basket of currencies, fell 0.1 per cent."
"The yen regained earlier losses to trade up 0.1 per cent to ¥110.66 to the dollar and the euro was little changed at $1.1335, while the pound was 0.1 per cent lower at $1.305."
"China’s onshore renminbi, which is permitted to trade 2 per cent either side of a daily midpoint set by the country’s central bank, was a touch weaker at Rmb6.7236 to the dollar after touching its strongest level since July on Wednesday."
The offshore renminbi was flat at Rmb6.7266.
"Brent crude, the international oil price benchmark, fell 0.1 per cent to $66.98 a barrel and"
West Texas Intermediate was up 0.3 per cent at $57.15.
"Gold firmed 0.4 per cent to $1,328 an ounce."
Thursday 23.08 GMT
Bounce in stocks pauses
FTSE 100 underperforms
Australian dollar slides
"The broad rally in global stocks paused on Thursday, as investors waited for a breakthrough in US-China trade talks."
Investors’ focus on the talks has sharpened as the deadline of March 1
"nears, when US tariffs on $200bn of Chinese imports will jump from 10 per cent to 25 per cent unless the world’s two largest economies reach an agreement."
"The S&P 500 closed 0.4 per cent lower in New York, with weaker US economic data doing little to help sentiment."
The latest reading from the Philadelphia Federal Reserve’s business index swung into negative territory in February.
The Dow Jones Industrial Average and Nasdaq Composite both closed 0.4 per cent lower.
"Treasury prices also fell, with the benchmark 10-year Treasury yield rising 5 basis points to 2.69 per cent."
"The FTSE 100, London’s blue-chip index, underperformed global equities as it was weighed down by a number of disappointing results for some of the market’s biggest companies."
"The index finished 0.9 per cent lower, dragged down by a 12 per cent decline in British Gas owner Centrica, which said it would struggle to meet its cash flow targets this year, and a 7.8 per cent decline in defence contractor BAE, which warned about the impact of a German ban on arms exports to Saudi Arabia."
"Barclays briefly provided some cheer, with the shares rising almost 5 per cent, as its results outperformed those of peers."
"However, the stock ended the day little changed."
"An additional headwind for the FTSE 100 came in the form of a stronger pound, which historically has weighed on the index given the proportion of its companies which generate revenues in dollars."
Sterling held above the $1.3050 mark and is now up 1 per cent for the week.
"European equities ended the day mixed, with the Stoxx 600, a benchmark for the region, finishing 0.3 per cent lower."
The softness in stocks came alongside weakness in sovereign bonds.
"In Europe, the yield on the benchmark German 10-year Bund rose 3 basis points to 0.13 per cent, while that on the 10-year Treasury rose 5 basis points to 2.69 per cent."
"The Australian dollar stood out in foreign exchange markets, as it was knocked by several developments."
"It reversed early gains after economists at Westpac forecast the Reserve Bank of Australia would cut rates in August and November, then dropped further after it emerged that China is restricting the access of Australian coking coal to its ports."
Australia is heavily exposed to China through its commodity exports.
"The currency pulled back from a two-week high touched in the wake of positive jobs figures after Bill Evans, chief economist for Westpac, said it expects the RBA to cut the cash rate by 25 basis points in both August and November."
The Australian dollar fell 1 per cent to almost $0.71.
Oil prices slipped on Thursday after rising more than 1 per cent on Wednesday.
"Brent crude, the international benchmark, dropped 0.1 per cent to $67.00 a barrel."
US marker West Texas Intermediate also moved 0.1 per cent lower to $56.84.
Wednesday 22.31 GMT
Wall Street muted after news of policymakers’ January meeting
US-China trade talks continue to progress in Washington
"Japan exports slump, dragged down by China slowdown"
Oil prices continue to make gains
US equity benchmarks edged higher after the US Federal Reserve’s
minutes from its January meeting showed that officials were generally in favour of a “patient posture” on interest rates.
"Stocks fluctuated a bit on the release, but were little changed on the day."
"The S&P 500 and Dow Jones Industrial Average both finished 0.2 per cent higher, while the Nasdaq closed flat."
"The price of US government bonds edged lower, with the yield on benchmark 10-year US Treasuries rising 1 basis point to 2.65 per cent."
The Fed minutes come after the central bank held rates steady at its January meeting.
"Several policymakers felt further rate increases may be warranted later in the year, but those hawkish views were weighed by the market against “almost all” participants wanting to announce a plan soon to end the process of reducing the Fed’s balance sheet later this year."
"“The fact is that the committee has spent three consecutive policy meetings discussing the balance sheet in detail, and to us that suggests some urgency in addressing the questions surrounding its future,” said Bob Miller, BlackRock’s head of US multi-sector fixed income."
“Now Chairman [Jay] Powell should be able to provide Congress with approximate numbers and rough timing for an end to balance sheet shrinking in his Monetary Policy Report and testimony on February 26/27.”
"Equities were mostly higher in Asia as trade negotiations between the US and China continued in Washington, shrugging off slowing Japanese exports that signalled further pressure from China’s slowing economy."
"Despite the apparent optimism, Chaoping Zhu, strategist at JPMorgan Asset Management, said the trade talks would remain the main risk for regional financial markets in coming months."
"He added that given the “divergences” between the two sides, it would be difficult for a final deal to be reached before the March 1 deadline."
"“If the negotiation develops into such a long-term campaign, expect regional markets to follow the tempo and experience high volatility periodically,” Mr Zhu said."
"Europe was also in a more bullish mood, with the continent-wide Stoxx 600 index advancing 0.7 per cent alongside a 0.8 per cent rise in Germany’s Dax and a 0.7 per cent lift in France’s Cac 40."
"Hang Seng index was among the region’s best performers, rising 1 per cent on the back of gains for consumer stocks."
"China’s CSI 300 index of major Shanghai- and Shenzhen-listed stocks closed down 0.3 per cent, while the Hang Seng China Enterprises index of large-cap Chinese companies listed in Hong Kong was up 1 per cent."
In Tokyo the Topix added 0.4 per cent.
"But Sydney’s S&P/ASX 200 was down 0.4 per cent, with strong gains for miners offset by declines for much of the market including financials, telecoms and consumer stocks."
"In foreign exchange markets, the US dollar index recovered from earlier weakening following the Fed minutes, finishing flat at 96.551."
The Japanese yen was 0.2 per cent weaker at ¥110.85 per dollar after data showed the country
’s exports tumbled 8.4 per cent year on year in January — the steepest decline since October 2016 and the latest sign that economies across Asia are being hit by China’s slowdown and the US-China trade war.
"Trinh Nguyen, Natixis senior economist for Asia emerging markets, said the fall came against a backdrop of lower exports from South Korea and Singapore, showing that regional and global demand was slowing fast."
"“Japan’s sharp decline in sales abroad is the nail in the coffin for regional growth and that means that policy easing is coming for the region,” she said."
"The onshore Chinese renminbi exchange rate, which moves within a trading band of 2 per cent either side of a daily midpoint set by the People’s Bank of China, was 0.5 per cent stronger at Rmb6.7213 against the dollar, after touching its best level since the start of February."
"Bloomberg, citing unnamed sources, reported that US officials have pressed their Chinese counterparts to include currency stability as part of a potential memorandum of understanding between the two sides."
"Oil prices firmed, with Brent crude up 1.1 per cent at $67.19 a barrel and West Texas Intermediate 1.4 per cent higher at $56.90."
"Gold climbed 0.2 per cent to $1,338.48 per ounce."
Tuesday 22.44 GMT
US stocks marginally up following long weekend
European equities retreat ahead of trade news
Brent crude eases slightly after 3-month high
Yen in focus after Kuroda comments
US stocks edged higher on Tuesday following a long weekend as investors await a breakthrough in trade talks between Washington and Beijing.
"The S&P 500 index rose 0.2 per cent to 2,779 and Nasdaq Composite added 0.2 per cent as well, while the Dow Jones Industrial Average ended the day flat."
"“In the short term, it is all about trade,” said JJ Kinahan, chief market strategist at TD Ameritrade."
He added that a positive earnings report from Walmart helped add a positive tone to the day’s trade.
Walmart on Tuesday reported its biggest rise in domestic sales for the crucial holiday period in 15 years.
"Shares in Walmart rose as much as 4 per cent on signs that the chain’s efforts to adapt and compete with ecommerce rivals, namely Amazon, were having some success."
Walmart shares ended the day 2.2 per cent higher at $102.20.
"The Stoxx Europe 600 index retreated, falling 0.2 per cent, after Europe’s"
"biggest bank, HSBC, warned on US-China trade tension."
"The almost 10 per cent rally in Europe’s benchmark index this year had been helped by expectations that the world’s two largest economies would avoid an escalation in tariffs that, without an agreement, would begin early next month."
"Commenting on “a softening in the asset side” of HSBC, John Flint, the bank’s chief executive, warned of “trade uncertainty”."
"Liu He, Chinese vice-premier, will meet Robert Lighthizer, US trade representative, and Steven Mnuchin, US Treasury secretary, on Thursday and Friday in Washington."
Chinese president Xi Jinping said last week that talks would continue in the US capital after the sixth round of cabinet-level negotiations wrapped up in Beijing.
"Chinese equities, which on Monday had their best day since early November, failed to maintain that momentum on Tuesday."
"The benchmark CSI 300 index, which has surged 14 per cent so far this year, fell 0.2 per cent."
"Companies linked to the Greater Bay Area, a Chinese government megaproject to create a powerhouse of innovation and economic growth in the Pearl River Delta linking Hong Kong, Macau and Shenzhen, rallied following an outline of the plans first revealed on Monday."
"In Japan the Topix climbed 0.3 per cent to a two-month high, helped by the energy sector."
"Meanwhile, South Korea’s Kospi dropped 0.3 per cent."
The Japanese yen stood out on a quiet day in the world’s foreign exchange markets.
"It briefly weakened following comments from Haruhiko Kuroda, the Bank of Japan governor, who cautioned that the central bank would consider easing policy if currency moves had an impact on consumer prices."
"After falling 0.3 per cent, the yen recovered to trade at ¥110.57 to the dollar."
"Elsewhere, the dollar index was down 0.4 per cent at 96.51."
US Treasuries firmed with the yield on the benchmark 10-year Treasury bond down 3 basis points at 2.63 per cent.
"Sovereign bond markets were calm, with the yield on the benchmark 10-year German Bund flat at 0.10 per cent."
"The yield has moved sharply lower in recent weeks, touching 0.08 per cent at the start of the month, as the outlook for the eurozone economy weakens."
The global oil benchmark Brent crude took a breather on Tuesday after climbing to a three-month high on optimism over the US-China trade dispute and following Saudi Arabia’s plans to make deeper-than-expected production cuts.
"Brent was 0.1 per cent weaker at $66.42, while West Texas Intermediate, the US benchmark, rose 0.9 per cent to $56.06."
Asia equities climb as trade war sentiment turns positive
Energy stocks outperform on hopes of output cuts
Pound up slightly after Australia signals potential fast-tracked UK trade pact
"Asia equities kicked off the week with strong gains, propelled by a solid close on Wall Street on Friday."
Energy stocks outperformed as oil prices touched their highest levels in months due to output cuts by key suppliers.
"Stocks across Asia Pacific got off to a robust start after broad declines on Friday, as trade war optimism on Wall Street in the interim fed through to markets in the region."
"“Last Friday, Asia was dominated by negative sentiment over trade talks; this Monday morning, it’s all smiles and optimism again,” said Robert Carnell, Asia-Pacific chief economist at ING."
“This could go on a while.”
"“Perhaps the worst outcome now might be an extension of the March 1 deadline to provide more time,” he added: “That leaves room for plenty more 180 degree turns in sentiment before, we assume, some eventual ‘deal’ is reached.”"
"Hang Seng was up 1.7 per cent with gains for all market segments, while in China the CSI 300 of major Shanghai- and Shenzhen-listed stocks was up 2.5 per cent."
Tokyo’s Topix jumped 1.5 per cent.
"Gains were across the board but energy stocks were far ahead of the pack, rallying 4.6 per cent on the back of a rise in oil prices during Friday’s session."
"Energy shares were also the best performers in Sydney, climbing 1.4 per cent."
"The benchmark S&P/ASX 200 index rose 0.4 per cent with all segments advancing except industrials, which fell 0.7 per cent."
"The gains for equities in Asian trading came after stocks on Wall Street posted their best daily gain for the month on Friday, with the S&P 500 climbing 1.1 per cent as investors kept faith that Beijing and Washington would manage to avert an escalation in the trade war."
"Trade talks resume in Washington later on Monday, a day when markets in the US will be shut for the Presidents Day national holiday."
"Foreign exchange markets were comparatively quiet, with the dollar index, which tracks the greenback against a basket of peers, falling 0.1 per cent to 96.782."
The UK pound was up 0.2 per cent against the dollar at $1.291 after Australia’s trade minister told the Financial Times that his country was ready to sign a fast-tracked trade agreement with the UK in the event of a no-deal Brexit.
"Sovereign bond markets were also quiet with the yield, which moves inversely to price, on 10-year US Treasuries unmoved at 2.663 per cent ahead of Monday’s US market holiday."
Oil prices rose to their highest levels in roughly three months on Monday amid global oil supply cuts and rising optimism that the US and China would be able to reach an agreement on trade.
"West Texas Intermediate, the US marker, rose as much as 1 per cent to $56.13 a barrel — its highest intraday level since November 20 and a rise of more than 23 per cent so far this year."
"Brent crude, the international marker, was up as much as 0.8 per at $66.78, just shy of a three-month high."
"The moves came after oil prices were buoyed last week by Saudi and Russian supply cuts, although gains were tempered somewhat by signs of resilience in the US shale industry, according to ANZ analysts."
Friday 21.35 GMT
Wall Street posts best day in February on US-China trade optimism
Euro holds despite ECB official pointing to slowing growth
Oil marches higher
"US stocks on Friday posted their best daily gain this month, as investors kept faith that Beijing and Washington will still manage to avert an escalation in the trade war between the world’s two biggest economies."
"The benchmark S&P 500 gained 1.1 per cent, the highest daily increase so far in February, contributing to a 2.5 per cent rise for the week."
The Dow Jones Industrial Average added 1.7 per cent for the day and 3.1 per cent for the week.
"After US and Chinese trade negotiators held the first substantial talks this week in several months, the two sides would meet again next week in Washington, President Xi Jinping said."
"Even though this week’s talks in Beijing between Liu He, Chinese vice-premier and Robert Lighthizer, US trade representative, yielded little concrete progress, investors’ optimism is grounded in the idea that a resolution to this dispute is in the interests of both sides."
In Europe the benchmark Stoxx 600 was up 1.4 per cent.
"French and German equities rallied, with the CAC 40 climbing 1.8 per cent and Xetra Dax 30 up 1.9 per cent."
"“Addressing global trade tensions is key for improving the economic outlook outside the US,” strategists at Bank of America Merrill Lynch noted."
“The timing and outcome of the US trade negotiations with China and the EU are key for markets for the rest of the year.”
"The advances for equities in the US and Europe were in contrast to the weakness in Asia earlier in the day, where the CSI 300, an index of major stocks in Shenzhen and Shanghai, fell 1.9 per cent."
The Topix in Japan was off 0.6 per cent.
Seoul’s Kospi was down 1 per cent.
The euro held its value following an early dip after a top European Central Bank official floated the possibility of another round of long-term loans to banks and said the eurozone’s slowdown is worse than thought.
"Speaking in New York, Benoît Coeuré, a member of the ECB executive board, said that targeted longer-term refinancing operations are “being discussed”."
"Mr Coeuré said that the eurozone’s path of inflation would be shallower while its economic slowdown would be “stronger and broader” than expected, a Reuters report said."
"Germany, the eurozone’s largest economy, avoided slipping into a technical recession by the narrowest of margins, according to this week’s"
figures from the national statistics office.
The dollar index was little changed.
"Sovereign debt markets were mostly steady, with the yield on the 10-year Treasury edging up 1 basis point to 2.67 per cent."
"Oil prices, buoyed this week by the prospect of output cuts, continued to march higher."
"Brent crude, the international benchmark, was up 2.8 per cent at $66.35 a barrel."
West Texas Intermediate climbed 2.4 per cent to $55.73.
Thursday 21.46 GMT
US retail sales data weighs on US stocks
"Mood turns after the data, which followed news of Germany nearing recession"
Rally in 10-year US Treasuries depresses yield to 2.65 per cent
European bourses balk at three-month highs touched earlier after strong earnings
Wall Street lost ground on Thursday after poorer than expected US retail sales data sent shivers through the stock market.
The bleak American data followed numbers that showed Germany only narrowly avoiding a return to recession in the fourth quarter.
"Both reports underlined the fragile state of the global economy as investors continued to wait for signs of progress on the trade dispute between the US and China, with high-level talks between the countries under way."
"The S&P 500 index was down 0.3 per cent, after having been down as much as 0.8 per cent after the biggest monthly drop in US retail sales since the depths of the financial crisis."
"Shares in Amazon, which announced an abrupt reversal of a decision to open a large New York headquarters, dropped 1.1 per cent."
"Europe’s Stoxx 600 slipped 0.3 per cent overall, coming off some of its highest readings since November, with the earnings-inspired rally looking overdone as sentiment soured."
"The move away from riskier assets drew investors into havens such as Treasuries, with the yield on the 10-year US bond down 5 basis points to 2.65 per cent."
"German growth data for the fourth quarter unexpectedly flatlined, having been expected to rise 0.1 per cent from the previous three months, coming as a reminder that the trade dispute coincided with faltering gross domestic product around the world."
"However, the euro was up 0.3 per cent at $1.13."
"Xetra Dax 30 ended the day down 0.7 per cent, while London’s FTSE 100 bucked the trend, helped by a weaker pound."
The main UK stock index ticked up 0.1 per cent.
It was a brighter day for
mainland China’s stocks.
"China’s CSI 300 rose 0.2 per cent, having climbed 2 per cent on Wednesday on hopes for firm signs of an improvement in trade relations with the US."
"Hong Kong’s Hang Seng slipped 0.2 per cent, with technology and consumer cyclical stocks falling."
Japan’s Topix held steady after data showed Japan’s economy returning to growth in the final quarter of 2018.
"Sterling retested lows previously seen in mid-January, when the UK parliament voted down the terms of the government’s Brexit deal, as the turbulent Westminster politics over the terms of Britain’s departure from the EU continued."
"The pound fell 0.4 per cent to $1.28, with MPs on Thursday once again voting down the government’s proposals."
The dollar index weakened 0.1 per cent but remained near a two-month high.
"Oil prices continued to climb, following comments from the Saudi Arabia’s energy minister that the kingdom would limit production."
"Brent crude rose 1.5 per cent to $64.59 a barrel in the afternoon, while US marker West Texas Intermediate edged 1.1 per cent higher to $54.51."
Wednesday 21.52 GMT
Stocks higher as US president floats tariff deadline extension
But gains subdued by Senator Rubio’s buybacks proposal
Oil prices rise on supply cut optimism after Saudi Arabia minister’s comments
Pound steady as UK consumer price inflation slips below Bank of England target
Dollar index near 2-month peak after January inflation data meet expectations
Global stocks rose and oil prices extended their rally after Donald Trump opened the door to an extension of the US-China trade truce beyond the March 1 deadline.
The US president said he could allow more time for negotiations with Beijing if the sides were close to a “real deal”.
That statement came as trade talks between the world’s two biggest economies continued in Beijing this week.
"Wall Street’s S&P 500 ended the day with another 0.3 per cent gain, extending its 1.2 per cent advance over the previous session, but gave up some of its morning gains after tweets by Republican senator Marco Rubio that argued the US should make it less attractive for companies to funnel their profits into buybacks — which have been a big pillar of support for the US stock market since the crisis."
"“Senator Rubio’s tweet pledging to submit a bill to tax corporate buybacks at the same rate as dividends dented some of the positive vibes evident early in the session,” said analysts at National Australia Bank."
“The Senator appears to be aiming at addressing criticism of the Republican’s 2017 tax law that cut the corporate rate to 21 per cent from 35 per cent.
"Many companies have used the savings to buyback shares, boosting EPS [earnings per share] by reducing the aggregate float, instead of using the savings in new investments,” NAB"
’s analysts noted.
"China’s CSI 300 added 2.2 per cent, building on the previous day’s gain of 1 per cent, while in Hong Kong the Hang Seng was up 1.2 per cent."
"London’s FTSE 100 rose 0.8 per cent, with Frankfurt’s Xetra Dax 30 up 0.4 per cent."
Topix ended 1.1 per cent higher.
"“A sustained bullish outcome from trade discussions may still need a more concrete resolution, [but] the softening of stance does suggest . . . "
"willingness to reach a deal [and] progress being made in talks so far,” said Johanna Chua, a strategist at Citi."
"The price of a barrel of Brent crude rose 1.5 per cent to $62.49, helping stocks in the energy sector."
The New Zealand dollar gained 1 per cent after the country’s central bank said it expected to leave interest rates at their current levels for the rest of 2019 and all of 2020 — in contrast to increasingly dovish leanings at other global central banks.
"The Reserve Bank of New Zealand held its official cash rate at 1.75 per cent as expected, and said in its monetary policy statement that “we expect to keep the OCR at this level through 2019 and 2020”."
But it added that the “direction of our next [rates] move could be up or down”.
"The central bank’s economic projections tipped the cash rate to average 1.8 per cent through 2021, before climbing to 2.2 per cent in 2022."
US inflation data for January met expectations and helped the dollar index remain near the two-month highs touched this week.
The index edged 0.5 per cent higher at 97.17 after the core consumer price index rose 2.2 per cent year on year.
"However, Paul Ashworth, chief US economist at Capital Economics, said the 2.2 per cent increase in core prices demonstrated “that the dangers of any significant breakout above the Fed’s target are fairly slim at this stage”."
He added: “That provides support for the FOMC’s [Federal Open Market Committee] ‘patient’ stance as it frets about the sudden economic weakness in Europe and Asia.”
Sterling held steady at $1.2882 as year-on-year consumer price index inflation fell below the Bank of England’s 2 per cent target for the first time since early 2017.
CPI for January came in at 1.9 per cent.
The UK’s fraught Brexit politics remained the main driver for sentiment toward the pound.
“A soft January does not a deflationary summer make.
It was a weak month for CPI but January sales and last year’s oil price are masking the inflationary demon.
"Foster, Head of Research at Brewin Dolphin"
The euro gained 0.3 per cent to $1.1265.
Oil prices extended a rally that kicked off during the previous session after signs that Opec’s production cuts were taking hold and comments on supply from Saudi Arabia’s energy minister.
"Brent crude, the international benchmark, climbed 1.5 per cent to $62.49 a barrel while US marker West Texas Intermediate climbed 0.3 per cent to $55.56."
"Gold dipped 0.4 per cent to $1,308.9 per troy ounce."
Tuesday 21.30 GMT
Wall Street gains on government funding optimism
Global indices cautiously optimistic on trade war hopes
Michelin profit forecast energises European car stocks
US stocks ended the day higher on optimism over a tentative deal to avert another government shutdown and encouraging signs that the US and China will advance trade talks this week.
"The S&P 500 rose 1.3 per cent, while the Dow Jones Industrial Average and the technology-heavy Nasdaq both advanced 1.5 per cent."
Investors dismissed comments from President Donald Trump that he was “not happy” with a deal etched out by Democrats and Republicans on Monday night that would keep the government open and avoid a shutdown on Friday.
The arrangement would provide less than a quarter of the $5.7bn
Mr Trump is seeking to build a wall along the Mexican border.
"Attempts to strike a deal could be derailed by “a number of separate issues”, said Nick Marro, an analyst at the Economist Intelligence Unit, a research group."
"“Potential export controls targeting China, as well as possible moves to ban Chinese telecoms equipment from US networks, are also in the pipeline."
"Movement forward on these issues could torpedo the trade talks regardless of what happens before March,” Mr Marro said."
"In Europe, there was reassuring guidance from Michelin, the tyremaker, which forecast a rise in profits for 2019, easing concern about the outlook for demand and drawing investors into the wider sector."
"Its shares rose 13.1 per cent, topping the Stoxx 600."
"The Europe-wide index inched up 0.9 per cent, with the index tracking car and car parts makers adding 3.21 per cent after Michelin’s update."
"This eased wider fears about the impact of the trade war on the sector, helping offset a cut to profit forecasts from Nissan."
"A cautiously optimistic mood helped global stocks stay positive, with the FTSE All-World index up 1.18 per cent, as investors remained on watch for firm signs of progress in the Sino-US trade talks."
US trade officials are meeting their Chinese counterparts in Beijing this week to try to resolve the trade dispute between the world’s two biggest economies before the end of the month — after which tariffs on about $200bn of Chinese exports to the US are set to increase from 10 per cent to 25 per cent.
Mr Trump suggested on Tuesday that he might be open to extending that deadline.
“Don’t get too panicked and don’t get too euphoric.
"When a deal is arrived at the devil is going to be in the details,” said Matthew Benkendorf, chief investment officer for Vontobel Quality Growth."
“There is a wild card and it is Trump — I wouldn’t bet on anything he would do.”
"Frankfurt’s Xetra Dax 30 added 1.45 per cent, with London’s FTSE 100 up 0.35 per cent."
"Hong Kong’s Hang Seng steadied after an early dip, while in China the CSI 300 index of Shanghai- and Shenzhen-listed stocks climbed 1 per cent, recovering from an intraday slip."
"Tokyo’s Topix gained 1.41 per cent, with industrials and other exporters encouraged by a weaker currency."
The dollar index was holding just under the 97 mark after climbing to its highest level since mid-December on Monday.
"In China the onshore renminbi, which is constrained by a trading band set daily by China’s central bank, was 0.27 per cent weaker at Rmb6.7740 per dollar after falling 0.7 per cent on Monday as trading resumed."
The offshore renminbi was down 0.39 per cent at Rmb6.7741 per dollar.
"Japan’s yen slipped further, by 0.08 per cent to ¥110.47 per dollar — its lowest level for the year."
The pound was up 0.30 per cent at $1.2893.
"A rally for iron ore futures cooled in China amid re-emerging concerns about global economic growth, threatening to cut short an ascent that saw a nearly double-digit jump by prices on Monday."
Iron ore futures on the Dalian Commodity Exchange were 0.5 per cent weaker at Rmb648 ($95.50)
"a tonne, having surged to Rmb652 a day earlier as Chinese traders returned from their break to a market shaken by deepening supply disruptions from Brazil."
"London iron ore contracts also cooled, falling to $87.45 a tonne from $90.20 on Thursday."
"Oil prices rose, with Brent crude climbing 1.5 per cent to $62.42 a barrel — a three-session high."
West Texas Intermediate was up 1.3 per cent at $53.07 a barrel.
Monday 22.24 GMT
European stocks follow China higher
Wall Street flat amid trade talk caution
Sterling falls as UK month-on-month growth data miss forecasts for December
"US stocks were mixed on Monday, struggling to maintain the momentum from gains in global stock markets as initial US-China trade talks got under way."
"A cautious mood hung over markets ahead of planned meetings this week between Robert Lighthizer, the US trade representative, Steven Mnuchin, the US Treasury secretary, and Chinese vice-premier Liu He as the separate threat of another US government shutdown also hung in the balance."
"“There is an uncertainty in the air and in the markets, which is adding a little downward pressure,” said Michael Underhill, chief investment officer at Capital Innovations."
"“There is cautious optimism that we will find a solution [on trade], but investors will be watching daily and weekly for hints of positive developments.”"
Wall Street’s S&P 500 eked out a 0.1 per cent gain alongside a similar rise in the Nasdaq Composite while the Dow Jones Industrial Average fell 0.2 per cent.
"US Treasuries were weaker, pushing yields higher."
The yield on the benchmark 10-year note was up 2 basis points at 2.65 per cent.
"Still, the Europe-wide Stoxx 600 added 0.9 per cent, with sectors exposed to the trade war rising."
Both the Stoxx index tracking industrial metals makers and the benchmark for technology stocks advanced.
"Earlier, Chinese stocks climbed."
"The CSI 300 index of mainland Chinese stocks closed up 1.8 per cent, its highest point in almost three months, after opening lower as trading resumed following the lunar new year holiday."
"In Hong Kong, the Hang Seng index was up 0.6 per cent, helped by technology stocks."
US President Donald Trump last week ruled out a meeting with his Chinese counterpart
"Xi Jinping before a March 1 deadline, shattering hopes of an agreement to avoid an escalation in tariffs when the truce ends."
"If Washington and Beijing do not strike a deal by the deadline, tariffs on about $200bn of Chinese exports to the US will rise from 10 per cent to 25 per cent."
ANZ analysts said “the absence of a planned meeting between the two heads of state before March is overshadowing sentiment”.
Markets in Japan were closed for National Foundation Day.
The dollar index rose above 97 points to the highest level since mid-December.
Sterling was 0.7 per cent weaker at $1.2860 after UK GDP data missed forecasts for December and investors remain wary of Brexit politics.
"The growth numbers showed a month-on-month contraction of 0.4 per cent, having been expected to stay flat."
The euro was 0.4 per cent weaker at $1.1276 and the Japanese yen slipped 0.6 per cent to ¥110.36 a dollar.
"The onshore renminbi, which is permitted to trade 2 per cent to either side of a daily midpoint set by the People’s Bank of China, was 0.7 per cent stronger at Rmb6.7907 to the dollar."
The offshore renminbi was 0.2 per cent up at Rmb6.7997.
"Oil prices cooled, with Brent crude down 1 per cent at $61.48 a barrel, trimming earlier losses, while US marker West Texas Intermediate fell 0.6 per cent to $52.41."
Friday 22.47 GMT
US stocks brush off concerns over US-China trade tensions
Trump rules out
Xi meeting ahead of March 1 tariff deadline
European bourses post Friday losses
Euro posts worst fall since September as economic data signal slowdown
"US stocks shrugged off brewing trade concerns to post an incremental gain on Friday and end the week higher, while European markets fell after brisker declines in Asia."
"The S&P 500 gained 0.07 per cent, rebounding after a dip earlier in the day and a 1 per cent drop on Thursday after Donald Trump ruled out a meeting with his Chinese counterpart before a March 1 deadline for Washington to strike a deal with Beijing over trade."
This nudged the index to a 0.05 per cent gain for the week.
"The US president answered “no” when asked by reporters in the Oval Office if he would meet Xi Jinping, China’s president, before March 1."
Mr Trump’s remarks
", White House economic adviser Larry Kudlow on Thursday had also noted that Washington and Beijing still had a “pretty sizeable distance to go here”, referring to trade discussions between the two countries."
"The date marks the end of a 90-day truce between the sides, after which tariffs on about $200bn worth of Chinese exports to the US will increase from 10 per cent to 25 per cent."
"The Europe-wide Stoxx 600 fell 0.7 per cent, with Frankfurt’s"
Xetra Dax 30 losing 1.2 per cent overall.
London’s FTSE 100 slipped 0.6 per cent.
“It is likely corporate investment decisions will be delayed until the [US/China] trade negotiations are settled and might even push companies to pursue cost cutting in job losses as corporates look to protect profitability.
"We are one step closer to a self-inflicted recession in the US.”Paul Flood, portfolio manager of the Newton Multi-Asset Income Fund"
Tokyo’s Nikkei fell 2 per cent.
In Sydney the S&P/ASX 200 dipped 0.3 per cent.
"In Hong Kong, where traders were returning from the lunar new year break, the Hang Seng index was down 0.2 per cent."
The euro slipped 0.1 per cent to $1.1323.
"The shared currency was down 1.1 per cent for the week, marking its biggest weekly fall since September, after a series of economic data out during the week pointed to a slowing eurozone economy."
The dollar index was up 0.1 per cent at 96.638.
Sterling remained drifting under $1.30 as investors waited for clarity on the terms of the UK’s departure from the EU.
The yield on US 10-year Treasuries fell 2 basis points on Thursday to trade at 2.63 per cent.
"Brent crude was 0.5 per cent higher at $61.97 a barrel, while WTI crude was flat at $52.71 a barrel."
"ANZ analysts noted that the US-China trade tensions had sent oil prices lower on Thursday, fuelling concerns over global economic growth and offsetting some optimism over the potential for Opec to extend its supply cuts later this year."
"Gold was 0.5 per cent higher at $1,316.61 an ounce."
Thursday 21.41 GMT
US equities weaken on China trade concerns
European government bonds rally
The euro slips to $1.13
German and Italian stocks fall
Oil prices soften
US and European stocks retreated on Thursday on growing concerns about US-China trade tensions and slowing economic growth.
"The S&P 500 lost 0.9 per cent on the day after having dipped as low as 1.6 per cent after news reports that President Donald Trump is unlikely to meet Xi Jinping, his Chinese counterpart, delaying a potential end to Sino-US trade disputes."
The benchmark index is coming off its best January since 1987.
"US bonds rallied, with the yield on 10-year Treasuries dropping 3.8 basis points to 2.66 per cent."
Yields move inversely to bond prices.
"In Europe, government bonds rallied and equities weakened after the European Commission cut its economic growth forecasts for the eurozone."
"The eurozone economy would expand just 1.3 per cent this year, the commission forecast, down from a projection of 1.9 per cent in November."
Its projection for 2020 has come down from 1.7 per cent to 1.6 per cent.
The gloomier prediction is a recognition of the deterioration in the eurozone in recent months.
"It was enough to inject fresh momentum into the rally for eurozone government bonds, with the yield on the benchmark 10-year German bond falling 4bp to 0.12 per cent."
Yields on most other eurozone government bonds dropped.
German and Italian stocks were both down about 1.5 per cent.
"UK government bonds also joined in the sovereign debt rally, with the yield on the benchmark 10-year gilt falling 5bp to 1.17 per cent."
The move was given extra impetus after the Bank of England became the latest central bank to grow less optimistic on the outlook.
"The economy would expand just 1.2 per cent this year, the BoE forecast, the slowest rate of expansion since 2009."
"Sterling, which has been in the crosshairs of Brexit since the 2016 referendum, weakened 0.3 per cent to just below the $1.29 mark."
"Italy, meanwhile, was one country that missed out on the sovereign debt rally."
"The yield on the benchmark 10-year Italian bond jumped 7bp to 2.92 per cent, as a much weaker economic outlook was seen as complicating the Italian government’s ambitions to introduce fiscal stimulus."
"Strategists at Oxford Economics noted that the deteriorating economic backdrop could “spell trouble for the Italian government’s expansionary fiscal plans, even though a compromise was reached at the end of last year”."
"Markets in Hong Kong and China were closed for the lunar new year but stocks in Seoul put in a weak showing after returning from the holiday, with the Kospi index up 0.1 per cent."
"The mixed showing in Asia came after Wall Street broke a five-day run of gains on Wednesday, with the S&P 500 slipping 0.2 per cent as investors digested a mixed batch of earnings."
"Having proved resilient in the face of weaker economic data and softening expectations for monetary policy, the euro was down on Thursday, falling 0.18 per cent to $1.13."
The dollar index tracking the greenback against a basket of peers was steady at 96.561.
Oil prices were in retreat after gaining about 1 per cent on Wednesday.
"Brent crude, the international benchmark, fell 1.6 per cent to $61.69 a barrel, while US marker West Texas Intermediate dropped 2.52 per cent to $52.65."
"Gold remained steady, up 0.25 per cent to $1,309.91 per ounce."
Wednesday 21.00 GMT
S&P 500 slips 0.2%; Nasdaq Composite ends 0.4% lower
Trump’s State of the Union address underwhelms
German industrial orders tumble
Aussie dollar slides after RBA governor
US dollar edges higher despite fresh fall for Treasury yields
Sign of fatigue began to show on Wall Street following a five-day run of gains for the S&P 500 as participants digested a mixed batch of earnings and found little to get excited about in Donald Trump’s State of the Union speech on Tuesday.
"Derek Halpenny at MUFG said there had been some relief in the markets that, despite the US president’s renewed calls for a wall on the country’s southern border, Mr Trump had not used his speech to declare a national emergency or initiate another government shutdown."
"He added: “There was little mention in the address of US-China trade relations, which may have reinforced the strong Australian dollar move lower overnight.”"
"The currency weakened sharply after the governor of the Australian central bank said the policy outlook was now more evenly balanced, opening up the possibility of a rate cut."
"“Now it sounds more as if the Reserve Bank of Australia has given up on the idea of rate hikes,” said Ulrich Leuchtmann at Commerzbank."
"Meanwhile, fresh concerns over the outlook for the German economy helped knock the euro back below the $1.14 level."
"“Factory orders fell 1.6 per cent in December, against expectations of a 0.3 per cent gain in the month, and while the heavy November decline was revised from a 1 per cent drop to a 0.2 per cent dip, the weak end of the year for the European growth motor — and concerns that the deceleration has extended in the new year — weighed on the euro,” said analysts at Scotiabank."
"Carsten Brzeski, an economist at ING, said he still expected the bottleneck in the German automotive industry to be resolved in the coming months."
"“However, the inventory build-up in recent months, as well as the recent drops in order books, suggest that any rebound of industrial activity in Germany will be slow and sluggish.”"
"In the US, news of an unexpected narrowing in the trade deficit in November “suggested that net trade made a small positive contribution to GDP growth in the fourth quarter”, said Michael Pearce at Capital Economics."
"“We now think fourth-quarter GDP growth was close to 3 per cent annualised,” he said."
"US Treasury yields retreated for a second day, while the dollar index hit an eight-session high."
"In New York, the S&P 500 ended 0.2 per cent lower at 2,731, after rising 3.7 per cent over the previous five sessions."
The Nasdaq Composite fell 0.4 per cent and the Dow Jones Industrial Average eased 0.1 per cent.
Electronic Arts and Take-Two Interactive were the biggest fallers in the S&P 500 — both shedding more than 13 per cent — after the video game developers unveiled disappointing sales forecasts
"General Motors rose as much as 3.7 per cent, before trimming its advance, after the carmaker said its profits fell less than expected in the final quarter of last year."
"Chipmaking stocks outperformed, with the Philadelphia SE Semiconductor index up 2.6 per cent."
"In Europe, the pan-regional Stoxx 600 index ended 0.2 per cent higher, even as the Xetra Dax in Frankfurt fell 0.4 per cent and London"
’s FTSE 100 slipped 0.1 per cent.
"Italian stocks continued to gain ground, with the FTSE MIB rising another 0.8 per cent."
The Australian dollar retreated sharply after the governor of the Reserve Bank of Australia introduced the possibility of a rate cut.
"The Aussie was down 1.7 per cent at US$0.7115 after his remarks, putting it on course for its biggest single-session decline since February 2018."
The euro was down 0.4 per cent at $1.1366 — the lowest since January 25 — with the dollar index up 0.3 per cent at 96.38.
The greenback was steady against the yen at ¥109.94.
Sterling was down 0.1 per cent against the dollar at $1.2935.
"The yield on the 10-year Treasury was down 1 basis point at 2.69 per cent, having earlier dipped as low as 2.673 per cent."
The 10-year German Bund yield held steady at 0.17 per cent
"Oil prices got a lift from a bullish report on US crude and gasoline inventories, with Brent bouncing off a low of $61.05 a barrel to settle 1.2 per cent higher at $62.69."
US West Texas Intermediate was up 0.6 per cent in late trade at $53.97.
"The US Energy Information Administration said domestic crude and gasoline inventories rose last week, although by less than expected."
"Gold was down $8 at $1,306 an ounce — and some $20 shy of a recent nine-month intraday peak."
Additional reporting by Michael Hunter in London and Alice Woodhouse in Hong Kong
Tuesday 21.00 GMT
S&P 500 gains 0.5%; benchmark now up 16% from Boxing Day low
Stoxx Europe 600 index climbs 1.4%
US ISM services index slips in January
Sterling drifts below $1.30 after weak UK services sector report
European energy shares rally after BP earnings shine
Oil markets stay choppy
US and European stock indices marched to fresh two-month highs as another encouraging batch of corporate earnings — Alphabet notwithstanding — helped keep the mood buoyant.
"Indeed, the S&P 500 notched up a fifth successive daily advance as participants awaited President Donald Trump’s State of the Union speech later in the day."
"Elsa Lignos, global head of FX strategy at RBC Capital Markets, noted that Mr Trump was supposed to talk on the theme of “unity” but said there were some risks to watch out for."
"“There has been some speculation whether Mr Trump will use his primetime address to declare a state of emergency in order to get funding for his wall,” she said."
"Across the Atlantic, the FTSE 100 index outperformed as BP reported strong profits and as sterling dipped below $1.30 for the first time in nearly two weeks after data showed growth in the UK services sector stalling last month."
"In the eurozone, the final reading of the services purchasing managers’ index for January was unexpectedly revised up from the initial estimate — leaving it unchanged from December."
"However, Italy’s services sector fell back into contraction as 2019 got under way."
"The data failed to unsettle shares in Milan, while the euro held above $1.14 — although Italian government bond yields inched higher."
"“The deteriorating outlook for Italy’s economic growth strengthens the view that the budget deficit will significantly overshoot the government’s targets,” said ABN Amro."
"“Given this, we remain of the view that the government debt ratio will trend up in the coming years."
"Against this background, we are cautious on Italy’s government bonds at current levels.”"
"Meanwhile, the US Institute for Supply Management’s non-manufacturing index eased back only slightly in January, but analysts said the details of the report — notably a sharp decline in the new orders component — suggested that further weakness probably lay ahead."
The dollar maintained its upward momentum in spite of a dip for Treasury yields.
"Oil markets stayed choppy, with Brent continuing to pivot around the $62 a barrel level."
"In New York, the S&P 500 rose 0.5 per cent to 2,737 — just off the session’s high of 2,738.98."
The benchmark index has now risen more than 16 per cent from the intraday low it struck on December 26.
"Well received results from Estée Lauder and Ralph Lauren pushed the two companies’ shares up nearly 12 per cent and more than 8 per cent respectively, and helped lift the S&P 500 consumer cyclicals sector by 0.9 per cent."
Alphabet shares recovered from an early fall to close 0.9 per cent higher.
The Dow Jones Industrial Average and the Nasdaq Composite each gained 0.7 per cent.
"In Europe, the pan-regional Stoxx 600 rose 1.4 per cent to its highest since early December."
The Xetra Dax in Frankfurt rose 1.7 per cent and the FTSE MIB in Milan gained 1.2 per cent.
"The FTSE 100 in London rose 2 per cent to its highest close since October 9, helped by a 5.2 per cent gain for BP."
"The dollar index was up 0.2 per cent at 96.06, its highest for a week, as the euro slipped 0.2 per cent to $1.1410 and the greenback edged up 0.1 per cent versus the yen to ¥109.95."
"The pound fell below $1.30 after the UK services sector PMI came in at 50.1 for January, just above the 50 level that nominally divides expansion from contraction."
"Sterling was down 0.6 per cent at $1.2953, a nine-session low, while the euro was 0.4 per cent higher at £0.8807."
"The yield on the 10-year US Treasury was down 2 basis points at 2.70 per cent, with the two-year yield 1bp lower at 2.53 per cent."
"Italy’s 10-year yield closed at 2.79 per cent, up 4bp on the day."
The 10-year German Bund yield slipped 1bp to 0.17 per cent.
"Brent oil settled at $61.98 a barrel, down 0.9 per cent, after swinging between $61.72 and $63.02."
US West Texas Intermediate was down 1.6 per cent in late trade at 53.71.
"Despite the dollar’s firmer tone, gold was up $3 at $1,314 an ounce."
Additional reporting by Michael Hunter in London and Edward White in Taipei
Monday 21.00 GMT
S&P 500 gains 0.7%; Nasdaq Composite ends 1.1% higher
Alphabet results due after closing bell
Activity subdued by lunar new year holidays in Asia
Brent oil retreats from two-month intraday high
"US stocks pressed ahead as a strong showing from the technology sector outweighed losses for healthcare and telecom services shares, with participants awaiting fresh leads from a string of corporate earnings this week, including Google parent Alphabet — due after the closing bell."
"However, trading activity was relatively light."
"“It appears that the lunar new year holidays in Asia have sapped some momentum, while markets may also be pausing ahead of President Trump’s State of the Union address on Tuesday,” said analysts at Action Economics."
"Furthermore, they added, “Federal Reserve chairman [Jay] Powell will speak after the close on Wednesday.”"
"The firm tone to equities paved the way for a fresh sell-off for US Treasuries, which pushed the yield on the 10-year note back to where it stood just before the Fed delivered a more dovish policy statement than expected last Wednesday."
"The dollar also resumed its upward momentum, pushing gold further back from last week’s nine-month high."
"Chris Turner, head of FX strategy at ING, noted that this week would be relatively quiet in terms of economic data while the lunar new year suggested that Asia would not be a source of volatility."
"“This presents a mixed story for the dollar,” he said."
“It should retain its strength against the low yielders of Japan and Europe while still staying soft against high-yielding G10 and emerging market currencies.
"“This has been the core theme through January but, unless US-China trade tensions flare up again or a ‘no-deal’ Brexit becomes likely, we’d expect this cautiously risk-positive environment to continue.”"
"Indeed, the US currency pushed back above the ¥110 level for the first time since December 31 while the dollar index continued to rebound from last week’s three-week intraday low."
Brent oil touched a two-month high of $63.63 a barrel in early trade before turning tail and briefly falling back below the $62 mark.
"The international crude benchmark has risen more than 15 per cent so far this year, bolstered by supply cuts from Opec and its allies, and US sanctions against Venezuelan oil exports, although uncertainty over global economic growth have tempered gains recently"
"In New York, the S&P 500 ended 0.7 per cent higher at 2,724, its fourth successive daily gain."
The tech-heavy Nasdaq Composite gained 1.1 per cent while the Dow Jones Industrial Average rose 0.7 per cent.
The CBOE Vix volatility index touched its lowest level in four months.
Alphabet shares rose 2 per cent ahead of its results.
"In Europe, the pan-regional Stoxx 600 index ended 0.1 per cent higher, while the Xetra Dax in Frankfurt slipped marginally and the FTSE 100 in London rose 0.2 per cent."
The dollar index was up 0.3 per cent at 95.84.
It fell as low as 95.16 last week.
"The euro was down 0.2 per cent against the US currency at $1.1434, while dollar/yen   rose as high as ¥110.15 before easing back slightly to ¥109.91, still up 0.4 per cent on the day."
"Sterling was down 0.3 per cent at $1.3040, while the euro was 0.1 per cent higher against the pound at £0.8766."
"The 10-year Treasury yield was up 3 basis points at 2.72 per cent, while the two-year yield was also 3bp higher at 2.54 per cent."
The German 10-year Bund yield rose 1bp to 0.18 per cent.
"A choppy day in the oil markets saw Brent dip as low as $61.28 a barrel before pulling back up to settle at $62.51, down 0.4 per cent on the day."
It gained 1.8 per cent last week.
US West Texas Intermediate was down 1 per cent in late trade on Monday at $54.73.
"Gold fell $4 to $1,313 an ounce, after touching $1,326 last Thursday."
Friday 21.00 GMT
S&P 500 inches up 0.1%; Nasdaq falls 0.3%
Amazon shares slide 5.4%
US non-farm payrolls report easily beats expectations
ISM manufacturing index rebounds
Treasuries sell off; dollar index holds steady
Italian manufacturing contracts at sharpest rate since 2013
"US stocks started the month on a hesitant note as a reassuring batch of domestic economic data was countered by caution over Amazon’s latest trading update, released late on Thursday."
The online retailer topped the list of fallers in the S&P 500 on Friday after its sales forecast for the first quarter was lower than expected.
"Wall Street had initially pushed higher after the latest US jobs report showed non-farm payrolls increased by 304,000 jobs last month, far exceeding expectations."
"However, analysts did point out that the figures may have been distorted by the government shutdown, and also noted that December’s payrolls increase had been revised down sharply."
"Further good news on the economic front came from the Institute for Supply Management’s manufacturing index, which staged a solid rebound in January following the previous month’s steep decline."
US Treasuries fell steeply after the release of the data.
"Michael Pearce at Capital Economics said that, taken together, the day’s"
reports provided a sign that economic growth remained solid.
"“Against that backdrop, we still think there is a fair chance that the Federal Reserve will raise interest rates once more in the coming months,” he said."
"Earlier this week, the US central bank delivered a surprisingly dovish policy statement in which it pledged to be “patient” with regard to further interest rate rises and signalled greater flexibility over unwinding its balance sheet."
"Meanwhile, there was a broadly optimistic view of the trade talks that took place this week between the US and China."
"Both Washington and Beijing said that progress had been made during the negotiations, although details remained scant."
"Robert Lighthizer, the US trade representative, said he was considering a trip to China after the lunar new year holiday with Steven Mnuchin, the US Treasury secretary, to resume the talks."
"The encouraging signals on the US economy contrasted sharply with a fresh run of unsettling eurozone economic data this week, most notably from Italy."
"The yield on the country’s 10-year government bond rose sharply on Friday, with its spread over the equivalent maturity German Bund yield hitting a two-week high."
Survey data showing Italian manufacturing activity contracting at the sharpest rate since 2013 came hard on the heels of preliminary figures indicating that the economy had slipped into recession.
The data helped fuel concerns that the government might have been overly optimistic with its assumptions for growth when making its budget deficit forecasts last year.
"Italian stocks also markedly underperformed those in the rest of the eurozone, with banks suffering the biggest falls."
"But the euro remained unfazed, for now at least."
"Weak manufacturing data out of China also helped keep worries over global growth high on the list of the market’s concerns, while Brexit remained a worry for market participants."
"“The drop in the value of the pound over the past week suggests that investors have become a little more wary about Brexit risks,” said Jane Foley at Rabobank."
"“That said, the year-to-date gains in the value of the pound suggest that the market is betting that a hard Brexit is still likely to be avoided,” she added."
"In New York, the S&P 500 ended 0.1 per cent higher at 2,706, having earlier risen as high as 2,716.66."
"For the week, the S&P gained 1.6 per cent."
The uncertain start to February came after the index secured its biggest monthly gain for more than three years in January.
The Dow Jones Industrial Average rose 0.3 per cent on Friday although the Nasdaq Composite closed 0.3 per cent lower.
Amazon shares fell 5.4 per cent.
"In Europe, the pan-regional Stoxx 600 ended 0.3 per cent higher, with the Xetra Dax in Frankfurt inching up less than 0.1 per cent and London"
"FTSE 100 gaining 0.7 per cent, helped by sterling’s softer trend."
The FTSE MIB index in Milan shed 0.8 per cent.  
"The dollar index was flat at 95.58, with the greenback up 0.6 per cent against the yen at ¥109.49, but the euro up 0.1 per cent at $1.1459."
"Sterling fell as low as $1.3044 before pulling back to $1.3082, still down 0.1 per cent on the day — and 0.9 per cent lower for the week."
"Year-to-date, the UK currency has risen 2.5 per cent versus the dollar."
The euro was up 0.3 per cent against the pound on Friday at £0.8758.
"The yield on the 10-year US Treasury was up 6 basis points at 2.69 per cent, with the two-year yield 5bp higher at 2.51 per cent."
"Italy’s 10-year yield jumped 14bp to 2.73 per cent, while the 10-year Bund edged up 1bp to 0.17 per cent."
"Oil prices had yet another strong session, with Brent crude settling 3.1 per cent higher at $62.75 a barrel — taking its rise since Monday’s close to 4.7 per cent, and its year-to-date gain to 16.6 per cent."
US West Texas Intermediate was 2.8 per cent higher in late trade on Friday at $55.32.
"Gold was down $2 at $1,318 an ounce, after ending Thursday’s session at its highest in almost nine months."
Thursday 21.00 GMT
S&P 500 gains 0.9%; Nasdaq ends 1.4% higher
Dovish Fed statement reassures equity bulls
Facebook up 11% after results
Italy slips into technical recession
Renminbi hits fresh 6-month high versus dollar
The afterglow from the Federal Reserve’s market-friendly policy update on Wednesday and strong results from Facebook helped keep the S&P 500 and Nasdaq moving higher although European indices wobbled in the face of poor economic news from the region.
"The US central bank struck a far more dovish tone than most observers had expected, as it stressed it would be “patient” regarding further interest rate rises and signalled greater flexibility on the issue of reducing its balance sheet."
Treasury yields continued to decline yesterday although the dollar rallied following a post-Fed retreat that allowed China’s renminbi to hit a six-month high.
"Paul Shea, strategic economist at Miller Tabak, warned that the Fed’s dovishness did not signal an end to rate rises."
"“The Fed’s new-found patience is a response to bad data, not President Trump, and is not a change in its plan to take interest rates to neutral as long as the economy is near full employment and inflation is near 2 per cent,” he said."
“CME futures suggest just a 6 per cent chance of a rate hike by June and a 9 per cent chance of one by December.
This is wishful thinking.
The odds of rate hikes by June and December are closer to 40 per cent and 50 per cent.”
"Meanwhile, quarterly earnings results continued to flood in, with Facebook standing out after it reported bumper profits."
General Electric shares also rose after news that its revenues had beaten forecasts.
Participants continued to watch for details on the latest round of US-China trade talks.
"Mr Trump said negotiations were going well, but that no final deal would be struck until he had met his counterpart Xi Jinping."
"Just prior to the close of US stock trading, Robert Lighthizer, US trade representative, said he thought progress had been made in the talks, although there was much work to do."
"The mood in stock markets across the Atlantic was more sombre, as data confirmed that fourth-quarter growth in the eurozone had been subdued — with Italy’s economy, the third-largest in the region, slipping into a technical recession."
"The FTSE MIB index in Milan eased back, while European financial stocks fell sharply amid fresh talk of a merger between Commerzbank and Deutsche Bank."
Markets also remained concerned about China’s economy after official data showed the country’s manufacturing sector contracting for the second month in a row.
"In New York, the S&P 500 rose 0.9 per cent to 2,699, giving it a two-day gain of 2.2 per cent."
"The benchmark index earlier hit 2,708.95."
"For January as a whole, the S&P rose 7.7 per cent, the biggest monthly gain in more than three years and its best start to a year since 1987."
General Electric shares rose as much as 18 per cent on Thursday before paring their advance.
"The Nasdaq Composite gained 1.4 per cent, with Facebook shares up 11.5 per cent, although the Dow Jones Industrial Average ended marginally lower, weighed down by a steep drop for DowDuPont."
"Across the Atlantic, the Stoxx Europe 600 index ended flat, as the Xetra Dax in Frankfurt shed 0.1 per cent and the FTSE MIB fell 0.2 per cent."
The FTSE 100 in London gained 0.4 per cent.
"The dollar index was up 0.3 per cent at 95.59, as the euro shed 0.3 per cent to $1.1443."
Sterling slipped marginally to $1.3112 while the greenback was down 0.2 per cent against the yen at ¥108.86.
China’s currency strengthened to a fresh six-month high against the dollar in early trading.
"The onshore renminbi, which moves within a trading band of 2 per cent either side of a daily midpoint set by the People’s Bank of China, was 0.2 per cent firmer at Rmb6.6976 against the dollar, after touching its strongest level since July 2018."
"The 10-year US Treasury yield was down 7 basis points at 2.63 per cent, the lowest since January 4, while the two-year yield was 7bp lower at 2.46 per cent."
The 10-year German Bund yield fell 3bp to 0.16 per cent.
"Brent oil rose for a third day, settling 0.4 per cent higher at $61.89 a barrel, although US West Texas Intermediate was 0.6 per cent lower in late trade at $53.33."
"Gold inched up $1 to a fresh eight-month high of $1,320 an ounce."
Additional reporting by Michael Hunter in London and Edward White in Taipei
Wednesday 21.00 GMT
S&P 500 gains 1.6%; 2-year Treasury yield down 6bp
US central bank drops forward guidance; vows “patience” on rates
Apple shares up 6.8% as results reassure
FTSE 100 leads in Europe with 1.6% advance
Iron ore futures jump on supply concern
US stocks extended early earnings-driven gains and Treasury prices reversed earlier losses as the Federal Reserve left interest rates unchanged and vowed to be “patient” in determining future moves in borrowing costs.
"The dollar went into retreat against most of its main peers, and gold prices climbed to a fresh eight-month high."
"“The Fed’s latest statement was more dovish than expected, signalling a shift from a tightening to a neutral bias,” said Nicholas Stamenkovic, an economist at NatWest Bank."
“Not only did the Fed drop its forward guidance but it also signalled a more flexible stance on balance sheet reduction.
"All in all, the Fed looks set to pause for a considerable period with the next move dictated by forthcoming data.”"
"But Harm Bandholz, chief US economist at UniCredit, cautioned that despite the important language changes in the statement, he felt that the central bank would still like to lift the Fed funds target rate at least to the longer-run neutral level, currently one or two rate rises away."
"“Financial markets, which currently price zero hikes for this year, may thus be a bit too complacent."
"But for now, nobody wants to take the punch bowl away.”"
The Fed’s statement followed an encouraging round of corporate earnings announcements and came as participants waited for news from the latest trade talks between Washington and Beijing.
"Apple offered the markets some much-needed reassurance after its first-quarter results, released late on Tuesday, came in better than many had feared."
"Boeing was another bright spot after it reported record full-year revenues, while chipmakers outperformed after an upbeat outlook from Advanced Micro Devices."
"Across the Atlantic, French luxury goods group LVMH helped soothe recent market concerns over China after it said that its fast-growing Asia business had yet to be affected by a slowing pace of growth in the country."
London’s FTSE 100 index easily outperformed its continental European peers as it benefited from its relatively heavy exposure to resources stocks.
Iron ore prices rose sharply as concerns over supply were driven by a decision from Brazil’s Vale to cut production following last weekend’s deadly dam disaster.
Oil prices also maintained their recent upward momentum.
"Sterling, meanwhile, attracted plenty of Brexit-focused comment in the wake of Tuesday’s parliamentary vote in favour of the government seeking to renegotiate the withdrawal agreement to replace the Northern Irish backstop with “alternative arrangements”."
"The pound spent much of the session little changed against the dollar, before gaining ground following the Fed statement, in spite of the “apparently impossible task facing Theresa May”, said Chris Beauchamp, chief market analyst at IG."
"“The prime minister might have some kind of backing from her party to go back into the ‘lions’ den’, but it is far from clear whether they have given her any effective weaponry with which to win more compromises from the EU.”"
"In New York, the S&P 500 ended 1.6 per cent stronger at 2,681, its best close since December 6, after rising as high as 2,690.44."
The Nasdaq Composite rose 2.2 per cent and the Dow Jones Industrial Average gained 1.8 per cent.
"Apple shares rose 6.8 per cent, with Boeing more than 6 per cent higher and AMD up"
19.9 per cent.
The Philadelphia SE Semiconductor index rose as much as 3.3 per cent.
"The pan-European Stoxx 600 index ended 0.4 per cent higher, although the Xetra Dax in Frankfurt slipped 0.3 per cent."
A 6.9 per cent jump for LVMH helped propel the CAC 40 in Paris 1 per cent higher.
"The FTSE 100 in London rose 1.6 per cent, with the basic materials sector up 2 per cent and energy 1.7 per cent higher."
"The dollar index was down 0.5 per cent at 95.39, its lowest for more than two weeks, as the euro gained 0.4 per cent to $1.1475 and the greenback slipped 0.4 per cent versus the yen to ¥108.95."
"Sterling was up 0.3 per cent against the dollar at $1.3102, although the euro was up 0.1 per cent versus the pound at £0.8755."
"In the fixed income arena, the yield on the policy-sensitive two-year US Treasury was down 6 basis points at 2.51 per cent, while the 10-year yield was 2bp lower at 2.69 per cent."
The German 10-year Bund yield slipped 1bp to 0.19 per cent.
Oil prices continued to rise as the market factored in the impact on the market of US sanctions on Venezuelan state-owned oil group PDVSA.
"Brent crude settled at $61.65 a barrel, up 0.5 per cent, off a high of $62.67 touched earlier in the day."
US West Texas Intermediate was up 1.8 per cent in late trade at $54.27.
"Gold was up $6 at $1,318 an ounce, after hitting $1,323, the highest since May"
Additional reporting by Alice Woodhouse in Hong Kong
Tuesday 21.00 GMT
S&P 500 falls 0.2%; Nasdaq sheds 0.8%
Markets cautious as Fed meets and
US-China trade talks loom
Sterling drops as MPs vote on amendments to May’s
News of US charges against Huawei has muted impact
Oil rallies as US imposes sanctions on Venezuela’s PDVSA
Wall Street put in another cautious showing as participants digested the latest batch of corporate earnings and awaited fresh direction from a meeting of the Federal Reserve and the forthcoming US-China trade talks.
"There was plenty of uncertainty in the UK, too, as the markets watched the latest episode of the Brexit drama unfold in Westminster."
The pound fell to the day’s lows against the dollar and the euro after MPs backed an amendment to prime minister Theresa May
’s withdrawal agreement calling for the Irish border backstop to be junked and replaced with “alternative arrangements”.
"“It is worth pointing out that the EU have said on numerous occasions that they will not change their stance on the backstop and a spokesperson from the bloc wasted little time in reiterating this following the votes,” said David Cheetham, chief market amnalyst at XTB."
“Therefore rather than a breakthrough this could be seen as something of a false dawn.”
Nerves were also in evidence ahead of the release of quarterly figures from Apple.
"The iPhone maker cut its revenue forecast earlier this month due to softer sales in China, foreshadowing concerns expressed on Monday by Caterpillar and Nvidia over faltering economic growth in the country."
"US earnings on Tuesday were more of a mixed bag, with Xerox and 3M beating expectations but Harley-Davidson badly missing estimates and Pfizer unveiling soft guidance."
There was relatively little impact from news that US authorities had filed criminal charges against Chinese telecoms group Huawei
"“The charges filed on Monday mark a clear escalation in bilateral tensions between the US and China, and will likely undermine efforts to reach a trade agreement by the self-imposed deadline of March 1,” said Lee Hardman, a currency analyst at MUFG."
"Noting the muted market response, he said recent US equity weakness and slowing growth in China “are still judged as placing pressure on both sides to reach a deal and avoid downside risks”."
"Steven Mnuchin, US Treasury secretary, said the Huawei action was a separate issue from trade talks, although China “is unlikely to view it that way”, noted analysts at Action Economics."
Gains for energy stocks offered support to the S&P 500 — and helped the UK
"’s FTSE 100 outperform its continental European peers — as oil prices rallied sharply, with Brent regaining the $60 a barrel mark."
The US imposed sanctions on state-owned Venezuelan oil company PDVSA late on Monday in an effort to curb its crude exports.
"In New York, the S&P 500 ended 0.2 per cent lower at 2,640, while the Dow Jones Industrial Average edged up 0.2 per cent and the Nasdaq Composite fell 0.8 per cent lower."
"Xerox shares rose more than 11 per cent, with 3M gaining 1.9 per cent and Pfizer  closing 3.1 per cent higher."
"Harley-Davidson, however, fell 5 per cent."
Apple ended official trade 1 per cent lower.
"Across the Atlantic, the pan-European Stoxx 600 index ended 0.8 per cent higher, although the Xetra Dax in Frankfurt registered a gain of less than 0.1 per cent."
The FTSE 100 in London rose 1.3 per cent.
"Chinese stocks had a choppy session, with the CSI 300 index ending 0.3 per cent higher after earlier falling 1.1 per cent."
"In Tokyo, the Topix index settled 0.1 per cent higher."
The dollar index was up less than 0.1 per cent at 95.83 as the euro held steady at $1.1432 and the greenback traded flat against the yen at ¥109.39.
"Sterling was 0.8 per cent lower against the dollar at $1.3062, having touched $1.3058, while the euro was up 0.8 per cent at £0.8748."
"The yield on the benchmark US 10-year Treasury was down 3 basis points at 2.71 per cent, while the that on the 10-year German Bund ended 1bp lower at 0.20 per cent."
"Brent oil rose as high as $61.79 a barrel before easing back to settle at $61.32, still up 2.3 per cent on the day."
The international crude benchmark was heading for a monthly gain of about 14 per cent.
US West Texas Intermediate was up 2.5 per cent at $53.29 in late trade.
"Gold was up $8 at a seven-month high of $1,311 an ounce."
Monday 21.00 GMT
S&P 500 falls 0.8%; Nasdaq Composite sheds 1.1%
Caterpillar tumbles after warning of no sales growth in China this year
Cut to revenue forecast sends Nvidia shares reeling  
Sterling soft but holds above $1.31
Brent oil dips below $60 a barrel
Global stocks started the week on a nervous note as unsettling trading updates from Caterpillar and Nvidia added weight to recent concerns about the outlook for the Chinese economy.
"China concerns also weighed on oil prices, with Brent dipping below the $60 a barrel mark, and there was also an element of caution in the markets ahead of this week’s Federal Reserve meeting."
"Participants will be keen to see if the central bank maintains its “patient” stance on interest rates, and will be watching for any updates regarding its balance sheet unwind."
But it was the warnings from Caterpillar and semiconductor group Nvidia that dominated the market mood.
"The former said it expected no sales growth in China this year, and only a “modest” increase worldwide."
"Nvidia, meanwhile, cut its fourth-quarter revenue guidance, citing weak demand in China for its gaming chips."
"Furthermore, Apple supplier Japan Display said it expected a “harsh” impact on earnings from the US-China trade war."
Trade talks between the two countries are scheduled to take place this week.
The “risk-off” mood helped support the Japanese yen and Swiss franc and nudged US Treasury yields slightly lower.
"Gold, however, was barely changed on the day after pushing above $1,300 an ounce on Friday to a seven-month high."
"Sterling remained in focus as it headed for its best monthly performance against the dollar for a year, largely fuelled by growing expectations that the UK would avoid a “no-deal” exit from the EU."
The pound was slightly lower on the day but managed to hold above $1.31.
"“The amendments that will be debated and voted on in parliament this week will bring some clarity as to what happens next in terms of the Brexit debacle,” said Jane Foley, strategist at Rabobank."
“The outcome of these votes should also make its clear if investors’ belief that a ‘no deal’ Brexit is off the table is justified.”
"Brent crude fell as low as $59.49 a barrel as the concerns over China added to worries about rising supply in the US, after data on Friday showed the US weekly rig count rising for the first time this year."
"In New York, the S&P 500 fell 0.8 per cent to 2,643, off the day’s low of 2,624.06."
"The Dow Jones Industrial Average also fell 0.8 per cent, while the Nasdaq Composite ended 1.1 per cent lower."
"Caterpillar shares fell as much as 10 per cent, but had trimmed their decline by the close."
"Nvidia fell 13.8 per cent, while Apple ended 0.9 per cent weaker."
"In Europe, the Stoxx 600 index ended 1 per cent lower as the Xetra Dax in Frankfurt fell 0.6 per cent and London"
’s FTSE 100 shed 0.9 per cent
"The dollar index was less than 0.1 per cent lower at 95.75, as the euro rose 0.1 per cent to $1.1426."
"The greenback slipped 0.2 per cent against the yen to ¥109.34, and was 0.1 per cent lower versus the Swiss franc at SFr0.9917."
"Sterling was down 0.3 per cent against the dollar at $1.3156, leaving it more than 3 per cent up since the start of the year."
The euro was up 0.5 per cent against the pound at £0.8684.
"The yield on the 10-year Treasury was down 1 basis point at 2.74 per cent, with the two-year yield 1bp lower at 2.59 per cent."
The 10-year German Bund yield ended 1bp higher at 0.21 per cent.
"Brent crude settled at $59.93 a barrel, down 2.8 per cent, but was still heading for a monthly gain of more than 11 per cent."
"US West Texas Intermediate was 2.8 per cent lower in late trade at $52.17, well off the day’s low of $51.33."
"Gold was little changed at $1,302 an ounce."
Additional reporting by Hudson Lockett in Hong Kong
Friday 21.00 GMT
S&P 500 up 0.9%
; Xetra Dax ends 1.4% higher
Reports claim Fed considering early end to balance sheet shrinking
Trump announces temporary government reopening
"Dollar index retreats from three-week high; gold hits $1,300"
Pound lifted by talk of DUP support for May’s Brexit plan
"Reports that the Federal Reserve was considering an early end to its balance sheet reduction programme helped US and European stocks end the week on a strong note, as participants digested a mixed batch of quarterly earnings and looked ahead to US-China trade talks next week."
President Donald Trump
’s announcement of a short-term deal to reopen the government following a record-long shutdown came midway through the US session and provided little in the way of fresh momentum to the stock market.
Analysts suggested that the move had hardly been unexpected given the increasing damage to the president’s approval ratings caused by the shutdown.
"Instead, it was the talk of the Fed ending quantitative tightening sooner than had been anticipated that caught the eye of many market observers."
"Analysts suggested that with Fed rate policy apparently on hold for now, the subject of its balance sheet could be more actively discussed at next week’s meeting of the US central bank."
"The dollar retreated sharply, after reaching a three-week high against a basket of currencies on Thursday, helping gold hit a seven-month peak of $1,300 an ounce."
Paul Ashworth at Capital Economics said the Fed was likely to reiterate its current mantra of “patience” with regard to further interest rate rises.
"“Admittedly, stock markets have recovered most of the losses from December and credit spreads have narrowed again, suggesting that fears of an imminent US recession have eased.”"
But Mr Ashworth pointed to continuing weakness in incoming global economic data as a good reason for the Fed to stick with its more cautious stance.
"Indeed, the softness of recent eurozone economic releases prompted Mario Draghi, president of the European Central Bank, to this week acknowledge downside risks to growth, fuelling talk of a possible shift in policy guidance and briefly pushing the euro below $1.13 to a one-month low."
"“The ECB’s language was a significant shift away from the previous ‘broadly balanced’ view of the outlook for the European economy, citing the persistence of risk factors, including trade tensions between China and the US, Brexit and a slowdown in China,” noted Hans Redeker, strategist at Morgan Stanley."
"The Bank of Japan, meanwhile, sharply cut its inflation forecast at its meeting this week, briefly sending the yen to a three-week low against the dollar."
"Adam Cole at RBC Capital Markets noted that the magnitude of the revision was unusually large, and that the end point of the BoJ’s forecast had never been so far below the BoJ’s target since the extraordinary easing started in 2013."
"“So it is not surprising that there is a growing expectation that the BoJ’s next move could be to ease further,” he said."
Sterling had a strong week as expectations mounted that the UK would avoid a “no-deal” Brexit.
The pound climbed above $1.32 to its highest against the dollar for more than three months on Friday after reports that the Democratic Unionist Party may be willing to support prime minister Theresa May’s Brexit deal.
"In New York, the S&P 500 rose 0.9 per cent to 2,664, but recorded a dip of 0.3 per cent for the holiday-shortened week."
The Dow Jones Industrial Average rose 0.7 per cent on Friday while the tech-heavy Nasdaq Composite index gained 1.3 per cent.
The Stoxx 600 Europe index rose 0.6 per cent to its highest close since early January.
The Xetra Dax in Frankfurt climbed 1.4 per cent but London
’s FTSE 100 slipped 0.1 per cent as sterling’s persistent strength took a toll.
"Asian stock markets also had a solid day, Hong Kong’s Hang Seng index added 1.7 per cent, mainland China"
"CSI 300 gained 0.8 per cent, while Japan’s Topix rose 0.9 per cent."
"The dollar index sank 0.8 per cent to 95.79, after touching 96.68 on Thursday."
The euro rallied 1 per cent against the dollar to $1.1413 and recouped most of an early decline against sterling to trade 0.1 per cent lower at £0.8642.
"The pound was up 1.1 per cent against the greenback at $1.3210, its strongest level since mid-October, putting it on track for a weekly rise of 2.6 per cent."
"The sharp gains for US stocks helped drive Treasury prices lower, with the yield on the 10-year note up 4 basis points at 2.75 per cent."
The 10-year German Bund yield rose 2bp to 0.20 per cent.
"Brent oil settled at $61.64 a barrel, up 0.9 per cent on the day but down 1.7 per cent on the week."
West Texas Intermediate was 0.8 per cent higher in late trade on Friday at $53.54.
Analysts said that oil prices had found support from the possibility that the US would introduce sanctions on Venezuelan crude exports after Washington withdrew recognition of President Nicolás Maduro’s administration.
"Gold was up $18 at $1,298 an ounce, after touching $1,300.30."
Additional reporting by Michael Hunter in London and Alice Woodhouse in Hong Kong
Thursday 21:00 GMT
S&P 500 ends 0.1% higher; Nasdaq Composite gains 0.7%
STMicro results bolster European chip stocks
Ross warns US-China agreement ‘miles and miles’ away
Euro hits two-month low against dollar at beneath $1.13
Draghi comments fuel talk of shift in policy guidance
Sterling holds above $1.30
Global stock markets struggled to establish a clear direction as uncertainty over the outlook for US-China trade talks was offset by strong gains for chipmakers following some encouraging trading updates from the sector.
Shares in European semiconductor group STMicroelectronics jumped more than 10 per cent after its results proved better than expected.
"Wall Street then picked up the baton, with the Philadelphia SE Semiconductor index hitting its highest level since the start of December, following some upside earnings surprises from the likes of Xilinx and Lam Research after Wednesday’s"
"But the optimism was tempered by comments from Wilbur Ross, US commerce secretary, that Washington was “miles and miles” from resolving trade issues with Beijing — although he later clarified that there was “a fair chance” a deal would be reached."
"Meanwhile, the euro sank to its lowest point against the dollar for more than two months after Mario Draghi, the European Central Bank president, acknowledged that risks to eurozone growth had “moved to the downside” — opening the door to growth downgrades and shifts in policy guidance, analysts said"
"Nick Kounis, an analyst at ABN Amro, said that up until this meeting the ECB had played down a string of weak economic data releases in the region."
Further bad news emerged on Thursday.
"The composite eurozone purchasing managers’ index fell to its lowest level this month for more than five years, although it still signalled a modest expansion."
"The German manufacturing PMI, however, fell below the 50 level that nominally separates contraction from expansion."
"“We expect the [ECB] Governing Council to change its forward guidance on interest rates to signal that it no longer expects to raise its policy rates this year,” Mr Kounis said."
The single currency slipped below the $1.13 level for the first time since December 17.
"The yield on the 10-year German Bund fell to its lowest for a fortnight, with Spanish and Italian yields coming under greater pressure."
US Treasuries took their lead from European government bonds.
Sterling edged back from a two-month high against the dollar but managed to hold above the $1.30 level as participants continued to take the view that a “no-deal” Brexit was looking increasingly unlikely.
"In New York, the S&P 500 ended 0.1 per cent higher at 2,636 — after earlier hitting 2,647.20 — while the Dow Jones Industrial Average slipped 0.1 per cent and the Nasdaq Composite gained 0.7 per cent."
"The Philadelphia SE Semiconductor index rose 5.7 per cent, with Xilinx up 18.4 per cent and Lam Research 15.7 per cent higher."
"Across the Atlantic, the Stoxx 600 Europe index ended 0.2 per cent higher, led by a 10.1 per cent rise for STMicro."
The chipmaker’s fourth-quarter revenue and margins beat forecasts.
The Xetra Dax in Frankfurt rose 0.5 per cent but
FTSE 100 finished 0.4 per cent lower.
"In China, the CSI 300 index of major Shanghai and Shenzhen stocks gained 0.6 per cent after China approved a new technology-focused index in Shanghai."
"The Hang Seng index in Hong Kong rose 0.4 per cent, as did the Topix index in Tokyo."
"The euro touched $1.1290 before edging back up 1.1308, down 0.6 per cent on the day."
"The single currency was down 0.5 per cent versus sterling at £0.8660, with the pound down 0.1 per cent against the dollar at $1.3058."
Dollar/yen was little changed on the day at ¥109.58.
"In the fixed income markets, the yield on the 10-year German Bund fell 5 basis points to 0.18 per cent, with Italy’s 10-year yield falling 9bp to 2.67 per cent and Spain"
’s 7bp to 1.25 per cent.
The 10-year Treasury yield was down 4bp at 2.72 per cent.
"Oil prices swung from gains to losses and back again, with Brent settling less than 0.1 per cent lower at $61.09 a barrel after trading between $60.41 and $61.51."
US West Texas Intermediate was up 1.1 per cent in late trade at $53.20.
"Gold was down $1 at $1,280 an ounce."
Wednesday 21:00 GMT
S&P 500 ends 0.2% lower; Nasdaq flat
"IBM, P&G shares rise after earnings please"
Worries over global growth and US-China
trade spat linger
Sterling climbs above $1.30 as prospect of no-deal Brexit appears to fade
Yen falls after BoJ lowers inflation forecasts
A strong early rise for the S&P 500 largely evaporated as well-received earnings from a number of big-name companies only partially offset persistent uncertainty on global growth and the outlook for trade talks between Beijing and Washington.
"Sterling remained in focus as expectations mounted that the UK’s exit from the EU might be delayed, with the pound breaking above the $1.30 level for the first time since mid-November and the euro briefly slipping below £0.87."
"“The gains reflect a modest unwinding in the pound’s Brexit-related premium after the [opposition] Labour party said that it is ‘highly likely’ to back a cross-party motion that would take the possibility of a ‘no-deal’ Brexit scenario off the table,” said Action Economics."
“We hear that writers of buy options have been in the mix of demand for pounds in the spot market.”
Sterling’s strength left the FTSE 100 share index lagging behind its continental European peers.
"On Wall Street, robust earnings from IBM, Procter & Gamble and United Technologies provided an early lift to the main stock indices, although the mood subsequently turned more cautious."
Analysts noted that the S&P 500 was still up more than 12 per cent since Christmas.
"Elia Lattuga, a strategist at UniCredit, said the near-term outlook for risk assets remained positive but urged investors to enjoy the rally while it lasted."
"“A fine balance of friendly monetary policy, decent growth, modest inflationary pressure and a lack of material external risks would be required to sustain the rally for the months to come,” he said,"
“Risks of an earlier slowdown in the US or of more significant market deceleration in China or the euro area would likely turn sentiment around swiftly.”
"Meanwhile, the yen retreated — with the dollar rising as high as ¥109.99 — after the Bank of Japan substantially cut its inflation forecast at Wednesday’s policy meeting, helping to confirm the institution’s position as “one of the most dovish central banks in the G10”, according to Jane Foley at Rabobank."
Adam Cole at RBC Capital Markets said: “The potential for additional BoJ easing is starting to creep into market thinking.”
"In New York, the S&P 500 ended 0.2 per cent higher at 2,638 — off an earlier high of 2,653.19 — while the Nasdaq Composite finished little changed but the Dow Jones Industrial Average gained 0.7 per cent."
"The 30-share Dow outperformed as IBM shares rose as much as 10.2 per cent, while P&G gained nearly 3 per cent and United Technologies added more than 5 per cent."
"Across the Atlantic, the Stoxx Europe 600 slipped 0.1 per cent, with the Xetra Dax in Frankfurt ending 0.2 per cent lower and the FTSE 100 shedding 0.9 per cent."
"Sterling rose above $1.30 for the first time in more than two months — rising as high as $1.3080 before easing back to $1.3068, up 0.9 per cent on the day."
"The euro was down 0.7 per cent at £0.8708, off a low of £0.8699."
"The single currency edged up 0.2 per cent against the dollar to $1.1384, while the dollar index was 0.2 per cent lower at 96.12."
The greenback pared its early rise versus the yen to stand 0.2 per cent higher at ¥109.57.
The euro was up 0.4 per cent against the Japanese currency at ¥124.71.
"In the fixed income arena, the yield on the 10-year US Treasury was up 2 basis points at 2.75 per cent, with the two-year yield up 1bp at 2.59 per cent."
"Ahead of Thursday’s European Central Bank policy decision, the 10-year German Bund yield slipped 1bp to 0.23 per cent."
The 10-year UK gilt yield ended flat at 1.33 per cent.
"Oil prices extended the previous day’s declines, with Brent crude settling 0.6 per cent lower at $61.14 a barrel and US West Texas Intermediate down 0.8 per cent in late trade at 52.61."
"Oil prices have come under pressure recently from “concerns over global economic growth amid renewed trade tensions”, said Soni Kumari, an analyst at ANZ."
"The price of gold was down $1 at $1,283 an ounce."
Additional reporting by Hudson Lockett in Hong Kong and Michael Hunter in London
Tuesday 21.00 GMT
S&P 500 falls 1.4%; Stoxx Europe 600 index sheds 0.4%
Brent oil briefly dips below $61 a barrel
IMF lowers growth forecast for this year and next
US rejects China offer of preparatory trade talks
Treasuries and yen rally
"Pessimism on the outlook for global growth, along with lingering uncertainty over the prospects for US-China trade talks, helped drag down equities and oil prices while offering support to Treasuries, the yen and gold."
"The IMF lowered its forecasts for GDP growth this year and next in both advanced and emerging economies, citing risks including trade tensions, Brexit and the budgetary position of Italy."
The downgrades came hard on the heels of data showing that China’s economy had expanded in 2018 at the slowest pace for almost three decades.
And there was little comfort for growth bulls from data released on Tuesday showing that US existing home sales dropped 6.4 per cent last month to the lowest level since November 2015.
"The Zew index of German investor confidence improved slightly this month, although this was “not a sign of rebound”, said Action Economics."
“The expectations reading remains far below the long-term average and the improvement at the start of the year seems more a sign of a new equilibrium at low levels as investors priced in excessive risks towards the end of last year.”
"Meanwhile, hopes for a breakthrough in US-Sino trade negotiations suffered a blow as the Trump administration rejected an offer by two Chinese officials to travel to the US this week for preparatory trade talks to pave the way for higher-level meetings at the end of the month."
"As US markets reopened after Monday’s holiday, the S&P 500 equity index gave back all of Friday’s advance, while Brent oil retreated after hitting a six-week high above $63 a barrel in the previous session."
The 10-year Treasury yield fell from a three-week high reached at the end of last week.
Sterling continued to outperform most of its rivals — nearing $1.30 against the dollar and hovering around a two-month high versus the euro.
"Robust UK labour market data helped support the currency, as the markets awaited further developments on the Brexit front."
"In New York, the S&P 500 fell 1.4 per cent to 2,633 — following a 1.3 per cent advance on Friday — having been down as much as 2 per cent at one stage."
It was the first fall for the index in five sessions.
The Dow Jones Industrial Average fell 1.2 per cent and the Nasdaq Composite ended 1.9 per cent lower.
"In Europe, the pan-regional Stoxx 600 index ended 0.4 per cent lower, as London"
FTSE 100 fell 1 per cent and the Xetra Dax in Frankfurt shed 0.4 per cent.
The CSI 300 index of mainland China
"stocks fell 1.3 per cent, while Hong Kong’s Hang Seng index finished 0.7 per cent softer."
Japan’s Topix shed 0.6 per cent.
The pound climbed back above the $1.29 mark after data showed that UK workers’ total pay grew at the fastest pace for a decade in the three months to November.
Employment reached its highest level on record
"Sterling was up 0.5 per cent against the dollar at $1.2953, while the euro was down 0.5 per cent at £0.8767."
"The dollar index was barely changed at 96.33, with the euro down 0.1 per cent at $1.1355."
The greenback was down 0.3 per cent against the yen at ¥109.35.
"The yield on the 10-year US Treasury was down 4 basis points at 2.74 per cent, while that for the 10-year German Bund fell 2bp to 0.24 per cent."
"Brent crude finally settled at $61.50 a barrel, down 2 per cent, after touching $60.57 earlier in the day."
US West Texas Intermediate was 1.9 per cent lower in late trade at $52.77.
"Gold was up $4 at $1,284 an ounce."
Additional reporting by Michael Hunter in London and Alice Woodhouse in Hong Kong
"Monday, 19:00 GMT"
Stoxx Europe 600 slips 0.2%; Xetra Dax ends 0.6% lower
US markets closed for holiday
Chinese GDP growth slows
Renminbi softens versus dollar
Oil markets turn choppy after Brent hits $63.15 a barrel
European stock markets made a cautious start to the week as the latest economic data out of China highlighted risks to the global growth outlook and as participants awaited the latest Brexit developments in Westminster.
"Trading activity was relatively light given the closure of US markets for the Martin Luther King, Jr holiday."
"The early focus was firmly on China, as official data showed the country’s economy growing at an annual rate of 6.6 per cent in 2018 — down from 6.8 per cent in 2017, and the slowest pace since 1990."
Growth in the fourth quarter slowed to 6.4 per cent.
"“Promises of a stimulus package for the Chinese economy have certainly helped ease the fears over a continued slowdown, yet the fact is that a trade breakthrough with the US is required to fully appease markets,” said Joshua Mahony, senior market analyst at IG."
Optimism that the two sides could be nearing a breakthrough gave a solid boost to market risk appetite last week.
"Hao Zhou, an analyst at Commerzbank, said: “The outlook [for China’s economy] remains challenging and the authorities have stepped up efforts to prop up growth."
"“We see further growth moderation this year and think that a gradual depreciation of the renminbi is justified due to intensifying growth challenges, monetary policy accommodation and a shrinking current account surplus.”"
"Indeed, the Chinese currency adopted a slightly softer tone against the dollar, although the US currency was a little weaker elsewhere."
"Sterling inched higher against the dollar, but stayed short of last week’s two-month highs of around $1.30, as UK prime minister Theresa May briefed the House of Commons on how she intended to proceed with Brexit."
"“The prime minister’s Plan B is remarkably similar to Plan A, which parliament rejected less than a week ago, so it doesn’t appear to change the near-term outlook for the economy,” said Andrew Wishart at Capital Economics."
"“In that regard, votes on amendments to Plan B on Tuesday January 29 will probably be more important.”"
"Oil prices had another choppy session, with Brent briefly breaking above the $63-a-barrel mark for the first time since early November"
"The region-wide Stoxx Europe 600 index ended 0.2 per cent lower, having been down 0.4 per cent at one stage."
Worries about China hurt metals and mining stocks.
"The Xetra Dax in Frankfurt fell 0.6 per cent, while France"
CAC 40 shed 0.2 per cent
The FTSE 100 in London finished flat.
"Following China’s GDP release, the Hang Seng index in Hong Kong was 0.8 per cent higher before pulling back to close up 0.4 per cent."
"The CSI 300 index of stocks listed in Shanghai and Shenzhen closed up 0.6 per cent, having been 1 per cent stronger beforehand."
The Topix index in Tokyo rose 0.6 per cent.
Sterling was up 0.1 per cent versus the dollar at $1.2884 — off the day’s high of $1.2910 — while the euro was barely changed against the pound at £0.8820.
"The dollar index was flat at 96.35, as the euro held steady at $1.1366 and the greenback edged down 0.1 per cent against the yen to ¥109.63."
The yield on the 10-year German Bund finished unchanged at 0.26 per cent and the 10-year UK gilt yield fell 3 basis points to 1.32 per cent.
"Brent oil touched $63.15 a barrel before retreating back to $62.61, down 0.1 per cent on the day."
The international crude benchmark gained 4.3 per cent last week.
US West Texas Intermediate was 0.2 per cent higher on Monday at $53.90 a barrel.
ANZ analysts noted that oil had been supported last week “after hopes rose that last year’s trade tensions are behind us” and following an International Energy Agency report forecasting further growth in crude oil demand.
"Gold slipped $1 to $1,279 an ounce."
Additional reporting by Edward White in Taipei and Michael Hunter in London
Friday 21.00 GMT
Global stocks head for fourth successive weekly rise
S&P 500 gains 1.3%; European bourses rise sharply
Brent oil tests $63 a barrel
"Treasuries, gold and yen fall back"
Pound retreats from $1.30 after strong week
Global stocks rose for the fourth week in a row as optimism mounted that progress was finally being made in resolving the trade dispute between the US and China.
"On Thursday, reports claimed that Steven Mnuchin, US Treasury Secretary, was considering scaling back tariffs on Chinese imports — although the Treasury department was quick to deny the talk."
Further grounds for optimism emerged on Friday when Bloomberg said China had offered a path to eliminate its trade imbalance with the US by ramping up purchases of American goods over the next year.
"“Recent comments continue to suggest that a US-China trade deal is on the cards in the weeks ahead, and this impression was affirmed in our meetings with policymakers in Washington during the course of the past week,” said Mark Dowding, co-head of developed markets at BlueBay Asset Management."
"“The sharp sell-off in financial markets during the fourth quarter appears to have caused a shift in the US administration, and while issues such as intellectual property theft and data security have not gone away, there is a desire not to create outcomes which exacerbate downside risks to global growth.”"
"The latest reports of progress helped drive the US S&P 500 to its highest level for more than a month, with the index recording a weekly gain of 2.9 per cent."
European indices put in similarly robust performances.
"Oil prices also benefited, with Brent crude testing the $63 a barrel level — after ending the previous week at $60.64."
"US Treasuries sold off, pushing the yield on the 10-year note to a three-week high, while the Japanese yen and gold also retreated."
"The “risk-on” mood was also helped by data pointing to underlying strength in US industrial production, which belied recent signs of slowing in more forward-looking manufacturing indicators."
"The figures came at the end of a week that saw China unveil fresh stimulus measures to bolster its faltering economy, while concerns about the outlook for global growth were heightened by German GDP data that indicated the country had narrowly avoided going into recession at the end of last year."
"“China led the growth slowdown last year, which accelerated as US tariffs came into force at the end of the third quarter,” said strategists at BofA Merrill Lynch."
"“That has spilled over into the rest of the world, with particularly weak growth in Europe and even the US manufacturing sector feeling the impact."
We almost certainly need a US-China trade deal to be confident that the macro economy can start to bottom out.”
"Meanwhile, markets spent a large part of the week focused on the UK as the Brexit political drama continued to unfold."
"Sterling rallied strongly, climbing to within a whisker of the $1.30 level on Friday, as the scale of the defeat of prime minister Theresa May’s proposed deal fuelled widespread expectations that a “no-deal” Brexit now looked far less likely."
"However, the pound gave back some of its gains on Friday, as a weak UK retail sales report for December offered a welcome diversion from politics."
"The FTSE All World equity index was up 1.1 per cent at 318.60, giving it a year-to-date gain of nearly 6 per cent."
"In New York, the S&P 500 rose 1.3 per cent to 2,670, its highest close since December 6."
The Dow Jones Industrial Average ended 1.4 per cent higher and the Nasdaq Composite gained 1 per cent.
"The pan-European Stoxx 600 index ended 1.8 per cent stronger, as Frankfurt’s"
Xetra Dax leapt 2.6 per cent and the FTSE 100 in London rose 2 per cent.
Chinese stocks had a predictably robust session with the CSI 300 gaining 1.8 per cent and Hong Kong’s Hang Seng up 1.3 per cent.
"In Tokyo, the Topix rose 0.9 per cent."
"The dollar index was up 0.3 per cent at 96.39, as the euro shed 0.3 per cent to $1.1363 and the greenback rose 0.5 per cent against the yen to ¥109.73."
"Sterling was down 1 per cent against the dollar at $1.2860, after touching $1.2993 earlier in the day, but was still up 0.1 per cent for the week."
"The euro rallied 0.8 per cent versus the pound to £0.8834 on Friday, after ending the previous week at £0.8926."
"Treasury prices fell as US equities gained ground, pushing the 10-year yield up 4 basis points to 2.78 per cent."
The two-year yield was 5bp higher at 2.61 per cent.
Germany’s 10-year Bund yield rose 2bp to 0.26 per cent and that on the 10-year UK gilt ended 1bp higher at 1.35 per cent.
"Brent crude touched $63.00 a barrel before settling at $62.70 — up 2.5 per cent on the day, and 3.4 per cent for the week."
US West Texas Intermediate was 3.1 per cent higher in late trade on Friday at $53.70.
"Gold was down $11 at $1,280 an ounce"
"Thursday, 21.00 GMT"
S&P 500 gains 0.8%; Nasdaq Composite ends 0.7% higher
Reports suggest Trump administration might lift duties on Chinese imports
Morgan Stanley shares tumble as much as 6.5%
Sterling heads toward $1.30 despite Brexit uncertainty
Oil prices turn volatile
"Media reports claiming US officials were weighing up plans to scale back tariffs on Chinese imports bolstered hopes for a breakthrough in the trade dispute between the two countries, giving shares on Wall Street a mid-afternoon boost."
"The optimistic mood also offered some support to oil prices, while the dollar and US Treasuries were little changed from levels seen earlier in the day."
"The US Treasury department subsequently disputed the report, with a White House official adding that no new tariff decisions had been made."
The report helped counter earlier concerns that a US investigation into Chinese telecoms equipment group Huawei could disrupt trade talks between Washington and Beijing.
"The early mood on Wall Street was also unsettled by a fourth-quarter earnings miss from Morgan Stanley, which sent the bank’s share price down sharply and weighed on the broader financial sector."
"In Europe, Société Générale warned that its fourth-quarter results would be hit by a “challenging environment” in global capital markets, driving the French bank’s shares sharply lower."
UK assets remained in focus as participants continued to weigh up the outlook for Brexit following this week’s dramatic events in Westminster.
"The pound rose against both the dollar and the euro, while the 10-year gilt yield rose to its highest level for a month."
"“Sterling has so far proven quite resilient to the latest political developments in the UK, probably because investors are still confident that an agreement will ultimately be reached and that a solution will prevail over a no-deal scenario,” said analysts at UniCredit."
"“This view is also confirmed by what the option market is pricing in, which assigns little chance to ‘extreme scenarios’ — like euro/sterling above £0.95 or sterling/dollar below $1.20 — even after [Theresa]"
May’s heavy defeat on Tuesday.”
"In New York, the S&P 500 ended 0.8 per cent higher at 2,629, after earlier hitting 2,645.06."
The gain left the index up more than 12 per cent from a 20-month intraday low hit on December 27.
The Dow Jones Industrial Average and the Nasdaq Composite both rose 0.7 per cent.
"Morgan Stanley shares fell as much as 6.5 per cent, before paring their decline, while the S&P 500 financial sector finished 0.2 per cent higher."
"S&P energy stocks also reversed early losses, with the sector gaining 0.8 per cent."
Plans unveiled by President Donald Trump to upgrade US missile defence systems helped shares in Northrop Grumman and Lockheed Martin gain ground.
"Across the Atlantic, the Europe-wide Stoxx 600 ended fractionally higher, as Frankfurt’s Xetra Dax slipped 0.1 per cent and the FTSE 100 in London shed 0.4 per cent."
"SocGen ended 5.7 per cent weaker, helping to pull the CAC 40 index in Paris down 0.3 per cent.   "
"The dollar index was a fraction higher at 96.07, as the euro fell 0.1 per cent to $1.1386."
The greenback was up 0.1 per cent against the yen at ¥109.24.
"Sterling was 0.8 per cent higher against the dollar at $1.2986, while the euro was 0.8 per cent lower versus the pound at £0.8768."
"The yield on the 10-year Treasury was up 2 basis points at 2.75 per cent, and that on the two-year note was 2bp higher at 2.57 per cent."
The 10-year gilt yield rose 3bp to 1.34 per cent.
"Oil prices swung from losses to gains and back, with Brent finally settling 0.2 per cent lower at $61.18 — well off the day’s trough of $60.04."
"It rallied in post-settlement trading to $61.30, barely changed on the day."
US West Texas Intermediate crude was 0.2 per cent higher in late trade at $52.41.
"Gold was down $1 at $1,292 an ounce."
Additional reporting by Michael Hunter in London and Alice Woodhouse in Hong Kong
Wednesday 21.00 GMT
S&P 500 ends 0.2% higher; Stoxx Europe 600 gains 0.5%
BofA and Goldman Sachs earnings received well
PBoC injects record $84bn into Chinese banking system
UK prime minister May wins confidence vote with majority of 19
Oil extends previous day’s gains; Brent settles above $61
"Well-received earnings from the US financial sector and more economic stimulus measures in China kept most global stock indices on an upward path, while sterling stayed in focus following Tuesday’s crushing parliamentary defeat for UK prime minister Theresa May’s Brexit deal."
Mrs May on Wednesday won a vote of no confidence — as had been widely predicted — by 325 votes to 306.
"The S&P 500 and the Stoxx Europe 600 equity indices both hit one-month highs, with the former taking its rise from a 20-month intraday low hit on December 26 to more than 11 per cent."
"The continued rally for equities helped nudge up US and German government bond yields, while the dollar inched higher against a weighted basket of currencies."
Shares in Bank of America and Goldman Sachs climbed sharply after fourth-quarter results from both beat estimates.
"Meanwhile, the People’s Bank of China injected a record $84bn into the country’s banking system in a bid to boost liquidity and increase lending."
"While the move underscored a recent pledge to increase policy support, analysts at Capital Economics noted that the timing suggested that concerns over a cash crunch ahead of the Chinese new year were likely to have been a factor."
"In the currency markets, all eyes were on sterling as the Brexit drama continued to unfold."
"“It is hardly surprising that the majority of the 118 Conservative rebels that voted against Mrs May’s Brexit deal [on Tuesday] then backed her in [Wednesday’s confidence] vote,” said Seema Shah at Principal Global Investors."
“The one thing Tories fear more than the various alternative options for Brexit is a [Labour leader Jeremy] Corbyn-led government.”
"David Cheetham at XTB said: “The likely next course of events will be a second Commons vote on an slightly amended version of the PM’s deal which, given the huge scale of the defeat on the first sitting, looks highly unlikely to pass."
"“It now seems that all roads lead to a softer version of Brexit, which will require an extension of Article 50 beyond March and ultimately be positive for sterling.”"
"The pound edged higher against both the dollar and the euro, while UK gilt prices fell sharply and the FTSE 100 share index retreated."
"Oil prices had a choppy session, after rising sharply on Tuesday as participants focused on the impact of Opec-led supply cuts."
"But strong buying emerged late in the day, helping Brent climb back above $61 a barrel."
Gold stayed in sight of a recent six-month high.
"In New York, the S&P 500 ended 0.2 per cent higher at 2,616 after earlier reaching 2,625.76."
"The Dow Jones Industrial Average rose 0.6 per cent, while the Nasdaq Composite edged up 0.1 per cent."
"BoA shares rose as much as 8.2 per cent, while Goldman Sachs gained nearly 10 per cent."
"Across the Atlantic, the Europe-wide Stoxx 600 index rose 0.5 per cent, with the Xetra Dax in Frankfurt gaining 0.4 per cent and France"
’s CAC 40 closing 0.5 per cent higher.
But the FTSE 100 index slipped 0.5 per cent.
Hang Seng added 0.3 per cent.
The CSI 300 index of Shanghai and Shenzhen-listed stocks was flat.  
"Sterling was up 0.2 per cent against the dollar at $1.2881, while the euro was 0.4 per cent weaker versus the pound at £0.8842."
The UK currency fell as low as $1.2668 in the immediate aftermath of Tuesday’s vote before recovering all its decline.
"The single currency was also 0.2 per cent softer against the greenback at $1.1394, while the dollar index was up 0.1 per cent at 96.09."
Dollar/yen was up 0.4 per cent at ¥109.04.
"The yield on the 10-year US Treasury was up 2 basis points at 2.73 per cent, while that on the 10-year German Bund rose 2bp to 0.22 per cent."
"The 10-year gilt yield hit 1.34 per cent before closing at 1.31 per cent, up 5bp on the day."
"Brent oil settled at $61.32 a barrel, up 1.1 per cent on the day — after earlier falling to $60.03 — while US West Texas Intermediate crude was 0.5 per cent higher in late trade at $52.37"
"Gold was $4 higher at $1,293 an ounce."
Additional reporting by Michael Hunter in London and Edward White in Taipei
Tuesday 21.00 GMT
Sterling rebounds after “meaningful” vote; MPs vote 432-202 against May’s deal
S&P 500 gains 1.1%
", Nasdaq ends 1.7% higher"
Euro tests $1.14 level; Xetra Dax pares early gain
"Hong Kong leads rebound in Asia, mainland China"
’s indices also rise
Brent crude rises back above $60 a barrel
"The pound swung sharply in the wake of news of a crushing Brexit defeat in parliament for UK prime minister Theresa May, initially weakening as much as 1.5 per cent against the dollar before recovering to stand slightly higher on the day."
"“Traders are seemingly taking the outcome as paving the way for an extension of the Article 50 deadline, rather than increasing the chances of a no-deal Brexit, and this has caused the recovery seen in the pound,” said David Cheetham, chief market analyst at XTB."
"Laith Khalaf, senior analyst at Hargreaves Lansdown, said: “The reality is there’s no correct price for sterling until there’s greater resolution on the direction of Brexit; what we have right now is a middle ground between competing possibilities."
"“Assuming Brexit does resolve itself one way or another, the pound will ultimately find a new level, but it’s not going to be a smooth journey.”"
"US stocks also overcame a mid-afternoon wobble following the vote, allowing traders to refocus on a package of stimulus measures unveiled by China aimed at stimulating its economy and countering the impact of the trade dispute between Beijing and Washington."
"The technology sector set the pace, with Netflix a notable riser after it announced price increases for its US subscribers."
Financials struggled after earnings from JPMorgan and Wells Fargo disappointed.
"China will lower value added tax rates for selected industries, and provide tax rebates for others, following the release of weak trade data on Monday."
"The news also offered much-needed support to European stock markets, as participants first digested unsettling data on German growth — and then got to grips with Mrs May’s vote defeat."
Her Brexit deal was overwhelmingly rejected by MPs by 432 votes to 202.
A vote of no confidence in the government will take place on Wednesday.
"Sterling briefly extended an early fall but then rallied smartly immediately after the vote, regaining the $1.28 mark to stand only moderately lower on the day."
"Meanwhile, markets were unsettled by news that Germany’s economy had grown 1.5 per cent in 2018, its slowest pace for five years, following growth of 2.2 per cent in 2017."
"GDP fell 0.2 per cent in the third quarter from the second, with fourth-quarter figures due next month."
"Andrew Kenningham at Capital Economics said the data, and comments by the Federal Statistical Office, suggested Germany had narrowly avoided a technical recession last year — usually defined as two successive quarters of economic contraction."
"“But this is of limited comfort: the bigger picture is that having slowed sharply last year, Germany’s economy is likely to remain weak this year,” he said."
"“With consumers likely to save much of any windfall from lower inflation and the industrial sector vulnerable to a global slowdown, we doubt that there will be a very strong rebound in overall GDP growth this year.”"
"The euro briefly slipped below $1.14 to a one-week low before recovering slightly, while the German 10-year Bund yield fell and the Xetra Dax share index in Frankfurt pared an early rise."
"Oil prices rallied after two days of losses, as markets focused on supply cuts by Opec and its allies and signs of falling US crude stocks."
Brent crude reclaimed the $60 a barrel level.
"Sterling was up 0.2 per cent on the day against the dollar in late trade, at $1.2880, after falling as low as $1.2672 immediately after the Commons vote."
The euro was down 0.7 per cent against the pound at £0.8858.
The single currency was down 0.5 per cent against the dollar at $1.1415 — well off the day’s low of 1.1382.
The greenback was up 0.5 per cent against the yen at ¥108.69.
"In the fixed income arena, the yield on the 10-year German Bund fell nearly 3 basis points to 0.20 per cent."
The 10-year UK gilt yield fell 4bp to 1.25 per cent.
"The US 10-year Treasury yield was up 1 basis point at 2.72 per cent, with the two-year yield steady at 2.53 per cent."
"In New York, the S&P 500 ended 1.1 per cent higher at 2,610 — after hitting 2,613.08 — while the Dow Jones Industrial Average rose 0.7 per cent and the Nasdaq Composite gained 1.7 per cent."
"Netflix shares rose 6.5 per cent, while JPMorgan recovered from an opening fall to close 0.7 per cent higher."
Wells Fargo fell 1.5 per cent.
"Across the Atlantic, the pan-European Stoxx 600 index rose 0.4 per cent, while the Xetra Dax ended 0.3 per cent higher after initially gaining as much as 1.3 per cent."
"In London, the FTSE 100 gained 0.6 per cent."
"In Asia, Hong Kong’s Hang Seng index and mainland China’s CSI 300 index both gained 2 per cent, while Tokyo’s Topix rose 0.9 per cent."
"Brent oil settled at $60.64 a barrel, up 2.8 per cent on the day, after spending the session trading between $59.11 and $60.86."
US West Texas Intermediate crude was 3.1 per cent higher in late trade at $52.09.
"Gold was down $2 at $1,289 an ounce."
"Monday, 22.00 GMT"
Wall Street closes lower after lacklustre start to earnings season
European bourses fall and Asian indices hit after weak data from both regions
"China export data dropped by the most in two years, stoking concern at economic outlook"
Renminbi holds at 5-month high
"Haven assets in demand, strengthening yen and lifting gold"
Oil prices slip
Pound touches 7-week high ahead of UK parliament
’s vote on Brexit deal
"Wall Street stocks slipped, tracking losses for equities in Europe and China after a run of weak economic data stoked fears about a global slowdown, leaving indices vulnerable after last week’s rebound."
"Trade figures from China showed exports posting the largest monthly fall in two years, while industrial production numbers from the eurozone missed forecasts."
The US earnings season had a lacklustre start after Citigroup posted an unexpected decline in quarterly revenue.
"Despite this, the bank’s stock rose 3.95 per cent by market close."
"Wall Street’s S&P 500 index dropped 0.53 per cent, after a slight fall on Friday left its gain for the week at 2.5 per cent."
European indices extended declines as the session developed.
London’s FTSE 100 was down 0.9 per cent and Frankfurt’s
Xetra Dax 30 fell 0.3 per cent.
"Haven assets were in demand, with investors buying gold, the yen and government bonds, while oil prices dropped."
"Asian equities indices extended early losses after China said exports in December slid 4.4 per cent year on year, the largest fall since the end of 2016 and lower than estimates."
Annual export growth was 9.9 per cent year on year in dollar terms.
"Germany led a sharp fall in eurozone industrial production, with figures for the single currency area for November missing forecasts."
"Global trade has been in particular focus in recent months as the US and China have introduced tit-for-tat tariffs on imports and also met for talks, boosting hopes of an improvement in relations."
"Mainland China’s CSI 300 index closed down 0.9 per cent, fading from a three-week high reached on Friday that came on hopes for a breakthrough around the talks."
"In Hong Kong, the Hang Seng index fell 1.6 per cent."
"Julian Evans-Pritchard, senior China economist for Capital Economics, said: “With global growth set to cool further this year, exports will remain weak even if China can clinch a trade deal that rows back"
[Donald] Trump’s tariffs.”
"Nonetheless, the onshore renminbi held around its strongest level since late July, flat at Rmb6.7572 to the dollar."
"It had its strongest week in more than a decade last week, climbing 1.6 per cent as emerging market currencies rose against the dollar."
The Chinese currency is permitted to trade 2 per cent either side of a daily midpoint set by the People’s Bank of China.
The offshore renminbi was also 0.1 per cent weaker at Rmb6.7648.
"The dollar index was 0.08 per cent lower, after hitting a three-month low last week."
The pound touched its highest level since November ahead of a UK House of Commons vote on Prime Minister Theresa May’s Brexit deal on Tuesday.
"Sterling gained 0.21 per cent to $1.2871, a level last touched in November."
The euro held steady at $1.1468.
"The yen was 0.2 per cent stronger at ¥108.17 to the dollar, while the Australian dollar — sometimes seen as a proxy for China’s economic outlook — was down 0.22 per cent at $0.719."
US government bonds were flat on Monday with the 10-year Treasury yield at 2.707 per cent.
The equivalent German Bund yield fell slightly to 0.226 per cent.
"Brent crude oil dropped 2.2 per cent to $59.19 a barrel, having posted a 6 per cent gain last week."
West Texas Intermediate was down 1.76 per cent at $50.68.
"Gold was 0.11 per cent higher at $1,291."
Friday 21.00 GMT
FTSE All-World index and S&P 500 slip marginally
Top Chinese economic official to visit Washington
Renminbi has best week against dollar since 2005
US core inflation figures match forecasts
Brent oil slips but holds above $60 a barrel
A five-session winning streak for global stocks ran out of steam as participants took a more cautious stance ahead of the weekend and the start of the US quarterly earnings season next week.
The US government shutdown drama provided a further reason for wariness.
"“Although stock markets have mostly dismissed the shutdown as having little relevance for trading, Federal Reserve chairman Jerome Powell has warned that a prolonged US government shutdown could start taking a toll on the country’s economic growth,” said Fiona Cincotta, senior market analyst at City Index."
"However, the underlying mood across stock markets remained broadly positive, given persistent hopes for a breakthrough in the US-China trade dispute and signs that the Fed was prepared to be “patient” with regard to further interest rate rises."
"Beijing and Washington held three days of trade talks this week and, while few details emerged, both sides struck a positive tone."
"Furthermore, Liu He, China’s top economic official, was expected to travel to Washington this month for high-level negotiations."
"Meanwhile, a dovish round of Fedspeak this week — plus the minutes of the central bank’s December meeting — played to market expectations for a pause in the US interest rate cycle."
"US consumer price inflation data, released on Friday, further underpinned such expectations and gave a lift to Treasury prices."
"The “core” CPI, which excludes food and energy, rose 2.2 per cent in the year to December, unchanged from the previous month."
"“The continued stability of core inflation could give the Fed more room to pause, as officials assess the impact of the slowdown in global growth and tightening in financial conditions on the domestic economy,” said Andrew Hunter at Capital Economics."
"The dovish tone of US policymakers this week briefly pushed the dollar index to a three-month low, in turn helping China’s renminbi to reach its highest point against the US currency since July, despite weak Chinese inflation data fuelling expectations for further stimulus measures."
The euro spent most of the week at the upper end of its recent trading range against the dollar — briefly topping the $1.15 level — even as a series of weak data releases heightened concerns over the outlook for the eurozone economy.
"Sterling sprang into life — hitting its highest level since late November against the dollar, and a two-week peak versus the euro — as speculation mounted that the UK would seek to delay its scheduled departure from the EU."
MPs are expected to reject a withdrawal deal reached between the EU and UK in a key vote on Tuesday.
"Oil prices had a positive week, despite coming off the boil on Friday, with Brent crude climbing back above $60 a barrel."
"The FTSE All World equity index was down slightly in late trade at 312.40, after rising 5.5 per cent over the previous five days."
"The US S&P 500 also ended the day with a marginal loss, at 2,596, but recorded a weekly gain of 2.5 per cent."
"The Dow Jones Industrial Average slipped slightly, while the Nasdaq Composite shed 0.2 per cent."
"In Europe, the Xetra Dax fell 0.3 per cent and London’s FTSE 100 shed 0.4 per cent, although the region-wide Stoxx 600 index eked out a 0.1 per cent gain."
"In China, the CSI 300 index gained 0.7 per cent and Hong Kong’s"
Hang Seng index rose 0.6 per cent.
Topix added 0.5 per cent.
China’s currency enjoyed its best week against the dollar in more than a decade.
The onshore renminbi
"advanced more than 1.7 per cent over the five days, its strongest such gain since China ditched its currency peg and moved to a managed floating exchange rate regime in 2005, according to Refinitiv data."
The US dollar index was up 0.2 per cent at 95.69 — after touching 95.03 on Thursday — with the euro down 0.3 per cent at $1.1460 and the greenback 0.1 per cent higher versus the yen at ¥108.53.
"Sterling was up 0.7 per cent at $1.2839, off the day’s high of $1.2865."
The euro was down 1 per cent against the pound at £0.8924.
"In the fixed income arena, the yield on the US 10-year Treasury was 3 basis points lower at 2.70 per cent, with the two-year yield down 2bp at 2.54 per cent."
The German 10-year Bund yield fell 2bp to 0.18 per cent.
"Oil prices pulled back after a strong week, with Brent crude settling 2 per cent lower on the day at $60.48 a barrel but still up 6 per cent for the five days."
US West Texas Intermediate was down 1.7 per cent in late trade at $51.69.
"Gold was $1 higher at $1,287 an ounce."
Additional reporting by Edward White in Taipei and Adam Samson in London
Thursday 21.00 GMT
S&P up 0.4%; longest run of gains for benchmark index since September
Brent oil rises for ninth day
Powell reiterates Fed’s ability to be patient on rate rises
US-China trade talks offer few details
Renminbi hits five-month high
"US stocks and oil prices extended their recent run of gains as participants digested comments from Federal Reserve chairman Jay Powell, shrugged off a disappointing lack of detail from this week’s US-Sino trade talks and showed only limited concern over the continuing government shutdown drama."
Mr Powell reiterated that the US central bank had the ability to be patient regarding monetary policy — although he briefly set some alarm bells ringing when he said the Fed would continue shrinking its balance sheet to a more normal level.
Early weakness on Wall Street was attributed by many to a lack of specifics in the statements from the US and China following three days of talks aimed at defusing trade tensions between the two countries.
"But the main stock indices turned positive as the session wore on, with the growing possibility of Mr Trump declaring a national emergency over US border security failing to derail the broadly upbeat mood."
"Analysts at Action Economics warned that the legality of such a move remained “murky” and was likely to be challenged in court — “further complicating relations between the president, Republicans and Democrats”."
Mr Trump said he would not be attending the World Economic Forum in Davos this month as a result of the partial government shutdown.
Mr Powell’s remarks helped underpin a modest rally for the dollar following its sharp fall on Wednesday.
"The weakness of the US currency in the previous session helped China’s renminbi reach its strongest level since August last year, despite soft inflation data that fuelled talk of further stimulus measures from Beijing."
"“Weak Chinese pricing power may bolster global slowdown concerns,” said analysts at Scotiabank."
"The euro eased back from Wednesday’s three-month high against the dollar to trade below the $1.15 level, while German government bond prices moved higher as the account of the European Central Bank’s last meeting showed increasing concern among some policymakers over downside risks to the region’s economic outlook."
"Sterling also inched lower against the dollar as Brexit uncertainty intensified, although some observers said the FX markets were mispricing the pound."
“This week’s events . . 
"lower the probability of a ‘hard Brexit’,” said Jordan Rochester, a strategist at Nomura."
“There are now tools to avoid a hard Brexit in parliament and the amount of government defeats thus far continues to remind us that there would be action by MPs to stop such a thing.”
"In New York, the S&P 500 ended 0.5 per cent higher at 2,596 as it rose for a fifth day, equalling a winning streak recorded by the index last September."
The S&P has gained more than 9 per cent over the period.
The Dow Jones Industrial Average and the Nasdaq Composite also both rose 0.5 per cent.
US retailing stocks came under pressure after a string of disappointing holiday season updates.
"Across the Atlantic, the Xetra Dax in Frankfurt rose 0.3 per cent and London’s"
"FTSE 100 climbed 0.5 per cent, helping the pan-European Stoxx 600 gain 0.3 per cent."
China’s CSI 300 index edged back and 0.2 per cent and the Topix in Tokyo fell 0.9 per cent.
"The dollar index, which tracks the US currency against a basket of peers, reversed early losses to trade 0.4 per cent higher at 95.56."
The euro was down 0.4 per cent at $1.1497 and sterling was 0.3 per cent lower at $1.2744.
The greenback was up 0.2 per cent against the yen at ¥108.42.
The dollar’s weakness saw China’s currency strengthen to its firmest level against the US currency in five months.
"The onshore renminbi, which trades within two per cent in either direction of a midpoint set each day by the People"
"’s Bank of China, gained as much as 0.5 per cent to Rmb6.7845 per dollar, its strongest level since August 2018."
The offshore rate strengthened by as much as 0.4 per cent to Rmb6.7851.
"In the fixed income arena, the yield on the 10-year US Treasury was flat at 2.73 per cent, while that on the two-year note was also unchanged at 2.57 per cent."
The 10-year German Bund yield fell 2bp to 0.20 per cent.
"Oil prices had a volatile day, with Brent falling as low as $60.44 a barrel before rallying back to settle at $61.68, up 0.4 per cent on the day."
"It earlier hit $61.91, the highest since December 13."
"That was the ninth successive rise for the international crude benchmark, equalling its longest winning streak on record."
It has now risen more than 14 per cent since the start of 2019.
US West Texas Intermediate crude was up 0.3 per cent in late trade at $52.53.
"The dollar’s bounce helped push gold down $7 to $1,286 per ounce."
Additional reporting by Kate Allen in London and Hudson Lockett in Hong Kong
Dollar index hits lowest since mid-October; euro retakes $1.15
Minutes of last Fed meeting point to caution among policymakers
S&P 500 up 0.4%; Nasdaq rises 0.9%
Brent oil back above $60 a barrel
Bank of Canada holds rates
The dollar hit its lowest level against a basket of currencies for nearly three months as expectations mounted that the Federal Reserve would adopt a more cautious policy stance over the coming year.
The minutes of the Fed’s meeting last month showed that recent volatility in financial markets and muted US inflation had encouraged “many participants” to take the view that the central bank could afford to be patient about further rate rises.
"Earlier in the day, several Fed officials made cautious comments about the path of US monetary policy."
"James Bullard, head of the St Louis Fed and a voting member of the Federal Open Market Committee this year, warned that further interest rate rises risked pushing the US economy into recession."
"Atlanta Fed president Raphael Bostic argued for a patient approach to policy adjustments, while Charles Evans of the Chicago Fed also said the FOMC had the ability to wait and see, while assessing current conditions."
Bill Diviney at ABN Amro said the “significant” dovish shift at the Fed in recent weeks pointed to a prolonged pause in the central bank’s rate path.
"“As [Fed] chair Powell has emphasised, the fed funds rate is already at the lower end of the range of estimates for neutral,” Mr Diviney said."
"“For the Fed to resume rate hikes and to take rates into potentially restrictive territory, we believe one or both of two conditions would need to be fulfilled: firstly, growth picking up again to rates well above potential; and secondly, core inflation showing sustained signs of acceleration."
“We do not believe accelerating wage growth alone will be enough to push the Fed to tighten further.”
But Paul Ashworth at Capital Economics said the Fed was not necessarily done for the year.
"“Policy will ultimately take its cue from the [US] economic data, which is still holding up surprisingly well,” he said."
“We still expect the Fed to hike its policy rate up to twice more in the first half of this year.”
"Meanwhile, global stocks continued to find support from optimism that progress had been made on resolving the trade dispute between the US and China following three days of talks between the two countries."
"However, some signs of fatigue began to show on Wall Street as the main equity indices rose for a fourth successive session."
"Oil prices also benefited from reports of the improved tone to the trade negotiations, with Brent crude breaking back above the $60 a barrel level for the first time in three weeks."
"Brent rose as high as $61.69 a barrel, even as data from the US Energy Information Administration showed crude stockpiles falling less than expected last week."
Saudi Arabia’s energy minister vowed to “stabilise” the oil market.
The euro pushed back above the $1.15 level as participants remained unfazed by recent evidence that the eurozone economy was faltering.
"Sterling, meanwhile, tested $1.28, even as uncertainty mounted over the Brexit outlook, although the pound eased back versus the euro."
The dollar index was down 0.8 per cent at 95.14 as the euro gained 0.9 per cent to $1.1546 and sterling rose 0.6 per cent to $1.2795 — having touched $1.2803.
The greenback was down 0.6 per cent against the yen at ¥108.05.
"US dollar was down 0.4 per cent against its Canadian namesake at C$1.3218 after the Bank of Canada left interest rates unchanged, as expected."
"The BoC reiterated that it “continues to judge that the policy interest rate will need to rise over time into a neutral range to achieve the inflation target”, although it slashed its economic growth forecasts following the slide in oil prices in the last two months of 2018."
"The 10-year US Treasury yield was flat at 2.72 per cent, after hitting 2.747 per cent, while the two-year yield was 2 basis points lower at 2.56 per cent."
The yield on the 10-year German Bund fell 1bp to 0.22 per cent.
"In New York, the S&P 500 ended 0.4 per cent higher at 2,584, having been up"
more than 0.8 per cent at one stage.
The day’s rise left the index with a four-day gain of 5.6 per cent.
"The Dow Jones Industrial Average also rose 0.4 per cent, while the technology-heavy Nasdaq Composite finished 0.9 per cent stronger."
The CBOE Vix volatility index closed below its long-term average of 20 for the first time since December 3.
"London’s FTSE 100 rose 0.7 per cent, with Frankfurt’s"
Xetra Dax ending 0.8 per cent higher.
The Europe-wide Stoxx 600 gained 0.5 per cent.
"Brent oil settled at $61.44 a barrel, up 4.6 per cent, taking its rise since the start of the year to more than 14 per cent."
US West Texas Intermediate crude was up 5 per cent in late trade at $52.27.
"The weak dollar helped gold gain $8 to $1,293 an ounce."
Additional reporting by Alice Woodhouse in Hong Kong and Michael Hunter in London
Tuesday 21.00 GMT
"S&P 500 ends 1% higher, Nasdaq Composite gains 1.1%"
US-China trade talks extended to third day
Brent oil rises for seventh day in a row
German industrial output drops 1.9% in November
US and European stocks maintained their upward momentum as hopes for progress in resolving the trade dispute between Beijing and Washington were buoyed by news that negotiations between the two countries would be extended into a third day.
"Donald Trump, US president, earlier said that the talks were “going very well”, following on from positive comments on Monday by Wilbur Ross, US commerce secretary and trade hawk."
"“With the US and China working to resolve their issues, the Federal Reserve promising to remain flexible and the US economy firing on all cylinders, it is easy to see why sentiment is on the up,” said Fiona Cincotta, senior market analyst at City Index."
"“Obviously, this is not the end of US-China trade tensions by a long shot and there will almost certainly be further bumps and twists along the way"
"but, for now, the markets are happy with the slow, steady progress that it perceives has been achieved.”"
"Indeed, the S&P 500 recorded its third successive daily rise, and was up nearly 10 per cent from the 20-month intraday low it struck on December 26."
Oil prices also continued to regain ground with Brent crude rising for a seventh day and making what appeared to be a decisive break above the $58 a barrel mark.
"The trade optimism continued to weigh on Treasury prices, with the yield on the 10-year note continuing to climb off a one-year low hit at the end of last week."
"German Bund yields also inched higher, in spite of further signs of weakness in the eurozone’s biggest economy."
"Industrial production fell 1.9 per cent in November, echoing an unexpectedly steep drop in factory orders announced on Monday and heightening the view that the German economy, and that of the eurozone more generally, had shifted down a gear in the fourth quarter."
Yet there was only a muted impact from the data on the euro with the single currency holding towards the upper end of its recent range against the dollar.
"“The narrowing in the Treasury/Bund yield differential is doing stalwart work in defending the downside for euro/dollar now and my confidence we’ve seen the lows for this cycle is growing,” said Kit Juckes, analyst at Société Générale."
"In New York, the S&P 500 rose 1 per cent to 2,574, having earlier touched 2,579.82, leaving it 9.7 per cent up from its Boxing day low."
The index has risen 5.2 per cent over the past three days.
The Dow Jones Industrial Average rose 1.1 per cent while the tech-heavy Nasdaq Composite also ended 1.1 per cent higher as participants largely managed to brush off a profit warning from South Korea’s Samsung.
"Retailers led the way higher in Europe, helped by positive comment on the sector from BofA Merrill Lynch, which put a “buy” rating on France’s Carrefour."
"The stock rose more than 2.7 per cent, with the CAC 40 index in Paris rising 1.2 per cent."
The pan-regional Stoxx Europe 600 index rose 0.9 per cent as the Xetra Dax in Frankfurt gained 0.5 per cent and London
FTSE 100 ended 0.7 per cent higher.
Seoul’s Kospi Composite fell 0.6 per cent as index heavyweight Samsung fell almost 2 per cent.
"In Tokyo, the Topix edged up 0.4 per cent, with shares in SoftBank up 5.7 per cent after it scaled back plans for investment in lossmaking shared-office provider WeWork."
The euro was down just 0.3 per cent on the day against the dollar at $1.1438.
The currency pair has held between $1.13 and $1.15 for most of the past two months.
"The greenback was flat versus the yen at ¥108.74, while sterling was down 0.5 per cent at $1.2717 as the markets braced for further Brexit developments."
The dollar index was up 0.3 per cent at 95.95.
"The yield on the 10-year German Bund ended the day at 0.23 per cent, up 1 basis point — its third rise in a row."
"The US 10-year Treasury yield was up 4bp at 2.72 per cent, with the two-year yield 6bp higher at 2.59 per cent."
"Brent oil settled at $58.72 a barrel, up 2.4 per cent on the day, marking a rise of 7.8 per cent from the low it struck two weeks ago."
US West Texas Intermediate crude was 2.5 per cent higher in late trade at $49.71.
"The firmer tone of the dollar helped push gold down $4 to $1,284 an ounce."
Additional reporting by Michael Hunter in London and Edward White in Taipei
S&P 500 gains 0.7%; Nasdaq Composite ends 1.2% higher
Dollar index falls to weakest since October
Oil prices rise for sixth day in a row
US ISM service sector index dips to five-month low
"Optimism about the outcome of trade talks between Washington and Beijing helped US stocks start the week on the front foot, with underlying support still coming from Friday’s soothing policy comments from Jay Powell, chairman of the Federal Reserve."
"Mr Powell’s remarks that the US central bank would be “patient” with regard to further interest rate rises helped calm worries about a possible Fed policy error, and helped put the dollar under pressure, even as Treasury yields moved higher."
"“Now that Fed chair Powell has smoothed over the market’s worries regarding rate policy, the next important catalyst is US corporate earnings season, that kicks off next week,” said Nicholas Colas at DataTrek Research."
“Bottom line: companies must convince investors that 2019 will show further earnings growth even as profit margins actually decline.”
"Oil prices extended their recent run of gains to a sixth session, as the markets focused on Opec production cuts due to come into force this month."
The mood was also helped by hopes that an easing of US-China trade tensions could support global growth.
"Chang Liu at Capital Economics noted that while few details had emerged after the first day of US-Sino talks, Chinese officials had announced numerous measures ahead of the meeting aimed at addressing US concerns about market access and intellectual property rights protection."
"“While these are unlikely to satisfy the hawks in the US administration, with President Trump now personally involved in the negotiations and showing his willingness to make a deal, an agreement might just be reached over the coming weeks,” he said."
"Meanwhile, Wall Street appeared unfazed by the latest sign that US economic growth was cooling."
The Institute for Supply Management’s headline non-manufacturing index fell to a five-month low in December.
"But analysts highlighted that the details of the report were more positive, notably a rise in the new orders sub-index to a six-month high."
The survey came hard on the heels of an unsettling manufacturing report from the ISM last week.
"In New York, the S&P 500 ended 0.7 per cent higher at 2,549, having touched 2,566.16, for a two-day gain of 4.1 per cent."
The Dow Jones Industrial Average rose 0.4 per cent on Monday while the Nasdaq Composite climbed 1.2 per cent.
Across the Atlantic
", Frankfurt’s Xetra Dax ended 0.2 per cent softer, having earlier been down as much as 0.8 per cent."
The FTSE 100 in London slipped 0.4 per cent while the region-wide Stoxx 600 shed 0.2 per cent.
"Japanese stocks outperformed in Asia, with the Topix gaining 2.8 per cent as all its sectors gained ground."
Hong Kong’s Hang Seng index rose 0.8 per cent while in China the CSI 300 index of Shanghai and Shenzhen-listed stocks rose 0.6 per cent.
"The dollar index was down 0.5 per cent at 95.71, as the euro climbed 0.7 per cent to $1.1475 and sterling gained 0.3 per cent to $1.2769."
"The greenback was up 0.2 per cent versus the yen at ¥108.73, after briefly touching a 10-month low of ¥104.96 last week during a sudden sharp appreciation for the Japanese currency."
US Treasuries extended Friday’s steep sell-off that had pushed the 10-year yield up from a one-year low.
"On Monday, the yield was up a further 4 basis points at 2.70 per cent, while that on the two-year note was 5bp higher at 2.54 per cent."
The 10-year German Bund yield edged up 1bp to 0.22 per cent.
"Oil prices continued to build on gains made last week, with international benchmark Brent crude settling 0.5 per cent higher at $57.33 a barrel, after earlier hitting $58.93."
US West Texas Intermediate was 1.4 per cent higher in late trade at $48.64.
"Gold was up $3 at $1,288 an ounce."
Friday 21.00 GMT
S&P 500 gains 3.4%; Nasdaq Composite ends 4.3% higher
Chinese stocks gain as Beijing confirms trade talks with US
US non-farm payrolls rise more than forecast; wage growth accelerates
Powell says Fed is sensitive to messages from market
Treasuries fall sharply; oil prices advance
"Global stocks rallied sharply and oil prices jumped as risk appetite was bolstered by optimism on the US-China trade front, a robust US jobs report and soothing comments from Federal Reserve chairman Jay Powell."
Officials from the US and China will meet on Monday for their first formal talks since the beginning of a truce in the trade war between the two countries that has kept market participants on edge.
"Furthermore, the People’s Bank of China announced a 100 basis point cut to the required reserve ratio for banks in a bid to support the economy."
More positive news came from an encouraging survey on China’s services sector.
"Earlier this week, data showed China’s manufacturing sector contracting for the first time since May 2017, while Apple blamed poor iPhone sales in the country for its first sales warning in 16 years."
"“We continue to expect additional policy easing to come as growth slows, including additional tax cuts and increased fiscal spending,” said Wang Tao, economist at UBS."
“We believe the most impactful measure for short-term growth will remain fiscal spending and infrastructure investment.”
"Apple’s remarks were viewed by many as the trigger for a strong rally for the yen, which saw the Japanese currency jump as much as 3.7 per cent against the dollar to a nine-month high, although it later relinquished some of its gains."
"Meanwhile, concerns about the strength of the US economy were assuaged to some degree by the latest US labour market data, which showed stronger job creation than expected and accelerating wage growth."
"Non-farm payrolls rose 312,000 last month, compared with a consensus forecast for a gain of 177,000."
"Average hourly earnings rose 3.2 per cent in the year to December, the fastest pace since 2009."
"“The report points to continued strength for consumer spending going forward,” said economists at BofA Merrill Lynch."
“Strong job gains coupled with rising wages should act as a tailwind for consumption.
"Additionally, the decline in gasoline prices helps to support consumption."
"“In terms of the Fed, the report will be seen as a relief following a run of relatively weak survey data and should leave them feeling more confident about delivering rate hikes this year.”"
"Indeed, Fed chairman Jay Powell said in a speech yesterday that while US economic momentum was solid, the central bank was sensitive to the messages being sent by markets and would be patient on monetary policy in 2019."
"He also emphasised that there was no preset path for interest rate rises, and said the Fed “wouldn’t hesitate” to change its balance sheet policy if needed."
"The more confident mood across stock markets helped push the S&P 500 back to levels seen just before its sharp pre-Christmas sell-off, while oil prices had one of their best weeks in years."
"US Treasuries sold off sharply, with the yield on the 10-year note bouncing off a near-one year low hit on Thursday, although a post-payrolls rally for the dollar proved shortlived — helping gold pare an earlier fall."
"In New York, the S&P 500 ended 3.4 per cent higher at 2,531, just off the day’s peak of 2,538.07, giving it a rise over the holiday-shortened week of 1.9 per cent."
"The Dow Jones Industrial Average gained 3.3 per cent — or nearly 750 points — on Friday, while the Nasdaq Composite climbed 4.3 per cent."
The CBOE Vix volatility index fell to its lowest point since mid-December.
"The Europe-wide Stoxx 600 rose 2.8 per cent, with Frankfurt’s"
Xetra Dax gaining 3.4 per cent and London’s
FTSE 100 adding 2.2 per cent.
"Chinese stocks also enjoyed a strong session, with the CSI 300 rising 2.4 per cent and the Hang Seng in Hong Kong ending 2.2 per cent higher."
"In Tokyo, the Topix index ended 1.5 per cent lower as participants focused on global growth concerns on the first day of trading for Japanese markets in 2019."
"The dollar rallied 0.7 per cent against the yen to ¥108.44, but was softer elsewhere as its initial strength following the release of the US jobs data faded."
"The euro was up 0.1 per cent at $1.1401 and sterling was 0.8 per cent firmer at $1.2735, with the dollar index down 0.2 per cent."
"Treasuries suffered hefty losses, with the yield on the 10-year note jumping 11 basis points to 2.67 per cent."
"The two-year yield was also up 11bp, at 2.50 per cent."
The 10-year German Bund yield rose 5bp to 0.20 per cent.
"Hopes that the trade talks between the US and China could provide a boost to the global economy helped oil prices gain ground, with Brent crude settling at $57.06 a barrel — up 2 per cent on the day, and a gain of 9.3 per cent on the week."
"Gold was down $8 at $1,285 an ounce, off a low of $1,276.92 hit earlier in the day."
Thursday 21.00 GMT
"S&P 500 falls 2.5%, Apple shares slide 10%"
Revenue warning from iPhone maker heightens China
US manufacturing expands at slowest pace for two years
Treasuries rally sharply; two-year yield below Fed’s effective policy rate
Yen touches nine-month high versus dollar
Copper touches 18-month low  
"Another day of turbulence across global markets left equities nursing further heavy losses, as mounting worries about the outlook for the world economy fuelled gains for “haven” assets such as the yen, US Treasuries and gold."
Apple set a gloomy tone late on Wednesday after it blamed poor iPhone sales in China for its first sales warning in 16 years.
The move came hard on the heels of data showing that Chinese manufacturing had contracted last month for the first time since May 2017.
"Apple’s announcement helped fuel strong gains for the yen, with the currency rising as much as 3.7 per cent versus the dollar to a nine-month high, before giving back some of its advance."
"Conversely, the Australian dollar — widely viewed as a proxy for the Chinese economy — touched its lowest level against its US namesake for a decade, before rallying sharply."
"“Thin liquidity due to a Japanese holiday may have exacerbated the surge in the value of the yen, but the bias towards yen strength has been very clear since the middle of last month,” said Jane Foley, senior FX strategist at Rabobank."
"“While the bad news from Apple may have been the trigger for the move, it has only served to enhance current market sensitivities.”"
"Meanwhile, the global growth worries were compounded on Thursday by the latest report from the US Institute for Supply Management, which showed that factory output on December had expanded at the slowest pace for more than two years."
The survey also showed that businesses were becoming increasingly worried about the impact of Washington’s trade dispute with Beijing.
"Kevin Hassett, chairman of the White House Council of Economic Advisers, warned that the US-China trade war was likely to lead to more companies seeing lower revenues and profits this year."
"“It’s not going to be just Apple,” he said."
Andrew Hunter at Capital Economics said the ISM report had provided the first genuine economic reason for the Federal Reserve to potentially stop raising interest rates.
"Indeed, Fed fund futures moved to price in a greater probability that the US central bank would cut rates than raise them in 2019."
"The two-year Treasury yield fell below the Fed funds effective rate, which was 2.4 per cent on Thursday, for the first time in more than a decade"
The yield on the 10-year note fell to the lowest for nearly a year.
"Gold rose to the highest level since June, copper touched an 18-month low in London, while oil prices moved higher after a volatile session."
"In New York, the S&P 500 ended 2.5 per cent lower at 2,447, while the Dow Jones Industrial Average tumbled 2.8 per cent and the Nasdaq Composite index fell 3.1 per cent, its first drop in six sessions."
Apple shares fell 10 per cent as they had their worst day in five years
"In Europe, Frankfurt’s Xetra Dax fell 1.6 per cent and London’s FTSE 100 closed 0.6 per cent lower."
"The region-wide Stoxx 600 shed 1 per cent, with the index tracking its tech sector falling 4.2 per cent."
Japanese markets were closed for a national holiday.
"The dollar was down 1.2 per cent against the yen at ¥107.55, after earlier touching ¥104.99, according to Refinitiv data."
"The euro was down 0.8 per cent versus the Japanese currency at ¥122.53, while sterling was 1 per cent weaker at ¥135.86."
"The euro was up 0.5 per cent against the dollar at $1.1398 and the pound was up 0.3 per cent at $1.2636, helping to push the dollar index down 0.6 per cent following a 0.7 per cent gain on Wednesday."
"The Australian dollar fell as low as US$0.6743 before rallying back to US$0.7003, up 0.3 per cent on the day."
"In the fixed income arena, the yield on the 10-year US Treasury was down 10 basis points at 2.56 per cent, the lowest since mid-January 2018."
The two-year yield was 12bp lower at 2.38 per cent.
The 10-year German Bund yield slipped 2bp to 0.15 per cent.
"Brent oil settled at $55.95 a barrel, up 1.9 per cent, after swinging between $53.93 and $56.30."
US WTI crude was 1.3 per cent higher in late trade at $47.15.
"LME copper touched $5,725 a tonne, the lowest since June 2017, before closing 1.8 per cent weaker at $5,736."
"Gold was up $9 at $1,293 an ounce."
Wednesday 14.55 GMT
Wall St and European equities start year with sharp declines
Data point to contraction for China’s manufacturing sector
"Fears of global economic slowdown mount, setting nervous tone to trade"
"Demand for havens draws investors into German Bunds, pushing yields lower"
Yen at fresh 6-month high
Oil prices fall further
"Stock markets made a gloomy start to 2019, with investors in a cautious mood at the start of a year featuring a lengthy list of risk factors, from a global economic slowdown to the US federal government shutdown and the threat of a disorderly Brexit."
"Haven assets rallied sharply, with demand for the 10-year German Bund sending its yield down 9.3 basis points to 0.154 per cent, its lowest since April 2017."
"Gold rose 0.4 per cent to $1,287.49 an ounce and Japan’s yen was stronger by 0.7 per cent against the dollar at ¥108.92, a six-month high."
"The sustained declines for equities followed on from the worst year for global stock markets since the financial crisis in 2008, with the impact of the trade war between the US and China on a stuttering world economy at the forefront of concern."
"Wall Street followed European and Asian markets lower after economic data pointed to a contraction for China’s manufacturing sector, adding to the worries."
"The S&P 500 fell 1.5 per cent, with the Nasdaq Composite down 1.7 per cent."
"London’s FTSE 100 fell 0.7 per cent, with Frankfurt’s Xetra Dax 30 down 0.6 per cent."
The losses were wider in Asia.
Hang Seng fell almost 3 per cent after a survey showing that China’s manufacturing sector contracted in December for the first time in 19 months.
"The Caixin-Markit manufacturing purchasing managers’ index dropped from 50.2 in November to 49.7, below the 50-point level separating expansion from contraction and worse than the 50.1 reading forecast by economists in a Reuters poll."
ING economist Iris Pang said the figures supported the view that the Chinese economy was weak and that “stimulus needs to arrive quickly”.
"The impact of the US-China trade war on export growth, combined with the knock-on effect on domestic demand, could pose a risk to job security and create a “vicious downward circle”, she added."
"“As a result, we expect the Chinese government to speed up the delivery of infrastructure investment to support the economy,” Ms Pang said."
The 2.8 per cent fall for the Hang Seng was the worst in the Asia-Pacific region.
Its financial and technology sectors were under the most pressure.
"On China’s mainland the CSI 300 lost 1.4 per cent, dropping to its weakest closing low since March 2016."
Australia’s S&P/ASX 200 was down 1.6 per cent.
Equities markets in Japan were closed for a public holiday.
"The S&P 500 ended 2018 down 6.2 per cent, while the FTSE All World Index shed 11.5 per cent for the year."
"The dollar index was flat, with the euro down 0.3 per cent to $1.1445."
The pound looked badly exposed to the UK’s turbulent Brexit politics as risk dried up.
"It fell by over 1 per cent to $1.2602, a two-week low."
"China’s onshore renminbi — which is permitted to trade 2 per cent either side of a daily midpoint set by the country’s central bank — was 0.3 per cent stronger at Rmb6.8560 per dollar, having hit a three-week high on its last trading day in 2018."
The onshore renminbi was a touch weaker at Rmb6.8716.
"Brent crude failed to hold gains as the mood worsened, falling 1.3 per cent overall to $53.08 a barrel."
"West Texas Intermediate was down 1.8 per cent, to $44.57 a barrel."
Friday 21.00 GMT
S&P 500 tumbles 2.1% to 17-month low
Fed policy concerns keep mood downbeat
Threat of US government shutdown adds to worries
Dollar edges higher; Treasury yield curves steepens
No respite for oil prices as demand worries persist
The mood across global markets remained fragile at the end of a week dominated by worries that the Federal Reserve would continue raising interest rates and running down its balance sheet despite mounting concerns about slowing global growth.
The downbeat mood was heightened by President Trump’s threat to shut down the US government for “a very long time” unless Democrats agreed to pass funding for his border wall ahead of a midnight deadline.
"The Nasdaq Composite equity index sank back into bear market territory, as it fell more than 20 per cent from its late-August high, while Brent oil dropped to its lowest level for more than 15 months."
"But there was little in the way of support for so-called “haven” assets, with the yen little changed against the dollar, Treasury prices mostly lower and gold weaker."
The two-year/10-year segment of the Treasury yield curve steepened slightly after hitting its lowest point for more than a decade earlier this week.
"The Federal Reserve’s Open Market Committee voted unanimously to raise interest rates on Wednesday, as had been widely expected, but forecast further increases next year — albeit fewer than had been pencilled in last September."
"Markets were particularly unnerved after the post-meeting press conference, which saw Jay Powell, the Fed chair, deliver an upbeat assessment of the US economy and remark that he saw no need to change the central bank’s policy of reducing its balance sheet from the current “autopilot” setting."
"“The FOMC meeting saw a dovish shift from the Powell Fed, but not nearly as dovish as global asset markets were hoping for,” said John Hardy, head of FX strategy at Saxo Bank."
"David Cheetham, chief market analyst at XTB, highlighted that investors had grown accustomed to a supportive Fed, with the actions of Mr Powell"
predecessors seeing the creation of he so-called “Bernanke/Yellen put” — the notion that the central bank would act to support stock markets in times of trouble.
"“Mr Powell’s stance seems more closely aligned to the Fed’s dual mandate of maximum employment and keeping inflation under control and it seems that he is not as willing as those before him to adjust policy due to adverse market movements,” Mr Cheetham said."
Michael Pearce at Capital Economics said that markets were increasingly pricing in the risk of a Fed policy mistake.
"“The clear view in financial markets in the wake of the December FOMC meeting is that any further rate hikes over the coming months are likely to be reversed in 2020,” he said."
"“Our long-held forecast is that a sharp slowdown in economic growth next year will prompt the Fed to cut rates by 75 basis points in the first half of 2020, more than markets are currently pricing in.”"
"John Williams, president of the New York Fed, on Friday sought to reassure markets, saying the central bank might reassess its plans to tighten monetary policy in the new year, and insisting it was paying close attention to the messages being sent by the markets."
"US stocks jumped immediately after his comments, but the rally proved shortlived — leaving the S&P 500 on course to record its worst December performance since the 1930s."
Analysts noted that volatility on Wall Street was likely to have been exacerbated by the “quadruple witching” expirations of futures and options on stocks and indices on Friday.
"Meanwhile, Brent oil fell as low as $52.79 a barrel, its weakest level since early September 2017, as persistent worries about the impact on demand of slowing global growth continued to outweigh the prospect of output cuts by major producers."
"The dollar index rallied back towards a recent 18-month high, as the euro eased below $1.14 and the yen steadied after hitting its strongest level against the greenback since early September."
The 10-year US Treasury yield inched higher after hitting an eight-month low this week.
"The two-year yield, however, fell back."
"Gold also eased back after reaching a six-month high of $1,266 an ounce on Thursday."
"In New York, the S&P 500 fell 2.1 per cent to 2,416, having been up as much as 1.5 per cent earlier in the day."
"That left the benchmark nursing a 7.1 per cent fall for the week, its worst such fall since August 2011."
"The Dow Jones Industrial Average shed 0.7 per cent, while the tech-heavy Nasdaq Composite ended 3 per cent lower."
"European stocks steadied after their recent declines, however."
Xetra Dax recovered early losses to end 0.2 per cent higher and the Stoxx 600 finished flat.
London’s FTSE 100 edged up 0.1 per cent.
There were some steep falls for Asian markets.
"The Topix in Tokyo was among the worst performers in the region, falling 1.9 per cent to its lowest since April 2017."
The CSI 300 index of major listed companies in Shenzhen and Shanghai shed 1.2 per cent.
"The dollar index was up 0.8 per cent at 97.04, in sight of the 18-month peak of 97.71 struck on December 14."
"The euro was down 0.7 per cent at $1.1362, while the greenback was flat against the yen at ¥111.28."
Sterling was down 0.3 per cent at $1.2625.
"The yield on the 10-year US Treasury was up marginally at 2.79 per cent, while that on the 30-year bond was 2bp higher at 3.03 per cent."
The two-year yield was 4bp lower at 2.64 per cent.
The 10-year German Bund yield edged up 1bp to 0.25 per cent.  
"Brent oil settled at $53.82 a barrel, down 1 per cent, some way off the day’s low but still down"
more than 10 per cent over the week.
US West Texas Intermediate was 1.2 per cent lower in late trade at $45.32.
"Gold was down $5 at $1,254 an ounce, after jumping $17 on Thursday."
Thursday 21.00 GMT
Nasdaq briefly slides into bear market; S&P 500 down another 1.6%
Fed’s forecasts and comments viewed as not sufficiently dovish
Brent oil dips below $55 a barrel
Dollar tumbles against yen; gold hits six-month high
Swedish Riksbank raises rates
"Another bruising session across global markets saw stocks, oil prices and the dollar come under renewed pressure and the Treasury yield curve flatten further as participants remained unsettled by the previous day’s comments from Jay Powell, chairman of the Federal Reserve."
The mood was not helped by persistent concerns over the threat of a US government shutdown this weekend
"The US central bank raised interest rates by 25 basis points on Wednesday, as expected, and lowered its forecast for further increases in 2019 to two from three — disappointing some in the markets who had hoped for an even shallower tightening path."
Mr Powell’s comments in the post-meeting press conference were also not as dovish as some observers had apparently expected.
"Moreover, he said the reduction of the Fed’s balance sheet would remain on “automatic pilot”."
"“The Federal Open Market Committee is putting much less weight on macroeconomic headwinds than many other forecasters,” said Paul Shea, strategic economist at Miller Tabak."
“It is less concerned about a flat yield curve and weak housing than we are.
It cares less about slumping equities prices than most participants in those markets realise.
"“Finally, it views weakening financial conditions more as a ‘return to normalcy’ than a sign of impending recession.”"
"The sell-off on Wall Street briefly drove the Nasdaq Composite index into bear market territory, defined as a fall of 20 per cent or more from a recent high."
"The S&P 500 traded as much as 17 per cent down from the record peak it reached in September, while across the Atlantic the Stoxx Europe 600 hit levels not seen for more than two years."
"The dollar index fell to its lowest point for a month, in response to the shallower path of tightening forecast by the Fed."
"Meanwhile, persistent concern over global growth helped drive Brent oil to a fresh 15-month low of $54.28 a barrel, taking its decline over the course of the week to 10 per cent."
"The risk-averse mood in the markets pushed the yen to its highest level against the dollar since mid-September, while gold hit a six-month high."
The Fed was not the only central bank in the news.
"’s Riksbank surprised many in the markets by raising its key interest rate by 25bp to minus 0.25 per cent, driving the krona higher against both the euro and the dollar."
"“However, the Riksbank remains cautious as it slightly lowered its interest rate path."
"It does not expect the next increase until the second half of 2019,” said Antje Praefcke at Commerzbank."
"The Bank of England, meanwhile, failed to stir the markets as its Monetary Policy Committee voted unanimously to leave rates unchanged,"
"“Not surprisingly, the tightening bias seems suspended for now with the central bank in limbo until the outlook on the Brexit scenario becomes clearer, which won’t be the case until next year now,” said analysts at Action Economics."
"Mexico’s central bank raised rates by 25bp to 8.25 per cent, as expected."
"“The [Banco de Mexico] board perceives the balance of risks for inflation continue to be tilted to the upside,” said analysts at Itaú BBA."
"In New York, the S&P 500 fell 1.6 per cent to 2,467, having earlier fallen as low as 2,441.18."
The Nasdaq ended 1.6 per cent lower — taking the fall from its record high in August to 19.6 per cent — while the Dow Jones Industrial Average fell 2 per cent.
"The pan-European Stoxx 600 fell 1.5 per cent, with"
the German Xetra Dax down 1.4 per cent and the CAC 40 in Paris 1.8 per cent lower.
London’s FTSE 100 outperformed as it shed 0.8 per cent.
"The dollar index was down 0.8 per cent at its lowest intraday level since November 20, as the euro climbed 0.8 per cent to $1.1467 and the greenback tumbled 1.2 per cent against the yen to ¥111.16."
Sterling was up 0.5 per cent at $1.2668.
"The dollar was down 1.4 per cent against the Swedish krona at SKr8.9662, while the euro was off 0.6 per cent at SKr10.2863."
The US currency was down 1.2 per cent against the Mexican peso.
"Meanwhile, the 10-year US Treasury yield was up 2 basis points at 2.80 per cent, with the two-year yield up 3bp at 2.67 per cent."
"Earlier in the day, the gap between the two and 10-year yield fell as low as 9.1bp."
The yield on the 10-year German Bund slipped 1bp to 0.23 per cent.
"Oil prices came under heavy pressure, with Brent crude settling at $54.35 a barrel, down 5.1 per cent on the day and West Texas Intermediate 4.2 per cent lower in late trade at $46.15."
"Gold was up $17 at $1,260 an ounce, after touching $1,266 — the highest intraday level since June 26."
Additional reporting by Alice Woodhouse in Hong Kong and Cat Rutter Pooley and Adam Samson in London
Wednesday 21.00 GMT
S&P 500 falls 1.5%; euro back below $1.14
Fed lifts rates by 25bp but signals slower pace of tightening going forward
10-year Treasury yield falls to lowest since April
Oil prices rebound after previous day’s sell-off
Italian assets lifted by budget agreement between Rome and EU
"US stocks reversed early gains, the dollar rallied and Treasury yields fell as trading turned very volatile in the wake of the Federal Reserve’s latest interest rate move and forecasts."
"The central bank raised the Fed funds target range by 25 basis points to 2.25-2.50 per cent, as expected, but signalled a slower pace of tightening going forward."
"It pencilled in just two rate rises next year, down from three in the previous forecast."
One further increase may come in 2020.
"“Still, with the vote unanimous and the median rate projection for end-2019 revised down by only 20bp, this is hardly the ‘dovish hike’ that some were anticipating,” said Paul Ashworth at Capital Economics."
"“The new median projection puts the fed funds rate at 2.9 per cent by end-2019 and 3.1 per cent by end-2020, down from 3.1 per cent and 3.4 per cent in the September projections."
"“At the same time, however, the median estimate of the neutral rate was also lowered to 2.8 per cent, from 3.0 per cent."
So officials still expect to hike rates above neutral.”
"Harm Bandholz, chief US economist at UniCredit, noted that the post-meeting statement contained only a few changes."
“But those that were made send the clear message
"that the Federal Open Market Committee’s confidence in the medium-term outlook has been rattled,” he said."
The latest swings for US equities capped a volatile few days that saw the S&P 500 fall into correction territory and pushed the small-cap Russell 2000 index into a bear market.
"Across the Atlantic, Italian assets outperformed strongly yesterday after Rome finally reached an agreement with the EU over its 2019 budget."
"The deal ended months of uncertainty and meant Italy would avoid a so-called excessive deficit procedure, for now at least."
Analysts said that Italian risks were now likely to move into the background but warned that many fundamental questions remained unresolved.
"“The Italian economy continues to flirt with a recession and the effect of higher borrowing costs and tighter credit conditions will continue to linger as a headwind for the real economy,” said Aila Mihr at Danske Bank."
"“Structural weaknesses will remain unaddressed and, even if the government’s expansionary measures can prevent a downturn, it is difficult to become too optimistic on the growth and debt outlook.”"
"Meanwhile, oil prices bounced back after suffering steep falls in the previous session."
The latest inventories report from the Energy Information Administration showed an unexpected drop in US distillate stocks last week.
Crude inventories also fell but by much less than expected.
"The steep sell-off on Tuesday, which came against a backdrop of concerns that slowing global growth could hurt demand, pushed Brent to a 14-month low of $55.89 a barrel."
"In New York, the S&P 500 ended 1.5 per cent weaker at 2,506, its lowest close since September 2017, having risen by about 1.5 per cent earlier in the day."
The sell-off in the S&P accelerated after Fed chairman Jay Powell told the post-meeting press conference that he did not see the central bank changing its “autopilot” policy of reducing the central’s balance sheet.
The day’s drop left the benchmark index nursing a fall of more than 5 per cent since last Thursday.
The Dow Jones Industrial Average shed 1.5 per cent while the tech-heavy Nasdaq Composite ended 2.2 per cent lower.
"The FTSE MIB equity index in Milan rose 1.6 per cent, leaving most of its rivals in the shade."
"The Xetra Dax in Frankfurt ended 0.2 per cent higher and the CAC 40 in Paris rose 0.5 per cent, while the FTSE 100 in London added 1 per cent."
The pan-European Stoxx 600 finished with a gain of 0.3 per cent.
"The 10-year US Treasury yield was down 5 basis points at 2.77 per cent, the lowest level since April."
The two-year yield was flat at 2.65 per cent and the 30-year yield was down 7bp at 3.00 per cent.
The gap between the two- and 10-year yield hit the lowest for a week.
"The yield on the 10-year Italian government bond fell 15bp to 2.79 per cent, the lowest level since the end of September when Rome’s budget figures were first released."
The gap between 10-year Italian and German yields briefly fell below 250bp.
The dollar index was down 0.1 per cent at 97.01 as the euro pared an early advance to stand 0.1 per cent higher at $1.1376.
The greenback was steady versus the yen at ¥112.58.
after earlier falling to ¥112.09.
Sterling was 0.2 per cent lower against the dollar at $1.2618.
"Brent oil settled at $57.24 a barrel, up 1.7 per cent, having earlier touched $58.11, while front-month US West Texas Intermediate settled 2.1 per cent higher at $47.20."
"The rallying dollar helped push gold down $7 to $1,241 an ounce."
"The metal earlier touched a five-month high of $1,258."
Additional reporting by Michael Hunter in London and Edward White in Taipei
Tuesday 21.00 GMT
S&P 500 ends barely changed after earlier rising 1.1%
Global growth concerns keep participants on edge
Brent oil touches 14-month low near $56 a barrel
Federal Reserve policy meeting gets under way
Dollar index slips; yen remains in demand
"An extremely choppy session on Wall Street saw the S&P 500 swing from gains to losses and back before closing barely changed, with oil prices under severe pressure as participants continued to focus on concerns over global growth, the US-China trade spat and tighter central bank policy."
"So-called “haven” currencies such as the Japanese yen continued to attract demand, while US Treasuries and gold edged higher."
"As a two-day meeting of the Federal Reserve’s Open Market Committee got under way, expectations for a rate rise remained high — although speculation has mounted that the central bank might adopt a more dovish stance in its policy forecasts for next year."
"“A 25 basis point rate hike on Wednesday is basically a done deal as the Fed has met its growth and inflation mandates and looks to further remove the accommodation from years of stimulus,” said Action Economics."
"“But with the worries over a growth slowdown, the [fed funds] futures continue to pare expectations for 2019 rate hikes."
"Indeed, the market is pricing in little chance for a move in the first half of next year.”"
"Meanwhile, fresh evidence emerged of the headwinds facing the German economy."
"The headline Ifo business climate index fell for a fourth successive month in December, to its lowest level for more than two years."
“The fact that the more forward-looking expectations component fell particularly steeply . . . 
"to a four-year low of 97.3 bodes ill for next year,” said Andrew Kenningham at Capital Economics."
"“The upshot is that, while its relationship with GDP is not very close, this survey adds to the evidence that Germany is experiencing a cyclical slowdown.”"
There was some better news on the US housing market — on the surface at least — as data showed the rate of new home construction rising by the most in three months in November.
"But Michael Moran at Daiwa Capital Markets highlighted that all of November’s increase, and an upward revision over the previous two months, occurred in the volatile multi-family sector."
"“Single-family starts fell 4.6 per cent in November, marking the third consecutive decline."
Single-family starts have joined other indicators signalling that housing activity has lost momentum.”
Oil markets attracted plenty of attention as concerns that demand could be hit by weaker global growth helped push Brent down as much as 6.2 per cent to its lowest since October 2017.
"Planned output cuts by major producers have done little to allay concerns about oversupply, which have largely been driven by rising US shale production."
"In New York, the S&P 500 finished just a fraction higher at 2,546 — snapping a three-day run of losses — after climbing as high as 2,573.99 earlier in the day."
The energy sector fell 1.9 per cent.
The S&P recorded its lowest close since early October 2017 in the previous session.
"The Dow Jones Industrial Average finished 0.4 per cent higher, while the Nasdaq Composite index gained 0.5 per cent."
"Across the Atlantic, the pan-European Stoxx 600 fell 0.8 per cent — led by the utilities and energy sectors — as the FTSE 100 in London shed 1.1 per cent and the Xetra Dax in Frankfurt slipped 0.3 per cent."
"In Asia, Hong Kong’s Hang Seng index lost 1.1 per cent as heavily weighted technology stocks lost ground, while mainland China"
CSI 300 fell 1 per cent.
Tokyo’s Topix fell 2 per cent to its lowest level in 18 months.
"The dollar index was a shade lower at 97.09 after recovering from an early dip to 96.70, as the euro edged up 0.1 per cent to $1.1360."
"The US currency was down 0.3 per cent versus the yen at ¥112.54, off the day’s low of ¥112.26."
"The yield on the 10-year US Treasury was down 3 basis points at 2.83 per cent, while the two-year yield was 5bp lower at 2.65 per cent."
The yield gap between the two maturities — which fell as low as 9bp last week — hit the highest level for more than a fortnight.
"Brent oil settled at $56.26, down 5.6 per cent, and fell as low as $55.89, while US West Texas Intermediate hit $45.79 before pulling back up to $46.26 in late trade, still down 7.2 per cent on the day."
"Gold was up $3 at $1,248 an ounce, after hitting $1,250."
Additional reporting by Michael Hunter in London and Alice Woodhouse in Hong Kong
Monday 21.00 GMT
S&P 500 tumbles 2.1% to lowest close in 14 months
Russell 2000 enters bear market
Nervous participants await outcome of Federal Reserve meeting
"Dollar falls, Treasuries gain ground"
Oil prices struggles for traction
Growing concerns over the health of the global economy pushed US stocks sharply lower for the second day in a row as participants awaited the outcome of a two-day meeting of the Federal Reserve’s policy-setting Open Market Committee.
The S&P 500 recorded its lowest close since October 2017 after an early attempt to rally ran out of steam.
"The dollar eased back from a 16-month high touched on Friday against a basket of currencies, with the yen and Swiss franc in particular gaining ground, while the nervous mood across equity markets helped fuel demand for US Treasuries."
The big focus this week will be the Fed’s decision on interest rates on Wednesday —
"a 25 basis point rise is widely expected — and whether the central bank signals fewer increases next year via its “dot plot” projections, particularly given a more “dovish” shift in its communications."
"Recent gloomy data releases in China and the eurozone have highlighted a darkening outlook for global growth, while an inversion across part of the US Treasury yield curve has been viewed by some as a warning that recession may not be too far away."
"Bill Diviney, senior economist at ABN Amro, said: “We expect a fall in the ‘dots’ to signal two further rate hikes in 2019 — down from three — but for 2020 to be unchanged at one rate hike.”"
"“We also expect some tweaks to the statement, particularly regarding the need for ‘further gradual increases’ in rates, which was hinted at in the November minutes."
“We expect some qualifiers to be added to this statement to suggest we are approaching the end of the rate hike cycle but that the tightening bias will nonetheless remain.”
"President Donald Trump on Monday renewed his criticism of the Fed, saying it was “incredible” that the central bank was considering raising rates again this month, given low inflation and a strong dollar."
"Jeffrey Gundlach, the chief investment officer of DoubleLine Capital known as Wall Street’s “bond king”, also said the Fed should not raise rates this week."
He added that US stocks were showing all the signs of a long-term bear market.
The mood was not helped by the latest US data releases.
"The New York Fed’s Empire State business index tumbled to its lowest level for 19 months in December, while confidence among US homebuilders deteriorated this month to its worst since 2015."
"Global growth worries also kept oil prices under pressure, with Brent crude dipping back below the $60-a-barrel mark and West Texas Intermediate beneath $50."
The losses came in spite of hopes that the market was rebalancing following agreed output cuts by Opec and its allies.
"In New York, the S&P 500 fell 2.1 per cent at 2,545, its lowest finish since October 9 2017, with all of its sectors ending in the red."
"The Dow Jones Industrial Average also finished 2.1 per cent lower, while the Nasdaq Composite shed 2.2 per cent."
"All three indices are now in correction territory, defined as a drop of 10 per cent or more from a recent high."
"The small-cap Russell 2000 index, meanwhile, ended more than 20 per cent down from its August 31 high, putting it into a bear market."
"In Europe, the pan-regional Stoxx 600 fell 1.1 per cent — having been down 1.4 per cent at one point — as the Xetra Dax in Frankfurt shed 0.9 per cent and London’s"
FTSE 100 ended 1.1 per cent lower.
"In Asia, the CSI 300 index of major Shanghai and Shenzhen stocks closed 0.2 per cent down."
Hong Kong’s Hang Seng also finished marginally lower.
"The picture was brighter in Japan, with Tokyo"
Topix adding 0.2 per cent.
"The dollar index was down 0.3 per cent at 97.13, after touching 97.71 on Friday."
"The euro was up 0.3 per cent at $1.1345, while the greenback was off 0.6 per cent against the yen at ¥112.68 and 0.5 per cent versus the Swiss franc at SFr0.9922."
"Sterling was up 0.3 per cent at $1.2616, although the euro was up 0.1 per cent against the pound at £0.8992."
"The yield on the 10-year Treasury was down 4 basis points at 2.85 per cent, with the on the two-year note also 4bp lower at 2.69 per cent."
The gap between the two recently fell as low as 9bp.
"Brent, the international crude benchmark, settled at $59.61 a barrel, down 1.1 per cent at $58.97 a barrel, and fell further in post-settlement trading — dipping below the $59 mark."
"US West Texas Intermediate, was 3.8 per cent lower in late trade at $49.24."
“Despite Opec and Russia agreeing to reduce oil production . . . 
"prices have fallen as the market awaits evidence that the cuts will balance the market,” noted ANZ analysts."
"Gold was up $8 at $1,246 an ounce."
Friday 21.00 GMT
S&P 500 falls 1.9%; Dow closes in correction territory
Disappointing data add to worries over impact of trade dispute
Chinese equity indices fall sharply
Pound weakens as May faces opposition in Brussels
Dollar index hits 16-month high
World equities closed out the week on a soft note as disappointing economic reports out of China and the eurozone heightened concern over the outlook for global growth.
"The euro sank below $1.13 to its lowest level against the dollar for more than two weeks, as the US currency hit its highest point against a basket of currencies for 16 months."
Sterling came under renewed pressure as the threat of a “no deal” Brexit continued to hang over the currency.
"But the big focus was on China, where activity and spending data confirmed that the country’s economy had a dismal November."
"Sue Trinh, head of Asia FX strategy at RBC Capital Markets, described the day’s figures as “ugly” and noted that officials had said the impact on China’s economy from Sino-US trade frictions was not obvious yet."
"“So the worst is yet to come and policymakers will be very worried, particularly with consumption growth falling off a cliff,” she said."
"“Expect further support measures, including rate cuts, in coming weeks, though these data would indicate measures to date aren’t really working.”"
Chinese equity indices fell between 1.5 per cent and 2.5 per cent.
"Meanwhile, disappointing survey data in the eurozone reinforced comments this week by Mario Draghi, president of the European Central Bank, that the balance of risks to the region’s economy was moving to the downside."
"The December eurozone composite purchasing managers’ index fell to its lowest level since November 2014, while the French PMI indicated that the country’s private sector had contracted for the first time in two and a half years."
"Edoardo Campanella, an economist at UniCredit, said the drop in the eurozone PMI was consistent with annualised GDP growth of about 1.2 per cent for the fourth quarter of 2018."
"“Some of the weakness was temporary, with the ‘yellow vest’ protests weighing particularly on the French services sector,” he said."
“But the German manufacturing sector failed to provide any sign of recovery on the back of a still weak auto industry.
“The overall growth outlook is certainly less bright than we envisaged in the first half of the year.”
US economic figures on Friday painted a more optimistic picture — albeit with some caveats — helping the dollar index reach a 19-month high.
"Capital Economics said a 0.9 per cent increase in underlying US retail sales last month, after an upwardly revised 0.7 per cent gain in October, suggested that real consumption growth had remained stronger in the fourth quarter than it had expected"
"But Capital also warned that a 0.6 per cent rise in headline industrial production last month was entirely due to a surge in mining and utilities output, which would be reversed over the coming months."
"“The bigger story is the renewed weakness in manufacturing output, which suggests that the sector is finally succumbing to the twin headwinds of weaker global demand and a stronger dollar.”"
"A choppy week for sterling saw the currency hit a 20-month low against the dollar as Theresa May, the UK prime minister, faced a vote of confidence by her own MPs after delaying the vote on the Brexit deal in the House of Commons."
The pound was back under pressure on Friday after Mrs May failed to win concessions from the EU to appease her domestic critics.
"In New York, the S&P 500 fell 1.9 per cent to 2,600, its lowest close since early April."
The drop left the index down 1.3 per cent for the week and took its year-to-date decline to 2.8 per cent.
"The Dow Jones Industrial Average fell 2 per cent and closed in correction territory, defined as a 10 per cent drop from a recent peak."
The Nasdaq Composite ended 2.3 per cent lower.
Johnson and Johnson shares tumbled more than 10 per cent after reports that the company had known for years that its baby powder contained asbestos.
"In Europe, the region-wide Stoxx 600 index fell 0.6 per cent, with the Xetra Dax in Frankfurt and London"
FTSE 100 both ending 0.5 per cent weaker.
"Hang Seng fell 1.6 per cent, with technology and telecoms stocks among the biggest fallers, while the Hang Seng China Enterprises index fell 1.9 per cent."
"CSI 300 declined 1.7 per cent, with the Shanghai Composite falling 1.5 per cent and the Shenzhen Composite down 2.5 per cent."
Japan’s Topix fell 1.5 per cent.
"The dollar index touched 97.71 — the highest since June 2017 — before edging back to 97.42, still up 0.4 per cent on the day."
"The euro touched $1.1270 before rallying back to $1.1301, down 0.5 per cent, although the dollar was 0.2 per cent softer versus the yen at ¥113.36."
"The pound was down 0.6 per cent against the dollar at $1.2584, with the euro flat against sterling at £0.8977."
The equity sell-off on Wall Street helped push Treasury prices higher.
"The yield on the 10-year note was down 2 basis points at 2.89 per cent, with the two-year yield 3bp lower at 2.74 per cent."
The 10-year German Bund yield dipped 2bp to 0.26 per cent.
"Oil prices retreated in choppy trade, with Brent crude settling at $60.28 a barrel, down 1.9 per cent, after hitting $61.58 earlier in the day."
West Texas Intermediate crude was 2.9 per cent lower in late trade at $51.04.
"The firm dollar helped pushed gold down $4 to $1,238 an ounce."
Additional reporting by Michael Hunter in London and Alice Woodhouse in Hong Kong
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Thursday 21.00 GMT
S&P 500 ends flat; Nasdaq slips 0.4%
Sterling rallies after Brexit-fuelled volatility
Euro slips as Draghi says risks to economy moving to the downside
Norwegian and Swiss central banks leave rates unchanged
"Caution prevailed across US and European stock markets as participants watched for any signs of progress in trade negotiations between Washington and Beijing and digested relatively downbeat remarks from Mario Draghi, president of the European Central Bank."
Sterling stabilised following the wild swings seen earlier this week triggered by mounting uncertainty over Brexit and a confidence vote in Theresa May as UK prime minister.
"The pound was little changed against the dollar but gained ground versus the euro, as the single currency was unsettled by fresh concern over the growth outlook for the eurozone."
"The ECB confirmed it would end its net asset purchases by the end of the year — as expected — but Mr Draghi otherwise sounded moderately dovish, saying he saw the balance of risks to the economy moving to the downside."
"The central bank also lowered its growth forecasts downward for this year and next, and enhanced its forward guidance on reinvestment"
"“Despite announcing the end of its asset purchase programme, the ECB delivered a very prudent policy message,” said strategists at Mirabaud Asset Management."
“We expect the ECB to hike interest rates for the first time in eight years during the fourth quarter 2019.”
But analysts at ABN Amro said they expected further outlook downgrades to trigger a shift on rate guidance from the ECB in coming months
"“We expect the ECB to keep interest rates on hold next year,” ABN said."
“We expect the forward guidance on interest rates to change following further downgrades to the outlook and we think that the central bank will signal that interest rates will be left on hold through 2019 by the June meeting.”
"Meanwhile, there was relatively little impact from Thursday’s other central bank policy meetings."
"“The Swiss National Bank remained firmly on hold and continues to rely on the combination of negative interest rates and the threat of FX intervention to keep the currency under control in times of heightened uncertainty about the global outlook,” said Action Economics."
Norway’s central bank also left rates unchanged but advised markets to prepare for a rise in March.
"In New York, the S&P 500 ended barely changed at 2,650, after rising as much as 0.7 per cent soon after the start of trading."
The Dow Jones Industrial Average edged up 0.3 per cent while the tech-heavy Nasdaq Composite — which outperformed on Wednesday — fell 0.4 per cent.
"In Europe, the pan-regional Stoxx 600 slipped 0.2 per cent, as the Xetra Dax in Frankfurt and the FTSE 100 in London both ended fractionally lower."
"The FTSE MIB index in Milan outperformed for a second day, rising 0.5 per cent, after the Italian government cut its deficit goal for next year."
"Sterling was up 0.3 per cent against the dollar at $1.2660, with the euro down 0.3 per cent versus the pound at £0.8970."
"The single currency fell as low as $1.1331 against the dollar before climbing back to $1.1362, down 0.1 per cent on the day."
The greenback was up 0.3 per cent versus the yen at ¥113.60.
"The US currency was flat against the Swiss franc at SFr0.9934, with the Norwegian krone 0.1 per cent firmer at NKr8.5565 per dollar."
"The ECB meeting had only a muted impact on German Bunds, with the 10-year yield inching up 1 basis point to 0.28 per cent."
"10 -year yield ended below 3 per cent for the first time since late September, according to data from Refinitiv."
The 10-year US Treasury yield was up 1bp at 2.91 per cent and the two-year yield was 1bp lower at 2.76 per cent — widening the gap between the two to the highest for more than a week.
"Oil prices had another choppy session, with Brent settling at $61.45 a barrel, up 2.2 per cent on the day — having swung between $59.33 and $61.61 — while West Texas Intermediate was up 3.5 per cent in late trade at $52.96."
Some market observers highlighted reports that Saudi Arabia was preparing to cut shipments to US refiners next month.
"Gold was down $3 at $1,242 an ounce."
Wednesday 21.00 GMT
S&P 500 ends 0.5% higher; Nasdaq gains 1%
Trump upbeat on prospects of trade deal
Huawei executive granted bail in Canada
Pound trims gains after May survives confidence vote
Italian assets rise as Rome promises to lower deficit target
"Global equities took their cue from positive developments on the US-China trade front after Donald Trump delivered some upbeat comments about the prospects for a deal — although once again, Wall Street pared an early advance in late trading."
“President Trump said trade talks were moving along . . . 
"and he would consider intervening in the Huawei chief financial officer case if it meant helping to secure a trade deal,” noted analysts at Action Economics."
“The semiconductor sector and others sensitive to trade news have capitalised on the news.”
The Philadelphia SE semiconductor index outperformed most other US equity gauges.
The benchmark S&P 500 briefly climbed back into positive territory for the year.
Further support for stocks came from a tame batch of US inflation data.
"Headline consumer prices rose at the slowest pace for nine months in November, largely due to the slide in energy prices."
"“More important for the Federal Reserve is the continued stability of core inflation [which excludes food and energy], which shows little sign of rising much above the 2 per cent target,” said Andrew Hunter at Capital Economics."
"He said that the softening in core inflation would not prevent the Fed from raising interest rates again next week, and that with real US economic growth likely to remain above trend in the near term, he still expected two more increases in the first half of next year."
“But it does suggest that the Fed won’t hesitate to move to the sidelines if activity growth begins to slow more sharply.”
The gap between two-year and 10-year US Treasury yields widened and the dollar index fell — in part reflecting an impressive rally for sterling.
The pound’s recovery from the previous day
"’s lows came as markets grew increasingly confident that Theresa May, UK prime minister, would survive a vote of confidence."
She won by a margin of 200 to 117.
"“While it means she remains in place, it is clear that her authority has suffered a blow,” said Chris Beauchamp, chief market analyst at IG."
"Indeed, the pound gave back some of its earlier gains against the dollar and the euro."
"Italian stocks outperformed, and government bond yields fell sharply, after Rome confirmed that it was preparing to bow to EU demands that it lower its budget deficit target for next year."
"In New York, the S&P 500 ended 0.5 per cent higher at 2,651, after earlier hitting 2,685.44 — above the level at which it ended 2017."
The Dow Jones Industrial Average rose 0.6 per cent while the tech-heavy Nasdaq Composite finished 1 per cent higher.
The Philadelphia SE Semiconductor SOX index was up 2.5 per cent.
"In Europe, the region-wide Stoxx 600 rose 1.7 per cent, with the Xetra Dax in Frankfurt rising 1.4 per cent and the FTSE 100 in London adding 1.1 per cent — in spite of sterling’s rally."
The FTSE MIB index in Milan gained 1.9 per cent.
Sterling bounced off a 20-month low of $1.2475 to stand 1 per cent higher on the day in late trade at $1.2604.
It earlier touched $1.2671.
The euro was down 0.5 per cent at £0.9012.
"The single currency was up 0.4 per cent against the dollar at $1.1360, and the greenback was 0.2 per cent weaker versus the yen at ¥113.19."
"China’s onshore renminbi exchange rate, which moves within a trading band of 2 per cent either side of a daily midpoint set by the country’s central bank, strengthened 0.2 per cent against the dollar."
"The yield on the 10-year US Treasury was up 3 basis points at 2.91 per cent, while that on the two-year note was unchanged at 2.77 per cent."
The yield gap between the two maturities fell as low as 9bp last week.
Italy’s 10-year yield fell 11bp to 3.01 per cent.
The French 10-year yield edged up 2bp to 0.73 per cent.
"Oil prices gave back early gains, as data showed that US crude inventories had fallen by less than expected last week."
"Brent settled at $60.15 a barrel, down 0.1 per cent, having touched $61.43."
West Texas Intermediate crude was down 1.1 per cent in late trade at $51.11.
"The softer dollar helped gold edge up $3 to $1,245 an ounce."
Additional reporting by Michael Hunter in London and Edward White in Taipei
Tuesday 21.00 GMT
"S&P 500 gives up 1.4% rise, Nasdaq trims gain"
Initial strength came amid optimism over US-China trade talks
Carmakers rally as Beijing prepares to cut tariffs on US motors
Pound falls further on talk of vote of no confidence in Theresa May
French sovereign yield spreads over Bunds highest for 18 months
"An initial bout of optimism that the US and China were making progress in resolving their trade dispute evaporated after Donald Trump, US president, threatened to shut down the Federal government over funding for a wall along the US-Mexican border."
"At a heated White House meeting with Democratic leaders Nancy Pelosi and Chuck Schumer, Mr Trump said: “If we don’t have border security, we’ll shut down the government.”"
"In another extremely volatile session on Wall Street, the S&P 500 gave back an early 1.4 per cent rise, although European stocks ended higher, with the resources, carmaking and technology sectors leading the way."
"Mr Trump had tweeted earlier in the day that “very productive conversations” were going on with China, and this was accompanied by news that Beijing was preparing to cut tariffs on US car imports from 40 per cent to 15 per cent."
"But analysts noted lingering uncertainty in the markets about the outlook for global growth, as well as a number of other reasons for caution."
"“Risk of a full-blown trade war with China, and some potentially concerning market signals have increased fears of recession,” said John Lynch, chief investment strategist at LPL Financial."
"“One such signal is the inversion of the short end of the yield curve, including the spread between two- and five-year Treasuries.”"
"That segment of the curve remained inverted on Tuesday, while the gap between US two- and 10-year yields, more closely watched as an indicator of recession, narrowed back towards last week’s"
"Meanwhile, concerns over the UK’s exit from the EU continued to unsettle market participants as Brussels warned that there was “no room whatsoever” to renegotiate on Brexit."
"Sterling suffered further losses, hitting a fresh 20-month low against the dollar, with the selling gathering steam as reports emerged that Theresa May, UK prime minister, could soon face a vote of no confidence."
"Meanwhile, the recent unrest in France came into focus as worries grew that President Emmanuel Macron’s"
additional fiscal measures to quell the protests could result in Paris breaching EU fiscal rules next year.
The spread between French and German 10-year bond yields hit the widest for 18 months.
"In New York, the S&P 500 ended fractionally weaker at 2,636, after touching 2,674.35 — briefly putting the index back in positive territory for the year."
"The Dow Jones Industrial Average slipped 0.2 per cent while the Nasdaq Composite finished 0.2 per cent higher, having earlier been up 1.6 per cent."
"In Europe, London’s FTSE 100 rebounded 1.3 per cent, with Frankfurt’s Xetra Dax up 1.5 per cent, with Volkswagen up 3.6 per cent."
The Europe-wide Stoxx 600 ended 1.5 per cent higher.
Hang Seng edged up 0.1 per cent as gains by industrials and tech stocks were limited by losses for telecoms and financials.
The CSI 300 of mainland China
stocks rose 0.5 per cent.
"But Tokyo’s Topix closed at its lowest since June 2017, with financial and cyclical stocks tracking worries about global growth."
Sterling was down 0.5 per cent against the dollar at $1.2492 after touching a fresh 20-month low of $1.2483.
The euro was up 0.3 per cent versus the pound at £0.9058.
"The single currency was down 0.3 per cent against the dollar at $1.1324, while the greenback was steady against the yen at ¥113.36."
The dollar index was up 0.3 per cent.
UK gilts steadied.
"At the height of the political drama on Monday, demand for the relative safety of gilts pushed the yield on the 10-year paper to its lowest intraday level since"
"May. On Tuesday, it ended just 1bp lower at 1.19 per cent."
The gap between the yield on 10-year French debt and the German equivalent rose as high as 47.92 basis points.
The 10-year US Treasury yield was up 2 basis points at 2.88 per cent while that on the two-year note was 4bp higher at 2.77 per cent.
The yield gap between the two maturities fell to 9bp last week.
"Brent oil settled at $60.20 a barrel, up 0.4 per cent, while US West Texas Intermediate crude was 1.4 per cent higher in late trade at $51.72."
"Gold was down $2 at $1,242 an ounce."
Additional reporting by Michael Hunter and Federica Cocco in London and Hudson Lockett in Hong Kong
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Monday 21.00 GMT
S&P 500 ends 0.2% higher; Stoxx Europe 600 sheds 1.9%
Apple reverses early fall despite worries over China iPhone sales  
Pound below $1.26 after parliamentary vote on Brexit is delayed
Gilt yields slide as rattled investors seek safety
Brent oil falls back as momentum fades from Opec supply cuts
A tense and choppy day for global equity markets saw US stocks recover from an early sell-off although the mood elsewhere remained unsettled by persistent uncertainty over the prospects for US-China trade and the UK
’s departure from the EU.
The improvement on Wall Street came as Apple recovered most of a steep opening drop.
That had followed news that a Chinese court had imposed a ban on the sale of certain iPhone models in the world’s largest mobile market.
"The S&P 500 index, fresh from its worst weekly fall since March, slid to an eight-month low before staging an afternoon rally, although the Stoxx Europe 600 index closed at its weakest point in two years."
The FTSE Emerging Market equity index fell 2 per cent to its lowest for a month.
"“Disappointed by the lack of clarity around US-China trade policy and startled by newly-emerging tensions around potential violations of US sanctions on Iran, the equity market narrative has newly centred on fears around global growth,” said Lisa Shalett at Morgan Stanley Wealth Management."
The latest data releases out of China did little soothe
Julian Evans-Pritchard at Capital Economics noted that Chinese export growth had slowed last month but said this reflected unflattering base effects and softer global growth rather than US tariffs.
"“A bigger concern is the sharp drop in import growth which, coupled with cooling factory gate inflation, suggests that policy efforts to shore up domestic demand are falling short.”"
"US Treasuries steadied after making sharp gains last week, while the dollar index rebounded after suffering its worst week in three months."
"That was in no small part because of a steep decline for sterling as prime minister Theresa May confirmed that the parliamentary vote on the Brexit deal, which had been due to take place on Tuesday, would be delayed until further notice."
UK gilts rallied strongly and the pound’s drop failed to lift the FTSE 100.
"“The lack of consensus among the UK’s elected representatives makes investing in the UK highly unattractive, with sterling the immediate barometer of that,” said Andy Scott at JCRA."
"Energy was once again the worst-performing sector in the S&P 500 as Friday’s rally for oil prices, following news that major producers had agreed to cut output, proved shortlived."
"In New York, the S&P 500 ended 0.2 per cent higher at 2,637, after sliding to 2,583.23 earlier in the day, its lowest point since early April."
"The index fell 4.6 per cent last week, the biggest such drop since March."
"The Dow Jones Industrial Average edged up 0.1 per cent, while the Nasdaq Composite index rose 0.7 per cent."
"Apple shares ended 0.7 per cent higher, having initially tumbled more than 3 per cent."
"Across the Atlantic, the Stoxx Europe 600 index fell 1.9 per cent, as the Xetra Dax in Frankfurt and the CAC 40 in Paris both shed 1.5 per cent."
"London’s FTSE 100 ended 0.8 per cent lower, having spent much of the session in positive territory as sterling tumbled."
"In Asia, China’s CSI 300 index fell 1.2 per cent and the Topix in Tokyo ended 1.9 per cent lower."
Sterling was down 1.3 per cent against the dollar at a 20-month low of $1.2560 — but off the day’s trough of $1.2508.
"The euro was up 1.1 per cent at £0.9038, the highest intraday point since early September."
"The 10-year UK gilt yield fell as low as 1.16 per cent before closing at 1.20 per cent, down 7 basis points on the day."
The two-year UK yield ended 5bp lower at 0.69 per cent.
"The dollar index was up 0.7 per cent at 97.20, with the euro down just 0.2 per cent at $1.1352."
The greenback was up 0.5 per cent against the yen at ¥113.27.
"The yield on the 10-year US Treasury was flat at 2.85 per cent, with the two-year yield up 1bp at 2.72 per cent."
The yield gap between the two maturities fell as low as 9bp last week.
"Brent oil settled at $59.97 a barrel, down 2.8 per cent, while US West Texas Intermediate was 3.5 per cent weaker in late trade at $50.77."
"The firmer tone of the dollar helped push gold down $4 to $1,243 an ounce."
Additional reporting by Michael Hunter in London and Alice Woodhouse in Hong Kong
Friday 21.00 GMT
S&P 500 sinks 2.3 per cent as it registers worst week since March
Focus returns to trade and global growth concerns
Energy stocks reverse early rise as crude rally falters
US non-farm payrolls report falls short of forecasts; dollar edges back
European and Asian stocks rebound after steep sell-offs
US stocks suffered further steep falls at the end of a turbulent week dominated by uncertainty over the US-China trade dispute and mounting concerns about global growth.
"Wall Street proved unable to hold its initial gains on Friday, as tech stocks sold off and early strength for the energy sector evaporated, with crude prices giving back some of their early gains after an agreement by Opec and its partners to cut output"
"The mood was not helped by remarks from White House trade adviser Peter Navarro, who said the US would push ahead and increase tariffs on Chinese imports if Washington and Beijing could not agree a binding trade truce within a 90-day negotiating period."
But European and Asian stock indices mostly ended firmer — albeit well off the day’s highs — as buyers stepped back in after some savage falls on Thursday.
"Those were largely driven by heightened worries over US-China relations following the arrest of the chief financial officer of Chinese telecoms group Huawei, on charges of fraud in violating US sanctions."
News of the arrest came just days after an apparent trade war “ceasefire” was agreed by the US and China at the G20 meeting in Argentina.
"“While the Huawei case was clearly a blow, I believe [presidents]"
"Xi and Trump will aim to separate the Trade War from the Tech War,” said Allan von Mehren, chief analyst at Danske Bank."
"“On the Chinese side, the challenge is that the Huawei case puts domestic pressure on Xi not to be too soft on the US."
"But I think he will go for reaching a trade deal as the Trade War hurts the Chinese economy, and that he will fight the Tech War with other tools.”"
"With such a focus on the trade dispute this week, Friday’s US jobs report had a relatively muted impact, although the dollar drifted lower."
"Non-farm payrolls rose by 155,000 last month, some way below the consensus forecast, and down from October’s 237,000 increase."
"The jobless rate held steady at just 3.7 per cent, while average hourly earnings increased by 0.2 per cent in November, keeping the annual growth rate unchanged at 3.1 per cent."
"“Today’s job report is consistent with what the Federal Reserve is looking for: steady job gains, further downward pressure on the unemployment rate leading to modest wage pressures,” said economists at BoA-Merrill Lynch,"
“This should leave the [Federal Open Market] Committee comfortable with raising rates at the December meeting and shift towards greater data dependence as labour market conditions begin to cool to more sustainable levels.”
"Indeed, markets this week increasingly moved to factor in the possibility of the Fed pausing its rate-rising cycle next year in response to an expected slowdown in global economic growth."
Such concerns helped push the yields on two- and three-year US Treasuries above that on the five-year note this week.
The inversion of the yield curve was viewed by many as warning of an impending economic slowdown.
"The gap between two- and 10-year Treasury yields, a more powerful indicator of recession, briefly fell below 10 basis points to the lowest level in 11 years."
"“The bond market is sending some clear signals here about lower future growth and inflation expectations,” said Katie Nixon at Northern Trust."
“We think the Fed will take notice.”
"A volatile week for oil markets ended with sharp gains for Brent crude and West Texas Intermediate after Opec and its allies agreed to cut crude output by 1.2m barrels a day, in an attempt to curb concern over an emerging glut of supplies."
"“The reduction was within market expectations,” said Harry Tchilinguirian at BNP Paribas."
"“If fully and promptly implemented, it should help attenuate, but not entirely eliminate, implied global stock builds in the first half of 2019.”"
"Brent rose as much as 6.1 per cent on Friday before trimming its advance, and was heading for a hefty gain over the week."
"In New York, the S&P 500 fell 2.3 per cent to 2,633, leaving it down 4.6 per cent for the week — its biggest weekly drop since March."
"Friday’s move took the index below its end-2017 reading of 2,673.61 for the second time this week."
Technical analysts noted that the S&P 500’s 50-day moving average closed below its 200-day moving average — the so-called “death cross” pattern.
"The S&P tech sector fell 3.3 per cent, while energy finished 0.6 per cent lower, after earlier rising sharply."
The Dow Jones Industrial Average fell 2.2 per cent softer and the Nasdaq Composite index shed 3 per cent.
"Across the Atlantic, the Stoxx Europe 600 index ended 0.6 per cent higher — having been up 1.7 per cent at one stage."
"FTSE 100 rose 1.1 per cent, but the Xetra Dax in Frankfurt reversed an early rise to close 0.2 per cent lower."
"The Stoxx index tracking European miners rose 2.2 per cent, while techs ended 0.3 per cent higher."
"In Hong Kong, the Hang Seng slipped 0.4 per cent, while on China’s mainland the CSI 300 index held steady."
"Topix rose 0.6 per cent, while the Kospi in Seoul added 0.5 per cent."
"The dollar index was down 0.2 per cent at 96.59, having been slightly higher before the release of the US jobs data."
"The euro was up 0.3 per cent at $1.1408, while the greenback held steady against the yen at ¥112.66."
Sterling was down 0.3 per cent at $1.2742.
"Oil-related currencies were lifted by the rally for crude prices, with the Russian rouble 0.6 per cent stronger against the dollar,"
the Norwegian krona up 0.4 per cent and the Canadian dollar up 0.5 per cent.
"In the fixed income arena, the yield on the 10-year US Treasury was down 2 basis points at 2.85 per cent, while that on the two-year note was 4bp lower at 2.72 per cent."
The yield gap between the two fell as low as 9bp on Tuesday.
The 10-year German Bund yield rose 2bp to 0.25 per cent.
"Brent oil rose as high as $63.73 a barrel before easing back to settle at $61.67, still up 2.7 per cent on the day and 5 per cent over the week."
US West Texas Intermediate was up 1.9 per cent in late trade at $52.48.
"Gold was up $11 at a five-month high of $1,248 an ounce."
Additional reporting by Michael Hunter in London and Edward White in Taipei
Thursday 21.00 GMT
S&P 500 pares early slide to close 0.2% lower
Nasdaq reverses early fall
Stoxx Europe 600 falls 3% to two-year low
"Global growth worries bolster Treasuries, pushing yields lower"
Brent oil spends much of session below $60 a barrel
Renewed worries over US-Chinese trade relations and steep falls for oil prices ensured another turbulent session for global stock markets.
"Fresh uncertainty over the trade war “truce” struck between Washington and Beijing just days ago was fuelled by the arrest of the chief financial officer of Huawei, the Chinese telecoms equipment group, as part of a US probe into alleged violation of sanctions against Iran."
"“Huawei has received considerable negative attention outside of China on national security concerns related to its mobile telephony and network technology and is banned from use by US government employees,” noted John Hardy, head of FX strategy at Saxo Bank."
He highlighted the risk that targeted sanctions against Chinese companies would do as much to keep the US-China relationship rocky as would the imposition of further tariffs.
"Worries over the impact of the trade dispute on global growth helped push the S&P 500 down as much as 2.9 per cent and back into negative territory for 2018, before a late rally for technology stocks helped the benchmark index pare its early fall."
But the Europe-wide Stoxx 600 equity index tumbled to a two-year low and there were sharp losses for Asian stock markets.
"The possibility that the Federal Reserve might respond to a global growth slowdown by turning more cautious on raising interest rates helped send the yield on the policy-sensitive two-year Treasury note down by the most in six months, before it pulled back up slightly."
"Action Economics noted that Fed fund futures had moved to price in the chance of a 25bp Fed rate rise in December at about 75 per cent, down from about 90 per cent early last month."
"“The market is showing only about a 38 per cent probability for a rate increase in the first quarter, with about a 48 per cent chance of action by the end of the second quarter."
"“Wall Street has grown increasingly anxious over a slowing in growth, due partly to trade tensions and waning fiscal stimulus, along with the risk of a Fed mistake.”"
"Yet strong survey data on the services sector from the Institute for Supply Management appeared to suggest that the US economy was “growing at pace that is well above potential”, said Bill Diviney at ABN Amro."
“There are pockets of softness in the US economy and we think on balance growth momentum is currently peaking.
"However, in the near term at least, the economy looks to remain on a very solid footing.”"
Government bonds in general got a boost from the broad risk aversion sweeping through markets.
"The Japanese yen and Swiss franc strengthened, while emerging market currencies were broadly lower."
Gold was flat.
"Meanwhile, energy was among the worst-performing sectors in the S&P 500 as Brent oil fell as much as 5.2 per cent — taking it back below $60 a barrel for much of the day — as concern grew that Opec and its allies were working towards agreeing a smaller production cut than had been expected."
"In New York, the S&P 500 ended 0.2 per cent softer at 2,695, off an earlier low of 2,621.53."
"The index ended 2017 at 2,673.61."
"The energy sector fell 2 per cent, while financials shed 0.8 per cent."
The Dow Jones Industrial Average fell 0.3 per cent but the tech-heavy Nasdaq Composite ended with a gain of 0.4 per cent.
"Germany’s Xetra Dax fell 3.5 per cent, while London’s FTSE 100 ended 3.2 per cent lower, with both finishing at two-year lows."
"The Stoxx 600 shed 3.1 per cent, its worst day since June 2016."
"In Tokyo, the Topix index tumbled 1.8 per cent, while in Hong Kong, the Hang Seng fell 2.5 per cent."
China’s CSI 300 index of major Shanghai and Shenzhen-listed stocks closed 2.2 per cent lower.
"The two-year US Treasury yield fell as low as 2.693 per cent — the lowest for three months — before pulling back up to 2.76 per cent, still down 5 basis points on the day."
The 10-year US yield was 4bp lower at 2.89 per cent as the recent flattening of the two-year/10-year segment of the US yield curve paused.
"The 10-year German Bund yield ended at 0.22 per cent, down 5bp on the day, but pulled back up to 0.24 per cent in after-hours trade."
"The dollar was down 0.4 per cent against the yen at ¥112.71, while the euro shed 0.1 per cent versus the Japanese currency to ¥128.25."
The greenback was down 0.4 per cent against the Swiss franc at SFr0.9932.
The euro was up 0.3 per cent against the dollar at $1.1378 and sterling was 0.4 per cent higher at $1.2781.
"In the emerging market arena, the South African rand was 1.4 per cent weaker, with the Brazilian real down 0.3 per cent and the Russian rouble off 0.6 per cent."
The Chinese renminbi was also lower versus the dollar.
"Brent, the international crude oil benchmark, hit $58.36 in early trade before settling at $60.06 a barrel, down 2.4 per cent on the day."
US West Texas Intermediate was down 2.3 per cent in late trade at $51.70.
"Gold was barely changed at $1,238 an ounce, despite the weaker dollar."
Wednesday 19.00 GMT
German Xetra Dax falls 1.2%; FTSE 100 sheds 1.4%
US markets shut to mark the death of former president George HW Bush
Uncertainty over US-China trade war truce persists
Markets remain unsettled by Treasury yield curve inversion
Canadian dollar falls after BoC turns more dovish
"Global stocks came under renewed pressure following Wall Street’s steep sell-off on Tuesday, with the mood unsettled by lingering concerns about the US-China trade dispute and the recent flattening of the Treasury yield curve."
China made its first comments on the trade ceasefire agreed by the two countries at last weekend’s
"G20 meeting, expressing confidence"
it could reach a deal with the US within 90 days.
"But the remarks — attributed to an unnamed commerce ministry spokesperson — did little to improve sentiment in Europe, where stocks fell pretty much across the board."
US markets were closed to mark the funeral of former President George HW Bush.
"Meanwhile, the Treasury yield curve remained a big focus for participants after the inversion of the two-year/five-year segment, and a sharp drop in the gap between two-year and 10-year yields, fuelled concerns about the US economy."
"“An inverted yield curve, where short-term rates are higher than long-term rates, has historically been a precursor to a recession,” said Ryan Detrick, senior market strategist at LPL Financial."
Mr Detrick acknowledged the sharp drop in the two-year/10-year spread to its lowest since July 2007 but emphasised that this segment of the curve was not yet inverted.
"“We’ve seen periods with a relatively flat yield curve that have lasted for years before a recession — the mid-to-late 1990s, for instance."
"“Contrary to what many people think, inverted yield curves don’t always sound the alarm to sell [equities]."
"In fact, looking at the past five recessions, the S&P 500 didn’t peak for more than 19 months, on average, after the yield curve inverted.”"
"Meanwhile, analysts also cited persistent uncertainty about the UK’s exit from the EU as a factor behind the recent deterioration in the market mood."
"However, analysts at JPMorgan said the opinion of the European Court of Justice advocate general that the UK could unilaterally revoke its Article 50 notification meant a no-deal Brexit was significantly less likely, and the no-Brexit probability had increased."
"“Markets have not yet adequately reacted to our view that ‘no-deal’ risks have fallen,” JPMorgan said."
"There was positive news from Italy, where the prime minister signalled a willingness to modify his government’s budget plan in response to criticism from Brussels — with some caveats."
"Italy’s stock market outperformed its European peers, while the country’s 10-year government bond yield fell to its lowest since September."
"“This has reduced the probability that an escalation of hostility might sharply increase the government’s funding costs,” said Loredana Maria Federico, chief Italian economist at UniCredit."
"Meanwhile, the Canadian dollar was one of the day’s big FX casualties as it fell to an 18-month low against its US namesake."
"The Bank of Canada, as expected, left interest rates unchanged but delivered a more downbeat assessment of the economy than six weeks ago — which analysts said was hardly surprising given oil’s recent slide."
"Crude prices continued to recover yesterday — with Brent rising as high as $63.29 a barrel, up 10 per cent from last week"
13-month low — ahead of a meeting of Opec and other big suppliers.
The FTSE All-World equity index was down 0.5 per cent at a one-week low.
"The pan-European Stoxx 600 index ended 1.2 per cent lower, with Frankfurt"
Xetra Dax falling by the same margin and the FTSE 100 in London ending 1.4 per cent lower.
"Asian stock markets were broadly lower, with the CSI 300 in China shedding 0.5 per cent, the Hang Seng in Hong Kong falling 1.5 per cent and the Topix in Tokyo ending 0.5 per cent lower."
"In New York on Tuesday, the S&P 500 fell 3.2 per cent, one of only eight declines of more than 3 per cent in the past five years."
The Nasdaq Composite dropped 3.8 per cent.
China’s onshore renminbi weakened against the dollar after reaching its strongest level in more than two months on Tuesday.
The offshore rate was 0.3 per cent weaker at Rmb6.8692.
"The dollar index was flat, with the euro little changed at $1.1347 and the greenback up 0.3 per cent versus the yen at ¥113.12."
"Sterling was up 0.3 per cent against the dollar at $1.2753, while the euro was down 0.2 per cent at £0.8896."
"The Canadian dollar was 0.8 per cent weaker at C$1.3369 per US dollar after earlier touching C$1.3399, its weakest point since June 2018."
Italy’s 10-year government bond yield fell 8 basis points to 3.07 per cent.
Oil prices rose as participants awaited any announcements on output cuts from the meeting of Opec and its partners.
"Brent, the international crude benchmark, was up 0.5 per cent at $62.41, with US West Texas Intermediate 0.6 per cent higher at $53.59."
"Gold was little changed at $1,238 an ounce."
Additional reporting by Edward White in Taipei and Michael Hunter in London
Tuesday 21.00 GMT
S&P 500 tumbles 3.2; biggest one-day drop for two months
Treasury yield curve inverts at short end; 10-year yield down 8bp
Renminbi registers biggest two-day rise against the dollar since 2005
Sterling lower after volatile session
Brent oil rallies amid speculation about output cuts
The post-G20 relief rally for global equities proved shortlived as doubts emerged about the durability of the US-China trade war truce and as financial stocks were unsettled by the continued flattening of the Treasury yield curve.
"Indeed, the yield on the two-year Treasury note edged above that on five-year paper, inverting that segment of the curve for the first time in a more than a decade."
Some in the markets view an inverted yield curve as a warning about the prospects for the US economy.
"“That fits with the more dovish tone at the Federal Reserve and continuing concerns about slowing global growth,” said Action Economics of the inversion."
"“It also dawned on the markets that the US-China deal was an agreement to agree, with much of the heavy lifting on detail yet to be done.”"
"Meanwhile, the gap between two- and 10-year US yields narrowed to below 11 basis points, less than half what it was just a week ago."
"“In the coming months, we expect the two-10 spread to turn negative as well,” said Philip Marey, senior US strategist at Rabobank."
“That will be a signal to tighten our seat belts for a hard landing.
“Our recession model now indicates a 47 per cent probability of a recession by April 2020.”
"The dollar continued its broad retreat as Treasury yields fell, with the Chinese renminbi registering its biggest two-day rally since 2005."
"Danske Bank analysts said this could be down to a squeeze of short renminbi positions after the meeting between presidents Trump and Xi, or intervention by China as part of the deal, or a combination of the two."
"However, sterling gave back an early rise against the dollar after the government of Theresa May was found in contempt of parliament for refusing to publish key Brexit papers."
The pound initially rose after a senior EU legal adviser said the UK could unilaterally withdraw its Brexit notice.
The generally softer tone of the dollar helped put gold on course to register its highest close since July.
"The price of palladium hit a record high, and briefly surpassed that of gold."
Brent oil extended the previous day’s rally — rising as high as $63.58 a barrel — as speculation mounted that Opec and its allies would agree to cut output at this week’s meeting in Vienna.
Fixed income and forex
"The 10-year US Treasury yield was down 8bp at 2.91 per cent, with the two-year down 3bp at 2.80 per cent."
The five-year yield was 5bp lower at 2.79 per cent.
"German Bunds followed suit, with the 10-year yield shedding 5bp to 0.26 per cent."
"The dollar index was down 0.1 per cent at 96.97, as the euro slipped 0.1 per cent to $1.1339 and the greenback shed 0.8 per cent against the yen to ¥112.80."
The pound rose as much as 0.9 per cent against the dollar before going into reverse to stand 0.1 per cent lower in late trade at $1.2711 — off a 17-month intraday low of $1.2661 hit earlier in the day.
The onshore renminbi strengthened to Rmb6.83 per dollar from Rmb6.96 on Friday.
An early sell-off for US stocks gathered pace after the S&P 500 broke through its 200-day moving average.
"The benchmark index ended 3.2 per cent lower at 2,700, its biggest one-day drop since October 10."
"Financial stocks fell 3.9 per cent, while the industrial sector shed 4.2 per cent and technology tumbled 4 per cent."
"The tech sell-off was reflected in a 3.8 per cent decline for the Nasdaq Composite index, taking it back into “correction territory”, defined as a drop of 10 per cent from a recent peak."
"The Dow Jones Industrial Average closed 3.1 per cent, or 800 points, lower."
"The Cboe Global Markets Vix volatility index rose back above its long-term average of 20, after closing at 16.44 on Monday."
"In Europe, the pan-regional Stoxx 600 ended 0.8 per cent lower as Frankfurt’s"
Xetra Dax 30 fell 1.1 per cent and London’s
FTSE 100 shed 0.6 per cent.
"Brent crude settled at $62.08 a barrel, up 0.6 per cent, although US West Texas Intermediate was down 0.2 per cent in late trade at $52.86."
"Gold was up $7 at $1,238 an ounce, with palladium up 2.4 per cent at $1,232 — after hitting $1,239."
Monday 21.00 GMT
S&P 500 up 1.1%; FTSE emerging market equity index up 2.1%
Brent oil retakes $60 a barrel level
Copper hits two-month high
Renminbi strengthens versus dollar
US Treasury 3-to-5 year yield curve inverts
Italian bond yields fall on hopes of budget compromise
"The US-China trade war ceasefire and a strong rally for oil prices helped drive global stock indices sharply higher — particularly in emerging markets — led by the resources, technology and industrials sectors."
"The Chinese renminbi — and trade-sensitive currencies such as the Australian dollar and South Korean won — made notable gains against the broadly weaker US dollar, while industrial metals prices also performed strongly."
"But while the agreement between US President Donald Trump and Xi Jinping, his Chinese counterpart, to suspend the imposing of any new trade tariffs for 90 days prompted a huge sigh of relief across markets, many commentators warned against getting too carried away."
“We doubt that the ceasefire . . . 
"will mark a real turning point in the trade war,” said Oliver Jones at Capital Economics."
"“Particularly contentious issues, like intellectual property rights and market access, have yet to be addressed, and we wouldn’t be surprised if no agreement is reached in the 90-day period.”"
"Meanwhile, oil prices received an additional boost after Russia signalled it would continue to co-operate with Saudi Arabia on managing output, ahead of this week’s Opec meeting in Vienna, and Canada’s Alberta province ordered a production cut."
"Brent crude, which touched a 13-month low last week, broke back above the $60 a barrel mark."
"There was also some encouraging news out of Italy, where media reports suggested that Rome was seeking a compromise with Brussels over its deficit-boosting budget."
"Italy’s 10-year government bond yield fell, and its spread over the German Bund yield narrowed to the lowest since October."
"In the US Treasury market, the gap between US two- and 10-year yields fell below 16 basis points to the lowest since 2007."
"Recent commentary from Jay Powell, chairman of the Federal Reserve, stoked speculation that the US central bank might take a pause from raising interest rates next year."
"Data released on Monday by the Institute for Supply Management showed US manufacturing activity rebounding last month, largely due to a jump in new orders, which analysts suggested reflected the strength of domestic demand"
"In New York, the S&P 500 rose 1.1 per cent to 2,790 — adding to last week’s 4.8 per cent jump, and leaving the index about 5 per cent short of September’s record high."
"The Dow Jones Industrial Average also ended 1.1 per cent higher, while the tech-heavy Nasdaq Composite rose 1.5 per cent."
"Across the Atlantic, the Europe-wide Stoxx 600 index rose 1 per cent as London’s"
FTSE 100 added 1.2 per cent and Frankfurt’s
Xetra Dax rose 1.9 per cent.
"Mainland China’s CSI 300 index climbed 2.8 per cent, trimming its decline for 2018 to just over 19 per cent."
Hang Seng rose 2.6 per cent.
"The FTSE Emerging Markets equity index was up 2.1 per cent, at its highest level since early October."
"Brent crude settled 3.8 per cent higher at $61.69 a barrel, off an earlier high of $62.60, while US West Texas Intermediate was up 4.4 per cent in late trade at $53.16."
Metals prices were also higher in the wake of the US-China trade truce.
"On the London Metal Exchange, copper hit a two-month high of $6,352 a tonne before ending at $6,295, still up 1.6 per cent on the day."
"The soft dollar helped push gold $8 higher to $1,230 an ounce."
"The offshore renminbi strengthened more than 1 per cent against the dollar, while the Australian dollar was up 0.5 per cent against its US namesake at US$0.7350."
"The won was 1 per cent stronger at Won1,108 per dollar."
"Those gains came as the dollar index fell 0.3 per cent, with the euro up 0.3 per cent at $1.1343 and the greenback up 0.2 per cent against the yen at ¥113.64."
"Italy’s 10-year government bond yield fell 7 basis points to 3.14 per cent, with its spread over the German Bund narrowing to as low as 278.5 basis points."
"The yield on the US 10-year Treasury was down 3bp at 2.98 per cent, as that on the two-year note rose 2bp to 2.83 per cent."
The US three-to-five year yield curve inverted.
Friday 21.00 GMT
US stocks advance before Trump-Xi meeting
S&P 500 has best week for 7 years after dovish Powell comments
European stocks struggle; Stoxx 600 falls 0.2%
Dollar index rises back toward 2018 high
Oil prices back under pressure ahead of next week’s Opec meeting
"US stocks gained ground — although the mood remained uncertain as the G20 summit got under way in Argentina — at the end of a week that saw markets react strongly to the surprisingly dovish tone of a speech by Jay Powell, chairman of the US Federal Reserve."
"Participants will be keen to assess the outcome of a dinner meeting between President Donald Trump and President Xi Jinping of China in Buenos Aires on Saturday, where they will discuss the trade dispute between the two countries."
"“Both sides have indicated their willingness to negotiate on trade,” said Lena Komileva at G+ Economics."
“But there is no appetite in the US administration or in Congress for easing pressure on China’s strategic advance against US economic interests.
"“Thus there is a real question mark over whether the US 25 per cent tariff on Chinese imports, due to come into effect in January, can be put on hold or whether the 10 per cent tariff on Chinese imports, introduced in September, can be rolled back.”"
"Reports on Friday suggested that Chinese and US trade negotiators were making progress in Argentina, although differences remained."
"And worryingly, data indicated that China’s manufacturing sector had failed to expand this month for the first time since July 2016."
"Meanwhile, there is also likely to be some interest in meetings on the fringe of the G20 between oil producers, ahead of next week"
’s official Opec meeting.
Oil prices have had a grim time of it over the past month with Brent sinking more than 20 per cent to a one-year low below the $60 a barrel level.
"There was some brief respite for oil markets on Thursday, following reports that Russia was considering reducing output alongside Saudi Arabia in a bid to bolster crude prices."
But oil resumed its downward path on Friday.
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"But the week’s big market-moving event came on Wednesday when Mr Powell, the Fed chief, declared US interest rates to be “just below the broad range of estimates of the level that would be neutral for the economy”."
"“The term ‘just below’ was a change compared to his indication in early October when he said that Fed’s rates were ‘a long way’ from neutrality,” said Luca Cazzulani, deputy head of fixed income strategy at UniCredit."
Markets reacted strongly to the shift as expectations mounted that the Fed would slow the pace of rate increases next year.
"The S&P 500 registered its biggest one-day rise since March, the dollar fell sharply and US Treasuries rose — pushing down the yield on the 10-year benchmark to within a whisker of 3 per cent."
"The minutes of the Fed’s November policy meeting, meanwhile, appeared to confirm expectations for a further rate rise at the central bank’s gathering in December — but also emphasised the data-dependent nature of further increases."
"“We see this as consistent with our outlook for 2019 for three hikes to 3-3.25 per cent in a year that will likely see the Fed pause and ultimately conclude its tightening cycle,” said David Page, senior economist at Axa IM."
"Friday’s solid performance helped the S&P 500 to its biggest weekly rise for seven years, while the dollar index recovered from Wednesday’s slide to end slightly higher on the week."
"In New York, the S&P 500 rose 0.8 per cent to 2,760 — giving it a weekly rise of 4.8 per cent, and a monthly gain of 1.8 per cent."
"The Dow Jones Industrial Average rose 0.8 per cent on the day, while the Nasdaq Composite also gained 0.8 per cent — leaving it 0.3 per cent up for November."
"In Europe, the Stoxx 600 fell 0.2 per cent, with Frankfurt’s export-heavy Xetra Dax index shedding 0.4 per cent, with Deutsche Bank shares down 2.9 per cent."
The Hang Seng index in Hong Kong rose 0.2 per cent.
"CSI 300 rose 1.1 per cent for the session, leaving it down 0.4 per cent for November."
"Japan’s Topix rose 0.5 per cent, holding a two-week high."
The dollar index was up 0.5 per cent at 97.26.
It hit a 14-month intraday high of 97.69 on November 12.
The euro was down 0.7 per cent at $1.1311 while the US currency was up 0.1 per cent against the yen at ¥113.55.
"Sterling was 0.4 per cent weaker at $1.2744, ahead of the vote on"
Theresa May’s Brexit deal in the UK parliament on December 11.
"The euro was 0.3 per cent lower versus the pound at £0.8876,"
The yield on the 10-year US Treasury was down 3 basis points at 3.01 per cent.
It briefly dipped just below 3 per cent in early trade on Thursday.
The two-year US yield was 1bp lower at 2.81 per cent.
"Brent crude settled at $58.71, down 1.3 per cent on the day and a shade lower for the week."
The benchmark was down about 22 per cent from its close at the end of October.
US West Texas Intermediate was down 1.7 per cent in late trade at $50.60.
"Gold was down $1 at $1,222 an ounce."
Additional reporting by Michael Hunter in London and Alice Woodhouse in Hong Kong
Thursday 21.00 GMT
S&P 500 falls 0.2%; Nasdaq sheds 0.3%
Minutes of last Fed meeting point to further US rate rises
Focus also turns back to US-China trade as G20 summit looms
Oil prices reverse early losses as reports suggest Russia may join supply cut
US core PCE index up 1.8% in year to October
The main US stock indices snapped a three-day winning streak in choppy trading as participants weighed up the outlook for Federal Reserve policy and looked nervously towards the forthcoming G20 summit in Argentina.
"On Wednesday, the S&P 500 recorded its biggest one-day rise since March after Jay Powell, chairman of the Federal Reserve, signalled that the US central bank was becoming more cautious over delivering further interest rate rises."
Mr Powell said rates were “just below the broad range of estimates of the level that would be neutral for the economy.”
That was a significant shift from his comment at the start of October that rates were “far from neutral”.
"“The updated judgment suggests that Fed tightening might not have much further to go, and [Mr Powell] could be preparing market participants for a potential pause in the rate hike cycle after delivering another hike in December,” said Lee Hardman, currency strategist at MUFG."
"However, the minutes of the Fed’s last meeting — released on Thursday — showed that almost all policymakers expected to push through further rate rises if the economy stayed on track, although officials stressed that policy was not on a preset course."
"As markets weighed up the prospects for future US interest rate rises, the focus also turned back to President Donald Trump"
’s G20 meeting with President Xi Jinping of China.
"However, analysts warned against expecting too much in the way of a breakthrough on the trade front."
"“The realistic best-case scenario coming out of the Trump-Xi meeting in Argentina is a very broad outline of a trade deal, combined with an announcement that new tariffs are delayed while discussions continue,” said Steve Englander, head of global G10 FX research at Standard Chartered Bank."
“The two leaders may simply announce that the US and China will commence discussions and hold off on additional tariffs.
"We think this would be enough to rally asset markets, even if no concrete deal is announced.”"
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The dollar steadied after falling sharply on Wednesday — notably against emerging market currencies — although uncertainty over Brexit kept sterling under pressure.
"US Treasuries turned mixed after the release of the Fed minutes, with the 10-year yield briefly falling below 3 per cent but the two-year yield inching higher."
"Data showed the Fed’s preferred gauge of inflation — the core personal consumption expenditures price index — rising 1.8 per cent in the year to October, below the Fed’s 2 per cent target and the weakest reading since February."
"Oil prices had a volatile session, initially falling sharply before rallying hard after reports that Russia was opening up to the idea of reducing crude output."
US West Texas Intermediate briefly fell below $50 a barrel for the first time since October 2017.
"In New York, the S&P 500 ended 0.2 per cent lower at 2,737, after rising 2.3 per cent on Wednesday."
The index was still up nearly 4 per cent so far this week.
The Dow Jones Industrial Average slipped 0.1 per cent while the Nasdaq Composite — which climbed 3.2 per cent in the previous session — shed 0.3 per cent.
"Across the Atlantic, the pan-European Stoxx 600 ended 0.2 per cent higher as the Xetra Dax in Frankfurt ended flat and London"
FTSE 100 rose 0.5 per cent.
"Equities were stronger across much of Asia, although China’s stocks took a hit in the approach to the G20 meeting."
"Hang Seng fell 0.9 per cent, failing to hold initial gains."
Mainland China’s CSI 300 index lost 1.3 per cent.
The Topix in Tokyo rose 0.4 per cent.
"The dollar index was barely changed at 96.78 after falling 0.6 per cent on Wednesday, with the euro up 0.2 per cent at $1.1391 and the US currency 0.3 per"
cent lower versus the yen at ¥113.37.
Sterling was down 0.3 per cent at $1.2783 as concerns lingered over the possibility of a “no-deal” Brexit if the UK parliament rejects the terms of prime minister Theresa May’s agreement sealed last weekend with EU leaders.
The euro was up 0.5 per cent at £0.8909.
"The yield on the 10-year US Treasury was 2 basis points lower at 3.03 per cent, after hitting 2.997 per cent earlier in the day."
"By contrast, the more policy-sensitive two-year yield was 1bp higher at 2.81 per cent."
A volatile session for oil markets saw Brent fall as low as $57.50 a barrel before going into reverse to top $60 briefly after reports that Russia was considering joining Saudi Arabia in cutting supply.
"Brent settled at $59.51, up 1.3 per cent on the day."
US West Texas Intermediate touched $49.41 but then rallied back to stand 2.1 per cent higher in late trade at $51.33.
"Gold was up $3 at $1,224 an ounce."
Wednesday 21:50 GMT
Wall Street rallies on Powell ‘just below’ neutral comment
Hopes remain for progress in relations at presidential meeting at G20
"European equities close flat, with gains in Asia stronger"
Pound makes gains after publication of Brexit economic impact study
Wall Street jumped higher after the Federal Reserve chairman said US monetary policy was not on a “preset” path and that interest rates were close to the “neutral” level where they neither stimulate nor hinder economic growth.
"After what was viewed as dovish remarks by Jay Powell, the S&P 500 stock index ended the day 2.3 per cent higher."
"Meanwhile, the Dow Jones Industrial Average rose 2.5 per cent while the Nasdaq Composite gained almost 3 per cent."
Global stock markets were also positive as investors measured the political rhetoric in the run-up to the G20 summit.
Europe’s Stoxx 600 closed flat while London’s FTSE 100 ended 0.2 per cent down.
"In Frankfurt, the Xetra Dax closed the session 0.1 per cent lower."
The CSI 300 index of major Shanghai and Shenzhen stocks rose 1.3 per cent.
"Following Mr Powell’s statement, the yield on the benchmark 10-year US Treasury bond was flat at 3.057 per cent, having been up by 1.1bp beforehand."
The yield on the more policy-sensitive two-year note was down 2.2bp at 2.811 per cent.
"China-US trade tension simmered in the background as Larry Kudlow, President Donald Trump’s economic adviser, said it was up to Chinese President Xi Jinping to “step up and come up with new ideas” to break the deadlock when the leaders meet."
Markets have already priced in some bad news from the G20 summit in Argentina later this week
"but if both leaders move further apart, the result would be “negative not just for China but the US, emerging Asia and Europe, which already has slowing momentum”, said Trinh Nguyen, Natixis senior economist."
Sterling added 0.6 per cent at $1.2826 after the release of an official study of the economic impact of the UK government’s Brexit deal.
"While the study concluded leaving the EU would reduce Britain’s gross domestic product by 4 per cent over the long term compared with staying in the bloc, a no-deal outcome would be significantly worse."
The Japanese yen was 0.1 per cent weaker at ¥113.65 to the dollar.
Oil prices were back under pressure after Saudi Arabia said it would not cut production unilaterally.
Brent crude fell 2.6 per cent to $58.66 a barrel while West Texas Intermediate declined 2.5 per cent to $50.27.
Tuesday 22.30 GMT
Wall Street ends higher even as sectors exposed to tariff threat slip
Defensive stocks gain ground
Brent crude holds above $60 a barrel
US stocks ended higher on Tuesday after vacillating during the session as investors weighed the prospects for upcoming US-China trade negotiations.
"The trading pattern followed Donald Trump’s threat late on Monday to widen tariffs on Chinese imports ahead of the G20 summit in Argentina where he is expected to meet Xi Jinping, Chinese president."
"That was followed by comments on Tuesday from Larry Kudlow, director of the US National Economic Council."
"Mr Kudlow said that in Mr Trump’s view there was a “good possibility that a deal can be made”, helping US shares move into the black."
"The S&P 500 rose 0.3 per cent, as gains for healthcare, consumer staples and utilities helped outweigh pressure on industrials, energy and materials shares."
The Dow Jones Industrial Average gained 0.4 per cent.
"“I doubt we’ll get a concrete trade deal between the US and China at the G20 meeting,” said Talley Léger, equity strategist at OppenheimerFunds."
"“That said, all we likely need to see is a ‘cease fire’ in order for Chinese, EM and tech stocks to benefit.”"
The tech-heavy Nasdaq Composite was flat as Apple and Microsoft took turns trading for the title of world
’s most valuable company after recent declines put the iPhone maker’s top spot at risk.
"The Europe-wide Stoxx 600 closed just 0.3 per cent down, but"
"the index tracking miners, which depend on China’s growth for much of the demand for their output, fell about 2 per cent, while that tracking the car industry dropped 3 per cent."
Mr Trump threatened to impose tariffs on $267bn of Chinese imports.
The US has already placed levies on $250bn of Chinese imports this year.
Tariffs on $200bn of those imports are set to increase from 10 per cent to 25 per cent if a deal is not reached between the two in Argentina.
"Mr Trump said: “If we don’t make a deal, then I’m going to put the $267bn"
"Frankfurt’s Xetra Dax 30 closed flat, while London’s FTSE 100 closed down 0.3 per cent, with defensive sectors including utilities and food retailers limiting losses."
"The CSI 300 of Shanghai- and Shenzhen-listed companies slipped 0.1 per cent, with Hong Kong’s Hang Seng down 0.2 per cent."
"Topix was brighter — up 0.7 per cent, helped by financials and telecoms stocks."
"Australia’s S&P/ASX 200 rose 1 per cent, with resource stocks in demand."
Sterling remained exposed to Brexit politics.
"The currency fell 0.8 per cent to $1.2731 as Theresa May, UK prime minister, urged her cabinet to sell the Brexit deal approved by EU leaders ahead of a crucial vote by MPs on December 11."
"Against the euro, the pound was 0.4 per cent weaker, with a unit of the shared currency costing £0.8872."
"“With the current political mess in the UK, sterling’s October lows could easily be tested and if the Federal Reserve doesn’t signal a more dovish approach to the US rate tightening cycle — which I doubt — then those lows for the pound could be broken further down the road."
"But ahead of Parliament’s vote on the Brexit deal, investors are unlikely to take more short positions in sterling in the near term”Paul Brain, Head of Fixed Income at Newton Investment Management"
The dollar index inched up 0.3 per cent to 97.361.
The euro was down 0.3 per cent to $1.1295.
"The yield on the 10-year US Treasury was flat as investors weighed comments from Richard Clarida, Federal Reserve vice-chair."
Mr Clarida backed further gradual tightening in monetary policy but signalled he was open to changing his estimates of the neutral rate of interest and the sustainable level of unemployment at any Fed meeting in light of incoming data.
"Brent crude held above $60 a barrel, but also seesawed during the session ending up 0.7 per cent to $60.88."
"West Texas Intermediate, the US marker, added 1 per cent to $52.15 a barrel."
Monday 21.29 GMT
Wall Street ticked higher with energy stocks rising
European energy stocks gather momentum as Brent edges back above $60
Investors remain on watch for insight into state of US/China trade relations
Sterling holds ground above $1.28 after EU approves Brexit deal
"Wall Street indices joined a global stocks rebound, helped by demand for energy majors as a rebound for oil prices left Brent crude above $60 a barrel."
The main international crude benchmark regained 3.2 per cent to $60.65 a barrel after the previous session’s fall of more than 6 per cent took it down
more than 30 per cent from its October peak.
"In New York, the S&P 500 closed up 1.6 per cent with oil majors among the biggest gainers."
The Nasdaq Composite ticked up 2.1 per cent.
"General sentiment was also helped by a brighter political backdrop, as hopes returned for an improvement in trade relations between the US and China at this week’s G20 summit."
"Presidents Donald Trump and Xi Jinping are expected to meet at the gathering in Argentina, leading to hopes that they will repair trade relations between the two countries."
"“By early next year, the 10 per cent tariff rate on $200bn of Chinese imports will have been raised to 25 per cent, so that in all, $250bn in Chinese imports would be subject to a 25 per cent tariff."
"This may well put sufficient pressure on both sides to come to a deal”David Kelly, chief global strategist for JPMorgan Asset Management"
Equities and fixed income
Signs that Italy’s government could be prepared to compromise on its budget stand-off with the EU and the approval of the UK’s Brexit deal by the European Council were also supportive.
They helped the rally gather pace in European trade.
Eurozone financials also benefited from talk that the European Central Bank was considering furthering its longer-term refinancing operations designed to support lending in the eurozone.
"That left the Stoxx indices tracking banks up nearly 3 per cent, with the equivalent benchmark for oil and gas stocks up 2.2 per cent."
The wider Stoxx 600 index rose 1.2 per cent.
"London’s FTSE 100 added 1.2 per cent, while Frankfurt’s Xetra Dax 30 climbed 1.6 per cent."
Financials were led higher by Italian banks on signs that the government there could be prepared to reduce its borrowing requirement for 2019.
That also sparked a brisk rally for the country’s sovereign debt.
"That pushed the 10-year BTP yield down 14 basis points to 3.26 per cent, its lowest point since the start of October."
FTSE MIB ended the day 2.8 per cent higher.
"Earlier on Monday, mainland China’s CSI 300 index ended the day flat, while the Hang Seng climbed 1.7 per cent and Tokyo"
Topix edged up by 0.2 per cent.
"The pound was flat at $1.281, after the terms of the UK’s exit from the EU were signed off at a European Council meeting on Sunday."
"Theresa May, prime minister, now faces a struggle to win over a divided House of Commons."
"The dollar index was up 0.1 per cent at 97.044, with the euro flat at $1.1331."
Friday 20.13 GMT
Brent crude touches new low for 2018 with oil market looking oversupplied
International oil benchmark down over 6% to its lowest level since October
Wall Street indices remain wobbly after Thanksgiving break
"European equities nudge higher, despite weaker crude hitting energy stocks"
Euro knocked by weaker-than-expected purchasing managers’ data
Pound falls as UK’s dispute with Spain over Gibraltar reaches Brexit politics
"The S&P 500 closed in correction territory as concern about the outlook for global growth triggered another slump in oil prices, dragging shares of companies in the sector down with it."
"In Asia, hopes for a breakthrough in trade relations between Washington and Beijing remained unfulfilled, leaving China’s stocks looking exposed, while weak data from the eurozone added to the sense of unease over the global economy."
"US stocks dipped as markets returned after the Thanksgiving holiday, with the S&P 500 closing down 0.7 per cent to 2,632.56, adding up to a drop of more than 10 per cent from its recent high in September."
The Nasdaq Composite fell 0.5 per cent.
With equity trading muted — given that many US investors took the post-Thanksgiving Friday off — energy markets were the centre of attention.
"Brent crude dropped to its lowest point since October 2017, amid concern that the oil market was looking oversupplied."
The international benchmark fell 6.1 per cent to $58.80 a barrel.
"From its most recent peak in October, it has fallen more than 30 per cent."
"West Texas Intermediate, the main US contract, dropped 7.8 per cent to $50.39 a barrel."
"The slide worsened as doubts grew about potential supply cuts from Saudi Arabia, with the White House putting sustained pressure on the kingdom to keep oil prices low."
"“The reality is that consumption is slowing at the same time as crude production is rising,” said Konstantinos Venetis, senior economist at TS Lombard."
"“Softer restrictions on Iran have changed the arithmetic, however, raising the possibility of a supply glut developing in 2019.”"
Crude’s decline left oil stocks underperforming wider equities benchmarks.
The European Stoxx index tracking oil and gas companies tumbled 3 per cent — compared with the wider Stoxx 600 index edging up 0.4 per cent — and the S&P 500’s energy sub-index lost 3.3 per cent.
Weaker-than-expected economic data from the eurozone added to the uncertain mood.
"German purchasing managers’ data for November missed forecasts, as did numbers from the wider currency area."
"After they came out, the euro was down 0.6 per cent for the session at $1.1331."
Bonds were firmer across Europe and in the US with the yield on the benchmark 10-year Treasury down 2 basis points at 3.04 per cent.
"The CSI 300 index of major Shanghai and Shenzhen stocks fell 2.2 per cent, with technology stocks under pressure."
"The sector is seen as vulnerable to any intensification of the trade dispute, as the potential target of the next round of tariffs."
"There were bigger moves for China’s oil majors, with concern about slowing growth and the potential economic impact of the US trade spat adding to pressure."
Hong Kong’s Hang Seng ended Friday down 0.4 per cent.
"However, the selling on China’s mainland did not spread into Europe."
"London’s FTSE 100 ended the day down 0.1 per cent, the French Cac 40 was up 0.2, Frankfurt’s"
Xetra Dax 30 closed 0.5 per cent higher and Italy
’s FTSE MIB climbed 0.6 per cent.  
The pound was weaker — down 0.5 per cent at $1.2808 — as traders continued to track Brexit politics.
Spain’s prime minister again threatened to veto a draft Brexit agreement between the UK and EU over the issue of Gibraltar.
"“The Spanish government has reiterated its threat to veto the entire proposal over the text’s treatment of Gibraltar; and although to the naked eye both this and the French protestations over fishing rights show the first cracks in the EU’s hitherto united front during the Brexit process we do not believe these complaints alone are likely to derail the plan”Paul Markham, global equities portfolio manager at Newton Investment Management"
"The dollar index was up 0.3 per cent at 96.96, taking its year-to-date gain to 5.25 per cent."
That strength for the US currency weighed on commodities contracts denominated in it.
"Gold dipped 0.4 per cent to $1,223 an ounce."
Thursday 18.00 GMT
European stocks drift lower
Pound briefly retakes $1.29 mark
Italian bond yields continue to fall
US markets closed for Thanksgiving
Oil prices dip following rally
"Lingering uncertainty over the outlook for global growth in the face of the US-China trade dispute left European stock markets on the back foot, with the absence of any lead from Wall Street adding to the cautious tone."
"The technology and energy sectors gave back some of Wednesday’s gains, while there were sharp losses too for mining and financial stocks."
"London’s FTSE 100 share index underperformed its continental European peers, as sterling moved higher after the UK and Brussels agreed a draft declaration for a Brexit deal that is expected to be endorsed by EU leaders at a summit on Sunday."
"But the pound proved unable to hold above the $1.29 level against the dollar, and also trimmed its initial advance versus the euro."
"“What is driving the pound is the ambitious tone of the declaration of future ties, which could help [UK prime minister]"
"Theresa May secure sufficient backing when she tries to pass the Brexit package through Parliament,” said Fiona Cincotta, analyst at City Index."
"She added that sterling coming off the day’s highs reflected “that the text, whilst broad, contained less detail than traders would have liked to have seen”."
The euro also inched higher against the dollar — but struggled to hold above $1.14 — as the markets digested the minutes of the European Central Bank’s policy meeting last month.
"These showed that while there had been a considerable discussion of downside risks to the economic outlook, “there was broad agreement that at present, the risks to growth could still be considered to be balanced overall”."
“We think that the ECB’s
"relatively positive communication is related to the fact that the central bank wants to end asset purchases in December, and it does not want to give investors reasons to think it may not do so,” said ABN Amro."
"Meanwhile, Italian government bond yields continued to decline — with the two-year yield briefly dipping back below 1 per cent — as markets took a fairly relaxed view of the country’s budget spat with Brussels."
The South African rand rose as much as 1.5 per cent against the dollar after the country’s central bank unexpectedly raised interest rates.
"The Stoxx 600 Europe index ended 0.7 per cent lower, wiping out a big chunk of the previous day’s 1.1 per cent gain."
"The Xetra Dax in Frankfurt shed 0.9 per cent, while London’s FTSE 100 lost 1.3 per cent."
"In Asia, Japan’s Topix index gained 0.8 per cent, helped by consumer and technical stocks."
"Hong Kong’s Hang Seng rose 0.2 per cent, while mainland China"
CSI 300 slipped 0.4 per cent.
Kospi shed 0.3 per cent.
"On Wednesday, the S&P 500 ended 0.3 per cent higher and the tech-heavy Nasdaq Composite closed up 0.9 per cent."
"Sterling rose as high as $1.2926 — its best level against the dollar for a week — before easing back to $1.2875, still up 0.8 per cent on the day."
"The euro was down 0.6 per cent at £0.8855, having dipped to £0.8837."
"The single currency was up 0.2 per cent versus the dollar at $1.1403, off the day’s best of $1.1433, while the greenback was down 0.1 per cent against the yen at ¥112.98."
The rand hit R13.075 per dollar and was last trading 1.1 per cent stronger at R13.767.
"Italy’s two-year government bond yield fell as low as 0.92 per cent before closing at 1.01 per cent, down 12 basis points."
The yield has now fallen 38bp since Monday’s close.
The 10-year BTP yield shed 4bp on Thursday to 3.44 per cent.
The 10-year UK gilt yield rose 3bp to 1.42 per cent
"The dollar index slipped 0.2 per cent to 96.53, continuing to edge lower following reports that the US Federal Reserve could pause its rate rise cycle as early as next spring."
"Oil prices resumed their downward path, although both Brent crude and US West Texas Intermediate managed to stay above the multi-month intraday lows hit earlier this week."
"Brent was down 1.4 per cent at $62.57 a barrel, after touching $61.71 on Wednesday, the lowest since last December."
WTI was also 1.4 per cent lower at $53.85.
It hit $52.77 on Wednesday.
"Gold was flat at $1,226 an ounce."
Additional reporting by Michael Hunter in London and Alice Woodhouse in Hong Kong
Wednesday 21.00 GMT
Wall Street pares gains in late trade
Nasdaq Composite ends 0.9% higher; S&P 500 rallies 0.3%
Energy stocks lifted by crude oil climb
Dollar inches lower; Treasury yields rise
Italian assets unfazed by budget stand-off
A rebound for technology stocks following the steep falls of the previous two sessions and a rally for oil prices helped global equity markets recover some poise — although Wall Street pared its gains in the last hour of trade ahead of the Thanksgiving break.
Analysts warned that mounting worries over the outlook for global growth — particularly given uncertainty over the trade dispute between the US and China — could lead to increasing bouts of volatility across markets.
"The mood in the markets was helped by reports that Peter Navarro, the top trade adviser to the White House and a prominent China hawk, would not attend meetings between presidents Donald Trump of the US and Xi Jinping of China at the forthcoming G20 meeting in Buenos Aires."
"“That could be interpreted as a more hopeful omen on the trade front,” commented Action Economics."
"Oil prices rallied strongly, in spite of data showing that US crude inventories had risen for a ninth successive week, the longest such run since 2017."
"The figures did, however, show strong demand for petrol and diesel."
"Mr Trump on Wednesday praised Saudi Arabia for helping to reduce oil prices, although analysts highlighted that talks among producer nations to curb output had gathered pace."
"Meanwhile, plenty of attention was given to a report that the Federal Reserve could pause its rate rise cycle as early as next spring — although the dollar edged only modestly lower and US Treasury yields rose across the curve."
Paul Ashworth at Capital Economics said it was likely that the strength of the US economy would persuade the Fed to follow through on its planned rate rise in December.
"“We also still expect two more rate hikes in the first half of next year,” he said."
“But the global and domestic downside risks to that forecast are mounting.
"The weakness in third-quarter GDP in Japan and Germany, even if it was partly due to temporary factors, has shifted sentiment."
The growing risks that the UK could leave the EU in a disorderly fashion and that Italy could be headed for a debt crisis are also weighing on global markets.”
"However, Italian government bond yields fell sharply, even after the European Commission moved towards disciplining the country over its 2019 budget."
"There were widespread hopes that compromise would be found, although deputy prime minister Matteo Salvini ruled out changing the budget deficit target of 2.4 per cent of GDP."
"The FTSE All-World equities index rose 0.4 per cent, after falling 2.5 per cent over the previous two days."
"In New York, the S&P 500 ended 0.3 per cent higher at 2,649, having earlier risen as much as 1.1 per cent, as the energy sector rose 1.7 per cent and techs gained 0.8 per cent."
The day’s rise trimmed the S&P’s fall this week to about 3.2 per cent.
The Nasdaq Composite rose 0.9 per cent — recouping about half of Tuesday’s 1.7 per cent drop but still leaving it down 3.8 per cent since Friday’s finish.
The Dow Jones Industrial Average ended flat on Wednesday.
"In Europe, the Stoxx 600 ended 1.1 per cent higher, as the Xetra Dax in Frankfurt gained 1.6 per cent and London"
’s FTSE 100 added 1.5 per cent.
The FTSE MIB index in Milan rose 1.4 per cent.
"The dollar index was just 0.1 per cent lower at 96.73, keeping it in sight of last week's 17-month high of 97.69."
"The euro was 0.2 per cent higher at $1.1387, while the US currency was up 0.3 per cent versus the yen at ¥113.06."
Sterling was flat at $1.2779.
The yield on the 10-year US Treasury was up 1 basis point at 3.06 per cent — after hitting a seven-week low on Tuesday — while the two-year yield was 2bp higher at 2.81 per cent.
"Italy’s two-year yield tumbled 24bp to 1.14 per cent, the lowest level for two weeks, while the 10-year fell 14bp to 3.48 per cent."
"Brent oil — which hit $61.71 a barrel on Tuesday, the lowest point since December 2017 — settled at $63.48 on Wednesday, up 1.5 per cent on the session."
US West Texas Intermediate crude was 1.9 per cent higher in late trade at $54.42.
"Gold was up $4 at $1,225 an ounce."
Tuesday 21.00 GMT
S&P 500 ends 1.8% lower; Nasdaq briefly erases 2018 gain
Brent crude touches 11-month low
Global growth worries help dollar rally  
Treasury prices edge higher
"Another day of extreme turbulence across financial markets saw global equities sell off sharply, oil prices tumble and the dollar swing from losses to gains as concerns intensified about the global economy."
"While weakness for technology stocks grabbed the headlines, energy was actually by far the worst performing sector in the S&P 500 as Brent oil fell as much as 7.6 per cent to its lowest point since December 2017."
"“Despite talk of a production cut from Opec [and its allies] the outlooks from both the International Energy Agency and Opec spell out a likely glut of crude for the year ahead, with supply growth outstripping demand,” said Joshua Mahony, market analyst at IG."
"“To a degree, the weakness we are seeing could pave the way for supportive action from Saudi Arabia, yet the declines are likely to persist until something substantial is announced.”"
"Meanwhile, retailing stocks also came under pressure as disappointing results and guidance from some big names in the sector heightened concerns about holiday season sales,"
"The Cboe Global Markets Vix equity volatility index climbed well above its long-term average of 20 to hit a three-week high, but stayed clear of levels seen at the height of October’s equity rout."
The deterioration in broad risk appetite across markets helped the dollar index rally off a two-week low.
"US Treasury prices also edged higher, nudging the 10-year yield towards the 3 per cent level, although gains were relatively modest."
"“Normally, ‘risk-off’ periods favour five- and 10-year US Treasuries but with large supply forthcoming and a seemingly programmatic Federal Reserve, longer Treasuries don’t have attraction they often have,” said Arnim Holzer, strategist at EAB Investment Group."
"Analysts noted that the recent dip for the US currency had followed comments from Federal Reserve officials expressing concern about risks from weaker global economic conditions, with the US-China trade dispute heightening these worries for market participants."
"Such concerns, plus the latest leg lower for oil prices, helped push US 10-year inflation break-evens, a keenly watched measure of inflation expectations, below the Fed’s 2 per cent target."
"In New York, the S&P 500 fell 1.8 per cent to a three-week closing low of 2,641, off the day’s low of 2,631.52, but back below where it ended 2017."
"The Dow Jones Industrial Average shed 2.2 per cent, while the Nasdaq Composite ended 1.7 per cent weaker at 6,908."
"It ended last year at 6,903.39."
"The mood was similarly downbeat in Europe, where the region-wide Stoxx 600 index fell 1.1 per cent and the Xetra Dax in Frankfurt shed 1.6 per cent."
The FTSE in London ended 0.8 per cent lower.
FT subscribers can click here to receive daily commentary on global trade from Mike Mackenzie in his Market Forces column.
"The dollar index was up 0.7 per cent to 96.82, having touched 96.04 earlier in the day, as the euro slipped 0.7 per cent to $1.1368 and the US currency edged up 0.1 per cent against the yen to ¥112.66."
The yen’s status as a haven in times of turbulence saw the euro slip 0.6 per cent to ¥128.13 and sterling fall 0.4 per cent at ¥144.06.
"The pound was down 0.5 per cent versus the firm dollar at $1.2786, although the euro was 0.2 per cent lower against the UK currency at £0.8889."
"In the fixed income arena, the yield on the 10-year Treasury fell as low at 3.036 per cent before pulling back to stand a shade weaker at 3.06 per cent."
Germany’s 10-year Bund yield fell 2bp to 0.35 per cent.
"Oil prices stayed under heavy pressure, with Brent falling as low as $61.71 a barrel before settling at $62.53, down 6.4 per cent on the day."
The international crude benchmark hit a four-year high of $86.74 at the start of October.
US West Texas Intermediate crude was down 6.8 per cent in late trade at $53.32.
"Gold was down $3 at $1,221 an ounce."
Additional reporting by Michael Hunter in London and Alice Woodhouse in Hong Kong
Monday 21.00 GMT
Nasdaq Composite slides 3%; Apple shares down 4%
Participants fret over iPhone demand
Friction between China and US at Apec summit
Pound holds above $1.28 mark as dollar falls
Oil prices have choppy session
"US technology stocks ran into a heavy bout of selling as the holiday-shortened week on Wall Street got under way, with Apple once again leading the way as concern over iPhone demand resurfaced."
The company’s shares retreated further away from the $200 mark following reports that it had cut production orders for all three iPhone models launched in September.
Semiconductor stocks were additionally weighed down by antitrust accusations levelled at the world’s top three makers of memory chips — including US-based Micron Technology — by Chinese authorities.
"The mood in the markets had already been unsettled by the tense dialogue between Xi Jinping, China’s president, and Mike Pence, the US vice-president, at the Asia-Pacific Economic Co-operation summit over the weekend."
Analysts at Scotiabank said the Apec meetings attended by Mr Pence “suggested the US is adopting a harsher tone in dealings with China and . . . 
"mean perhaps little likelihood that a trade deal can be reached, which might inject some unease into markets ahead of the G20 meetings at the end of the month”."
"The dollar index continued to fall from the 17-month high hit earlier this month, as markets remained focused on comments by Federal Reserve officials last week suggesting that US interest rates were nearing “neutral” and highlighting risks from weaker global economic conditions."
"“The Fed is expected to hike rates again in December, but these more dovish comments raise the likelihood that the Fed will consider pausing rate hikes in 2019 rather than continuing to hike rates every quarter as they have done so far this year,” said analysts at MUFG."
"“Nevertheless, the euro is still subject to downside risks of its own which limit upside potential for euro/dollar.”"
"Sterling inched higher against the dollar, holding above the $1.30 mark following last week’s Brexit-driven turbulence, but edged back against the euro."
"Oil prices had a volatile time, with Brent swinging through a $2 range before settling little changed."
The benchmark remained nearly 24 per cent off a four-year high reached in early October.
"In New York, the Nasdaq Composite index fell 3 per cent — its worst day in more than three weeks — with Apple shares falling 4 per cent and Micron down 6.6 per cent."
The Philadelphia SE Semiconductor index extended Friday’s 1.2 per cent drop by a another 3.9 per cent.
The S&P 500 fell 1.7 per cent and the Dow Jones Industrial Average ended 1.6 per cent lower.
"Across the Atlantic, the pan-European Stoxx 600 index fell 0.7 per cent as the Xetra Dax in Frankfurt shed 0.9 per cent and London’s FTSE 100 ended 0.2 per cent lower."
"The CAC 40 in Paris fell 0.8 per cent, with Renault shares falling 8.4 per cent after news that its chief executive, Carlos Ghosn — also the chairman of partner Nissan — had been arrested in Japan."
Nissan said an internal investigation had revealed that Mr Ghosn had understated his income over many years.
The dollar index was down 0.3 per cent at 96.20 — leaving it 1.5 per cent short of the intraday peak reached on November 12.
The euro was up 0.3 per cent at $1.1453 and the US currency was 0.3 per cent weaker versus the yen at ¥112.49.
The pound held above $1.28 — edging up 0.1 per cent on the day to to $1.2854 — as investors continued to watch the Brexit saga unfold.
But the euro was up 0.2 per cent against sterling at £0.8910.
“Currency option markets now expect the pound to be as volatile as the Mexican peso over the next month . . . 
"Insurance against downside risks is especially sought after — justifiably so, in our view."
The high volatility in sterling could make buying the currency on dips attractive — for the pound against the dollar . . . 
"we would eye levels below $1.20.”Caroline Simmons, Deputy Head of the Investment Office UK, UBS Global Wealth Management."
"The dollar’s weakness came as the yield on the 10-year Treasury slipped 2 basis point to 3.05 per cent, the lowest intraday level in about three weeks."
The two-year US yield was 3bp lower at 2.78 per cent.
Brent oil traded between $65.27 and $67.64 before settling just fractionally higher at $66.93 — taking its run of gains to four sessions.
US West Texas Intermediate also reversed an early fall to stand 1.3 per cent higher in late trade at $57.17.
"The softer dollar helped gold edge up $2 to $1,223 an ounce."
Friday 21.00 GMT
Pound regains $1.28 level as dollar stages broad retreat
Fed vice-chairman cautions on global growth
"Nasdaq down 0.1 %, S&P 500 edges up 0.2%"
Oil prices continue to rise
Sterling recovered some ground against the dollar and European stock indices stabilised at the end of a week dominated by the twists and turns of the Brexit drama.
"The pound’s rally came as the dollar suffered broad weakness, and Treasury yields fell, after the Federal Reserve’s new vice-chairman said US interest rates were nearing “neutral”, and warned that there was evidence the world economy was slowing."
"US chipmaking stocks came under pressure from disappointing guidance from Nvidia, although the S&P 500 recouped an early fall as the energy sector got a lift from a renewed rally for oil prices."
"But it was UK assets that garnered much of the attention this week, as Theresa May, prime minister, reached a technical agreement with the EU on Brexit and secured “collective” cabinet agreement for the deal."
"However, a series of ensuing ministerial resignations and fierce criticism of the deal helped fuel speculation that the prime minister could be forced out — heightening concerns about an eventual “no-deal” Brexit."
"“Even if Mrs May’s deal with the EU survives, the real test is the vote in the UK House of Commons,” said Danske Bank."
"“Leading Brexiters and Theresa May’s supporting party DUP have already said they will vote against the deal, meaning that moderate Conservative and Labour MPs are key for PM May.”"
"Sterling regained the $1.28 level against the dollar but was still down sharply over the week, while UK government bonds relinquished some of Thursday’s gains."
"The euro, meanwhile, extended the previous day’s sharp advance against the pound, and hit its highest level against the dollar for more than a week."
"Kit Juckes, currency strategist at Société Générale expressed surprise at the single currency’s resilience."
"“A no-deal Brexit is much worse for the UK than the EU but the eurozone economy is simply not in good enough shape to shrug it off,” he said."
“The next three weeks will see increased speculation about whether the European Central Bank really will stop bond-buying at the end of this year.”
"Brexit overshadowed the Italian budget saga this week, but analysts warned it could soon reappear on the market radar screens after Rome stuck to its fiscal plans — setting the scene for a clash with Brussels."
"“Admittedly, senior Italian politicians have said this week that they are working to avoid EU sanctions,” said Jack Allen at Capital Economics."
“But the budget published on Tuesday suggests that they are unwilling to match those words with action.
"So disciplinary proceedings are likely to follow, reportedly as soon as next week.”"
"Italy’s 10-year government bond yield rose 10 basis points this week but stayed well short of levels seen last month,"
"Volatility in the oil markets this week provided a further reason for nervousness, particularly after Brent tumbled 6.6 per cent on Tuesday — its biggest one-day drop since July — as fears about slowing demand intensified."
Brent subsequently pulled back but was still down 4.6 per cent for the week — and 22 per cent below a four-year high struck in October.
Sterling was up 0.4 per cent against the dollar at $1.2824 — off an earlier high of $1.2877 — but was still down 1.2 per cent over the week.
The euro was up 0.4 per cent versus the pound at £0.8899 and 1.9 per cent higher over five days.
"The dollar index was down 0.5 per cent at 96.44 — its lowest point for a week — as the euro rose 0.8 per cent to $1.1414, and the US currency weakened 0.7 per cent against the yen to ¥112.78."
"The dollar’s dip came as the yield on the 10-year US Treasury fell 4bp to 3.07 per cent, with that on the two-year note 5bp lower at 2.81 per cent."
The 10-year gilt yield rose 4bp to 1.41 per cent — after sliding about 14bp on Thursday — while the German 10-year Bund yield rose 1bp on Friday to 0.37 per cent.  
"In New York, the S&P 500 ended 0.2 per cent higher at 2,736 — after earlier falling to 2,712.16 — but still shed 1.6 per cent over the week."
The energy sector rallied 1.3 per cent on Friday.
The Dow Jones Industrial Average rose 0.5 per cent but the tech-heavy Nasdaq Composite slipped 0.2 per cent.
The Philadelphia SE Semiconductor index pared an early fall to close 1.2 per cent lower.
Nvidia tumbled 18.8 per cent.
"Across the Atlantic, the Europe-wide Stoxx 600 index ended 0.2 per cent lower after sliding 1.1 per cent on Thursday."
The Xetra Dax fell 0.1 per cent on Friday and London’s
FTSE 100 shed 0.3 per cent.
"In Asia, Hong Kong’s Hang Seng ticked up 0.3 per cent."
CSI 300 turned round from earlier losses to end 0.5 per cent higher.
Topix fell 0.6 per cent.
"Oil prices rose for a third day, with Brent crude settling at $66.76 a barrel, up 0.2 per cent on the day."
US West Texas Intermediate crude was 0.6 per cent higher in late trade at $56.81.
"The weaker dollar helped gold rise $9, or 0.7 per cent, to $1,222 an ounce."
Additional reporting by Michael Hunter in London and Alice Woodhouse in Hong Kong
Thursday 21.00 GMT
Concerns over ‘no-deal’ Brexit intensify
Pound sinks through $1.28;
2-year gilt yield falls below UK base rate
European stocks fall; FTSE 100 outperforms
S&P 500 gains 1.1%;
Nasdaq up 1.7%
Oil prices extend rebound
The unfolding political drama in the UK played a pivotal role in driving markets on Thursday as ministerial resignations and the threat of a leadership challenge to prime minister Theresa May heightened concerns over a “no-deal” Brexit.
"But Wall Street managed to look beyond the Brexit headlines and instead took a more optimistic view of the US-China trade picture, paving the way for the S&P 500 index to register its first rise in six sessions."
"But it was UK politics that dominated market action for most of the session as, just a day after Mrs May appeared to secure backing from her cabinet for a draft Brexit deal with the EU, cracks began to show."
"“The departure of a number of cabinet members, especially Dominic Raab, Brexit secretary, has cast serous questions over Mrs May’s ability to get the withdrawal draft approved,” said David Madden, a market analyst at CMC Markets."
Sterling had its worst day in about two years as it sank back below the $1.28 level against the dollar and was about 2 per cent weaker versus the euro.
"A shift into the perceived safety of UK government bonds helped push the two-year yield below the Bank of England’s base rate of 0.75 per cent, while yields on benchmark German bonds also moved lower."
"The latest bout of uncertainty also unsettled major continental European stock indices, although the UK’s FTSE 100 itself — dominated by foreign currency earners — inched higher."
Oliver Jones at Capital Economics said: “The market reaction today — which was essentially a microcosm of what happened after the EU vote itself in 2016 — probably provides some indication of what might happen in the event of a ‘no deal’ Brexit.”
"Noting the drop in UK government bond yields, Mr Jones added: “Investors are clearly not paying any heed to [governor] Mark Carney’s suggestion that the Bank of England might have to raise rates in the event of ‘no deal’.”"
US stocks got off to a weak start — in spite of broadly market-friendly economic news — but rallied as the session wore on.
Some market observers highlighted an Financial Times report saying that the US and China had intensified their efforts to strike a truce at the forthcoming G20 meeting that could curb the trade dispute between the two countries.
The technology sector led the way on Wall Street while energy stocks rallied as crude oil prices recouped more of their recent losses.
"Data released on Thursday showed a 0.8 per cent jump in headline US retail sales last month, although economists noted signs that underlying spending growth had begun to slow."
"The S&P 500 rose 1.1 per cent to 2,730, having fallen as low as 2,670.75 — its first rise in six days."
"The technology sector rose 2.1 per cent, while energy gained 1.4 per cent."
The Dow Jones Industrial Average rose 0.8 per cent and the tech-heavy Nasdaq Composite ended 1.5 per cent higher.
"In Europe, the region-wide Stoxx 600 index fell 1.1 per cent as the Xetra Dax in Frankfurt shed 0.5 per cent and French stocks lost 0.7 per cent."
The Dublin bourse had its worst day since 2016 — with the ISEQ index falling 3.8 per cent — as worries grew that
Ireland’s economy could be one of the biggest casualties of a no-deal Brexit.
"The FTSE 100 edged up 0.1 per cent although the mid-cap FTSE 250 index, which has more domestic exposure fell 1.3 per cent."
"Sterling/dollar was last quoted at $1.2770, down 1.7 per cent on the day, after earlier falling as low as $1.2726."
The euro was up 2 per cent versus the pound at £0.8870.
"The yield on the 10-year UK gilt fell by a hefty 14 basis points to 1.36 per cent, with the two-year ending 10bp lower at 0.70 per cent."
The dollar index edged up 0.2 per cent to 97.03 — putting it back in sight of a recent 17-month high.
"That rise came even as the euro firmed 0.2 per cent at $1.1332, while the US currency was a shade lower against the yen at ¥113.53."
"The 10-year US Treasury yield was down 1 basis point at 3.11 per cent, having earlier slipped to 3.08 per cent."
The 10-year German Bund yield fell 4bp to 0.36 per cent.
"Oil prices continued to recover after a recent run of losses, with Brent settling at $66.62 a barrel, up 0.8 per cent on the day."
The international crude benchmark remained some 23 per cent below a four-year high struck in early October.
US West Texas Intermediate crude was 0.4 per cent higher in late trade at $56.46.
"Gold was up $2 at $1,213 an ounce."
Wednesday 21.00 GMT
S&P 500 down 0.8%; Nasdaq 0.9% lower
Brent and WTI gain but retreat from highs
Pound struggles to hold gains
Apple falls into bear market as iPhone worries persist
Budget worries push Italian bond yields higher
"US stocks pared early losses but the S&P 500 still ended lower for a fifth successive session, while sterling hit its high for the day against the dollar after UK prime minister Theresa May secured the backing of her cabinet for a draft Brexit deal."
"Wall Street found some support from gains in the energy sector, as oil prices recouped some of the previous day’s steep losses."
Further help came from a relatively tame set of US inflation data.
But there was fresh uncertainty regarding Italy after the government said it would stick with its decision to embark on higher spending in an effort to kick-start the country’s economy.
Sterling dominated the action on the foreign exchanges as it swung through a near-2 cent range against the dollar.
The pound hit the day’s high of $1.3071 following the announcement of cabinet approval for the Brexit deal after a marathon five-hour meeting.
"But the currency could not hold at that level as participants looked to the prospect of hurdles ahead, which include the possibility of an imminent vote of no-confidence in Mrs May."
Meanwhile Brent oil rose as much as 3.3 per cent — before paring its advance — following a 6.6 per cent slide on Tuesday.
Support came from fresh reports that Opec and its partners were considering cutting output.
"“The latest report of output cuts is higher than the rumours of a possible 1m barrels a day cut that were making the rounds after the meeting in Abu Dhabi on Sunday,” said analysts at Action Economics."
"The rebound in oil prices helped US energy stocks rally, although their gains were easily outweighed by losses in the financial and technology sectors."
Apple came under renewed pressure from persistent concern that demand for iPhones might have peaked.
Worries over Italy also remained elevated after the government said it would stand by its decision to embark on higher spending to try to revive economy.
Analysts at Daiwa Capital Markets highlighted that the European Commission was likely to reiterate that the budget proposals represented a “significant deviation” from what was required under EU rules.
"“So the confrontation will likely persist, with a formal disciplinary procedure, which theoretically might eventually lead to the imposition of fines on Italy, likely to be launched in due course.”"
"Italy’s 10-year government bond yield hit its highest level for three weeks, while an index of its banking stocks fell about 1.4 per cent."
"The day’s big US data release showed that core inflation, which excludes food and energy prices, rose by 2.1 per cent in the year to October, down from 2.2 per cent in the previous month, and a lower reading than economists had expected."
"“This inflation release will not alter the outlook for the December Federal Open Market Committee meeting,” said James Knightley, chief international economist at ING."
"The Federal Reserve is widely expected to raise interest rates again next month,"
"In New York, the S&P 500 fell 0.8 per cent to 2,701, leaving it down about 4 per cent over the past five sessions."
"The Nasdaq Composite shed 0.9 per cent — with Apple down a further 2.8 per cent, a drop that took the stock into bear market territory."
The Dow Jones Industrial Average ended 0.8 per cent lower.
"In Europe, the region-wide Stoxx 600 ended 0.6 per cent lower, with the German Xetra Dax index falling 0.5 per cent and the FTSE 100 in London down 0.3 per cent."
"Hang Seng dropped 0.5 per cent, led lower by the energy sector."
"On China’s mainland, the CSI 300 lost 1 per cent after government data showed retail sales in China grew at the slowest pace in five months in October."
"Sterling was last quoted at $1.3005, up 0.3 per cent on the day, while the euro was flat against the pound at £0.8609."
"The dollar index was down 0.4 per cent, as the single currency rose 0.2 per cent versus the US unit to $1.1315."
"The yield on the 10-year US Treasury was down 2 basis points at 3.12 per cent, with the two-year yield 3bp lower at 2.86 per cent."
"Brent crude settled at $66.12 a barrel, up 1 per cent on the day, having touched $67,63."
US West Texas Intermediate was 0.9 per cent firmer in late trade at $56.16.
"Gold was up $9 at $1,211 an ounce."
Additional reporting by Michael Hunter in London and Alice Woodhouse in Hong Kong
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Tuesday 21.00 GMT
S&P 500 falls 0.2%; energy sector down 2.3%
Brent crude settles 6.6% lower as demand worries grow
Optimism over US-China trade helps limit losses
Sterling unable to hold $1.30 level despite Brexit deal hopes
US Treasury yields decline
"US stocks gave back early gains, with the S&P 500 ending lower for the fourth day in a row, as a rebound for techs and financials faded and the energy sector tumbled as oil prices once again came under heavy pressure."
"In the currency markets, all eyes were on sterling following news that UK cabinet ministers had been summoned to an emergency meeting on Wednesday to sign off a draft Brexit agreement with Brussels."
"“While there are still numerous hurdles ahead, sign-off on Wednesday could be a hugely important step towards getting a deal over the line before Christmas and avoiding a disastrous ‘no-deal’ scenario,” said Craig Erlam at Oanda."
He noted the pound’s initial rally back above $1.30 but added: “The lack of an even stronger response is a clear reflection of the level of doubt that still exists.”
"Indeed, sterling rose as high as $1.3047 against the dollar, before giving back much of its gain."
The euro hit its lowest level versus the pound since April but then trimmed its decline.
"But the single currency also benefited from optimism for a deal, as it recovered much of the previous day’s decline against the dollar."
"The 10-year UK gilt yield rose 7 basis points to 1.52 per cent, while the internationally focused FTSE 100 share index ended flat, underperforming its continental European peers."
"Meanwhile, the latest drop for Brent oil left it nearly 25 per cent down from a four-year high reached in early October — and at its lowest level since March."
US West Texas Intermediate crude had its worst day for three years as it fell for a record 12th successive session.
"The losses came after Opec once again lowered its forecast for 2019 oil demand growth, prompting expectations that producers might have to curb supplies to bring the market into balance."
"The S&P 500 energy sector went into a tailspin, although the wider market found some support from hopes for a fresh round of US-China trade talks."
"That followed reports that Steven Mnuchin, the US Treasury secretary, had spoken to Liu He, China’s vice-premier, ahead of the G20 meeting later this month,"
The dollar’s retreat from Monday’s 17-month high against a basket of currencies was also viewed as mildly supportive for equities.
"In New York, the S&P 500 ended a choppy session 0.2 per cent softer at 2,722, following a 2 per cent drop on Monday."
The index has now fallen more than 3 per cent since last Wednesday’s close.
"The Nasdaq Composite finished barely changed on the day, while the Dow Jones Industrial Average shed 0.4 per cent, pegged back by a fall for Boeing shares."
"In Europe, the region-wide Stoxx 600 index rallied 0.7 per cent, with the Xetra Dax in Frankfurt gaining 1.3 per cent and the Cac-40 in Paris ending 0.9 per cent higher."
"The dollar index edged back 0.2 per cent to 97.31, after hitting 97.69 on Monday, the highest since June 2017."
"The euro was up 0.5 per cent at $1.1269, while the US currency was steady versus the yen at ¥113.84."
"Sterling was up 0.9 per cent at $1.2956, while the euro was off 0.4 per cent versus the pound at £0.8697."
US Treasury prices rose as equities lost ground and as the market reopened after Monday’s Veterans Day holiday.
"The yield on the 10-year Treasury was down 5 basis points at 3.14 per cent, while the two-year was 4bp lower at 2.90 per cent.  "
"Brent crude settled at $65.47 a barrel, down 6.6 per cent on the day, and extended its decline to more than 7 per cent in post-settlement trading."
US WTI dropped 7.1 per cent to $55.69.
It too fell further in after-hours trade and briefly dipped below $55.
"The price of gold was unchanged at $1,200 per ounce."
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Monday 21.00 GMT
Nasdaq Composite slides 2.8%; S&P 500 down 2%
Apple and Goldman Sachs tumble
Brent and WTI crude both reverse early gains
Dollar index hits 17-month high
Euro unsettled by prospect of Rome-Brussels clash
US stocks had their worst day since late October as Apple came under pressure from weak outlooks from two of its suppliers — fuelling fresh worries about iPhone demand — and Goldman Sachs tumbled after reports that Malaysia was seeking a refund of fees paid to the investment bank for deals it arranged for the 1MDB state fund.
"Energy stocks failed to benefit from an early bounce for crude prices, which came as Saudi Arabia said oil demand had softened enough to warrant lower production."
Both Brent and West Texas Intermediate later turned negative.
The wider US equity market was unsettled by a sharp rise for the dollar to a 17-month high against a basket of peers as participants remained focused on the prospect of further US interest rate rises.
"“Recent US data, such as last Friday’s hot producer price inflation numbers, and the Federal Reserve’s policy guidance following last week’s FOMC meeting, have fanned expectations for a resumption in Fed tightening at December’s policy meeting,” said Action Economics."
The euro also lost ground against the US currency — and Italian bond yields rose — as the markets were braced for a potential clash this week between Rome and Brussels over Italy’s 2019 budget proposal.
"“The government must submit a redrafted budget to the European Commission by Tuesday, and reports suggest that it will lower its growth forecast,” said Capital Economics."
"“But without significant changes to its tax and spending plans, the commission still looks almost certain to recommend to the European Council that Italy be put into an Excessive Deficit Procedure.”"
"Meanwhile, sterling lost ground against the dollar even after the EU’s"
chief negotiator said the main elements of an exit treaty text were ready to present to the UK cabinet on Tuesday.
Analysts voiced serious doubts that a deal would persuade sufficient Conservative MPs to vote for it.
"“And with the support of the Democratic Unionist party also uncertain it looks as if the prime minister will have to try to secure support from opposition MPs on the Labour party benches,” said Steve Barrow at Standard Bank.  "
"In New York, the S&P 500 ended 2 per cent lower at 2,726 — its biggest one-day drop since October 24 — taking its decline over the past three days to 3.1 per cent."
"The Nasdaq Composite shed 2.8 per cent, with Apple falling 5 per cent — taking it back below the $200 a share mark — after two of its suppliers, Lumentum Holdings and Japan Display, cut their earnings forecasts."
"Goldman Sachs fell 7.5 per cent, helping to drag the Dow Jones Industrial Average down 2.3 per cent."
"In Europe, the region-wide Stoxx 600 index ended 1 per cent lower, with the Xetra dan Frankfurt shedding 1.8 per cent"
The FTSE 100 outperformed slightly — falling 0.7 per cent — aided by the weaker pound.
"The dollar index was up 0.7 per cent at 97.56, its highest point since June 2017, with the euro down 0.9 per cent at the day’s low of $1.1231."
Sterling was also off 0.9 per cent at $1.2853 after touching $1.2828 earlier in the day.
The US currency was flat against the yen at ¥113.79.
Italy’s 10-year government bond yield rose 5 basis points to 3.45 per cent.
"The US Treasury market was shut for Veterans Day,"
Brent oil rose as high as $71.88 a barrel before going into reverse to settle 0.1 per cent lower on the day at $70.12 — and falling further in post-settlement trade.
US West Texas Intermediate was 2.2 per cent weaker late in the day at $58.87.
"Last week, Brent entered bear market territory, having fallen 20 per cent from the four-year high hit a month ago."
"The strong dollar helped push gold down $8 to $1,200 an ounce."
Additional reporting by Michael Hunter in London and Alice Woodhouse in Hong Kong
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Friday 21.00 GMT
S&P 500 falls 0.9% but still secures weekly gain
Brent oil briefly slides below $70 a barrel mark
Focus returns to US-China trade dispute and global growth outlook
Fed statement paves way for more US rate rises
Pound below $1.30 as UK transport minister quits over Brexit
Weakness for industrial commodities weighed on global stock markets at the end of a week otherwise dominated by the US midterm elections and the Federal Reserve’s latest policy statement.
"With oil prices pushing into “bear market territory” — defined as a 20 per cent drop from cyclical peaks — energy stocks came under pressure, most notably in Europe."
"“We are not hugely surprised by the move into bear territory, given the waivers granted to eight countries by the US from Iran sanctions, and the rumours of Russia and Saudi Arabia discussing possible production cuts next year,” said Ashley Kelty, oil and gas research analyst at Cantor Fitzgerald Europe."
“This signals that the likelihood of oversupply in the near term is far more likely.”
Basic materials stocks also came under pressure on both sides of the Atlantic as market participants turned their focus to the prospects for global growth and the risks from the US-China trade dispute.
"“We continue to believe that the outcome of US-China trade talks are crucial to global markets,” said strategists at BofA-Merrill Lynch."
"“A deal, or at the very least a ceasefire that suspended tariff increases due in January, would improve the global growth outlook for 2019, particularly with policy easing in China.”"
"But despite the big losses for resources stocks, the benchmark US S&P 500 equity index was still heading for a solid weekly gain after rising sharply on Wednesday as the midterm election results turned out largely as expected."
The Democrats taking control of the House was widely seen as making further fiscal stimulus unlikely.
"“Global markets have decided that a divided Washington would actually be good for risky assets,” said analysts at Danske Bank."
"“Tax cuts cannot be rolled back and new fiscal expansion is less likely, keeping longer-dated yields under control.”"
"Indeed, both Treasury yields and the dollar fell sharply as the election results rolled in but subsequently rebounded as the Federal Reserve did little to cool expectations that it would continue its policy of gradually raising interest rates."
"“The December hike now seems to be a done deal and our economists look for another three hikes in 2019,” said Petr Krpata, FX strategist at ING."
Some observers highlighted the failure of the Fed to comment on the steep equity sell-off last month.
"“Evidently the poor performance was regarded as a modest correction but not sufficiently bearish to warrant a mention at this stage in their policy statement,” said MUFG."
"“However, if October’s performance were to be repeated, this may feature in the Fed’s decision-making and projections.”"
"Data on Friday showed that headline US producer prices jumped 0.6 per cent last month, taking the annual rate of wholesale inflation to 2.9 per cent — providing further support to the dollar."
Sterling slipped back below the $1.30 mark as the abrupt resignation of Jo Johnson as UK transport minister raised the prospect of wider protests against the Brexit plans of prime minister Theresa May.
"In New York, the S&P 500 fell 0.9 per cent to 2,781 but still registered a weekly gain of 2.1 per cent."
"The basic materials sector fell 1.2 per cent on the day, while techs shed 1.8 per cent."
"Indeed, the tech-heavy Nasdaq Composite index ended 1.7 per cent lower, while the Dow Jones Industrial Average fell 0.8 per cent."
"Across the Atlantic, the Europe-wide Stoxx 600 index fell 0.4 per cent, with the resource-heavy FTSE 100 in London shedding 0.5 per cent."
"The Xetra Dax in Frankfurt ended flat, even as steelmaker ThyssenKrupp tumbled 9 per cent."
"Hang Seng fell 2.4 per cent, with technology stocks joining energy companies under pressure."
CSI 300 fell 1.4 per cent.
Tokyo’s Topix edged down 0.5 per cent.
"The dollar index was up 0.2 per cent at 96.94, for a two-day advance of nearly 1 per cent."
"The euro was down 0.3 per cent at $1.1331, while the greenback was 0.2 per cent softer versus the yen at ¥113.80."
"Sterling was down 0.8 per cent against the dollar at $1.2959, with the euro up 0.5 per cent against the pound at £0.8742."
renminbi was 0.2 per cent weaker at Rmb6.9458 to the dollar.
"In the fixed income arena, the US equity sell-off helped push the 10-year Treasury yield down 4 basis points to 3.19 per cent."
The two-year yield was 3bp lower at 2.94 per cent.
"Brent oil settled at $70.18, down another 0.7 per cent on the day — having earlier fallen as low as 69.13."
It hit a four-year high of $86.74 in early October.
"US West Texas Intermediate crude was 1.2 per cent lower in late trade $59.22, down some 23 per cent from its peak of $76.90 last month."
"On the London Metal Exchange, copper fell 1.6 per cent on the day to $6,056 a tonne, leaving it down more than 3 per cent over the week, its biggest weekly drop since mid-August."
Nickel fell 2.7 per cent to its lowest in almost 11 months.
"Gold was down $14 at $1,209 per ounce, and on course for a 1.9 per cent weekly fall."
Thursday 21.00 GMT
S&P 500 slips 0.3% after Wednesday’s 2.1% jump
"Dollar index extends day’s rise to 0.7%, Treasury yields rise"
Federal Reserve leaves interest rates unchanged
"US central bank on course to lift rates next month, say analysts"
"Oil prices continue to retreat, WTI in bear territory"
US stocks gave back some of their strong post-midterm election gains while the dollar extended an early rise as the Federal Reserve left interest rates unchanged but did little to challenge the view that it would pull the trigger again next month.
"The statement from the central bank acknowledged that unemployment had dropped further, as growth in economic activity and household spending remained strong — although it also noted that business investment had “moderated from its rapid pace earlier in the year”."
"“The midterm election outcome is not likely to have changed the Fed’s outlook, nor has it changed our Fed view,” said Philip Marey, senior US strategist at Rabobank."
"“Our baseline scenario is a federal funds rate hike in December, another hike in March 2019, followed by an inversion of the [yield] curve in the second quarter."
The latter would lead to a pause in the Fed’s hiking cycle.”
"Brian Coulton, chief economist at Fitch, said: “In a way, the most interesting thing [in the statement] is the absence of any reference to October’s stock market volatility, which implies the Fed is not concerned that there’s been any material tightening of financial conditions.”"
"On Wednesday, equity market participants embraced the election result, which was in line with expectations."
Analysts noted that further US fiscal stimulus looked far less likely under a Democrat-controlled House of Representatives.
"“A divided Congress reduces the risk of overstimulation and a rapid rise in interest rates,” said Trevor Greetham at Royal London Asset Management."
Some observers highlighted that a key test of the political climate in Washington could come in the run-up to the expiry of the current government funding bill on December 7.
"“With the Democrats set to take control of the House in January, President [Donald] Trump may see this as a last opportunity to force the House into providing funding for the wall on the Mexican border,” said analysts at MUFG."
"“To force the issue, President Trump may well be willing to trigger a government shutdown.”"
"Meanwhile, there was no respite for oil prices, with Brent reversing an early rise to touch a fresh three-month low — reflecting persistent concerns that global crude supplies will increase more quickly than expected."
Brent has now fallen more than 18 per cent from a four-year high struck in early November.
"West Texas Intermediate, the main US contract, traded 20 per cent below its recent high — the usual definition of a bear market."
"In New York, the S&P 500 shed 0.3 per cent to 2,806 following a 2.1 per cent advance in the previous session, with the energy sector sliding 2.3 per cent."
The benchmark US index was up more than 3 per cent over the course of the week.
"The Dow Jones Industrial Average ended a shade higher, while the tech-heavy Nasdaq Composite — which leapt 2.6 per cent on Wednesday — fell 0.5 per cent."
"Across the Atlantic, Frankfurt’s Xetra Dax slipped 0.5 per cent but London’s FTSE 100 ticked up 0.3 per cent, with the Europe-wide Stoxx 600 index ending 0.2 per cent higher."
"Japanese stocks led the way in Asia, with a gain of 1.7 per cent for the Topix, led by energy stocks."
"Figures released on Thursday showed Chinese exports grew 15.6 per cent in October in US dollar terms, despite US tariffs on Chinese-made goods."
"Hong Kong’s Hang Seng rose 0.3 per cent, helped by demand for tech stocks."
The CSI 300 index of Shanghai and Shenzhen stocks slipped 0.3 per cent.
The dollar index was up 0.7 per cent at 96.69 — after trading about 0.4 per cent higher before the Fed announcement — as the euro shed 0.6 per cent to $1.1360 and the greenback firmed 0.4 per cent versus the yen to ¥113.99.
"Sterling was down 0.5 per cent at $1.3061 — after holding above $1.31 for much of the session, supported by yet more reports in the European media that Brexit talks were close to a positive conclusion"
"The yield on the 10-year US Treasury was up 3 basis points at the day’s high of 3.24 per cent, with the two-year yield up 3bp at 2.97 per cent."
"FT subscribers can sign up to receive the daily Market Forces email on what is moving global markets from Mike Mackenzie, our columnist"
"Oil prices fell again, with Brent crude settling at $70.65 — down 2 per cent on the day — following a choppy session on Wednesday after data showed US crude and gasoline stockpiles increasing at a faster rate than expected."
"West Texas Intermediate was down 1.8 per cent in late trade at $60.54, having touched $60.40."
"The firm dollar and the rise in Treasury yields helped push gold down $3 to $1,222 an ounce."
Additional reporting by Michael Hunter in London and Alice Woodhouse in Hong Kong
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Wednesday 21.00 GMT
S&P 500 gains 2.1%; Nasdaq 2.7% higher
Dollar falls as Democrats take the House
Treasuries reverse early gains
Focus turns to Federal Reserve meeting
Oil prices hit by US inventories report
Global stocks continued their recovery following October’s steep sell-off while the dollar and Treasury yields fell as the outcome of yesterday’s US midterm elections
broadly matched market expectations.
"With the Democrats winning control of the House and the Republicans retaining control of the Senate, analysts focused on the impact of a divided government on US fiscal policy."
"“The main risk scenario for us would have been a Republican victory in both the House and the Senate, which would likely have meant further fiscal stimulus and a prolonged ‘boom and bust’-style economic cycle,” said Bill Diviney at ABN Amro."
"“With Democrats now controlling the House, we think it will be much harder for the president to push through further significant tax or spending changes.”"
"That helped push the dollar index to a two-week low, while longer-dated Treasury yields fell, flattening the curve."
"Equity markets embraced the election results, with the S&P 500 extending its rise this week to more than 3 per cent."
"Healthcare stocks led the way in the US amid expectations that a gridlocked Congress would struggle to push through restrictive regulations on the sector, while tech stocks, which suffered badly in October, continued to rally."
The Cboe Global Markets Vix equity volatility index touched a three-week low.
"European equity markets also had a strong session, “likely tied to the idea that a split Congress will deliver a sweetener in an upcoming trade deal”, said Peter Garnry, strategist at Saxo Bank."
The focus will now turn to the conclusion on Thursday of a two-day meeting of the US Federal Reserve.
Daiwa Capital Markets highlighted that market participants would be watching for any signs “that recent financial market developments might cause the Fed to refrain from tightening policy at the subsequent December meeting”.
"Oil prices continued to fall, with West Texas Intermediate touching a fresh eight-month low, as data showing a sharp rise in US crude inventories offset reports that Saudi Arabia and Russia were discussing whether to cut output next year."
"FT subscribers can sign up to receive the daily Market Forces email on what is moving global markets from Mike Mackenzie, our columnist"
"The FTSE All-World equities index was up 1.5 per cent, its seventh rise in a row, as US and European markets shrugged off a hesitant session in Asia."
"In New York, the S&P 500 rose 2.1 per cent to 2,813, its highest close for a month and its biggest one-day rise since October 16."
It was the benchmark’s best post-midterm performance since 1982.
The Dow Jones Industrial Average also climbed 2.1 per cent while the tech-heavy Nasdaq Composite ended 2.7 per cent higher.
The pan-European Stoxx 600 index rose 1.1 per cent as the Xetra Dax in Frankfurt gained 0.8 per cent and the London
’s FTSE 100 finished 1.1 per cent higher.
"Major Asia-Pacific equities benchmarks, which had been broadly higher, were mixed as the US results became clear."
Hang Seng came off earlier gains to close down 0.1 per cent.
"On China’s mainland, the CSI 300 index fell 0.7 per cent while Tokyo"
Topix closed 0.4 per cent weaker.
"The dollar index was down 0.3 per cent at 96.05 — after touching 95.68, the lowest since October 22 — as the euro rose 0.1 per cent to $1.1438, but the greenback edged up 0.1 per cent against the yen to ¥113.47."
"Sterling maintained its upward path against the soft dollar, rising a further 0.3 per cent to a three-week peak of $1.3133, after reports suggested that a Brexit deal could be agreed by the end of the month."
The euro was down 0.2 per cent against the pound at £0.8708.
"US Treasuries reversed early gains, leaving the yield on the 10-year note up 1 basis point at 3.22 per cent, and that on the 30-year bond 1bp higher at 3.43 per cent."
"The latter had earlier dipped to 3.385 per cent, which helped deter investors from participating in a $19bn auction of 30-year paper."
The two-year yield was up 2bp at 2.95 per cent.
"A choppy session in the oil markets saw Brent rally all the way up to $73.55 a barrel before sliding back to settle at $72.07, down 0.1 per cent on the day."
That marked a 17 per cent retracement from its early October intraday high of $86.74.
"US West Texas Intermediate was down 1.1 per cent in late trade at $61.53, after hitting $61.20."
"Gold was down $1 at $1,225 an ounce."
Tuesday 21.00 GMT
Caution over election outcome makes for choppy session
S&P 500 and Nasdaq both rise 0.6%
European bourses struggle for momentum
Sterling touches 2-week high as Brexit hopes set pace
Oil prices retreat sharply
"FT subscribers can sign up to receive the daily Market Forces email on what’s moving global markets from Mike Mackenzie, our columnist"
"US stocks recouped more of the losses incurred during October’s brutal sell-off, although activity was predictably light and trade choppy as participants awaited the outcome of the midterm elections."
"“US midterms rarely move markets but, against the backdrop of continued trade conflict and global tensions, today’s elections will be closely watched as a vote on White House policies,” said Aman Bansal, analyst at Citigroup."
"Action Economics said: “A gridlock result with the House flipping to the Democrats remains the base-case scenario, with divergence from that result likely determining the extent of post-election volatility in its wake.”"
The currency and bond markets were similarly becalmed with the dollar just a shade higher against a basket of its main rivals and Treasury yields edging up after a slow start.
European stock markets also had a cautious session with the Stoxx 600 falling for the second day in a row.
"The mood was not helped by persistent uncertainty over Italy’s proposed 2019 budget, which kept up pressure on the country’s bond prices."
The yield on Italy’s 10-year debt climbed 8 basis points to 3.40 per cent.
"Furthermore, Italy’s composite purchasing managers’ index fell to 49.3 in October, the lowest level since November 2013 — and below the 50 mark that nominally separates growth from contraction."
"Economists at Daiwa Capital Markets highlighted that, with the new orders component of the index also back in contractionary territory, jobs growth was reportedly the slowest for 14 months."
"“And with Italian firms’ concerns about the coalition government unlikely to fade over the near term, economic surveys are likely to point to ongoing sluggishness,” Daiwa said."
Sterling remained in the spotlight as it hit a two-week high against the US currency.
“The Brexit talks are heating up and prime minister [Theresa]
"May is confident a deal can be reached but she is not willing to do it ‘at any cost’,” said David Madden, analyst at CMC Markets UK."
“The pound might find it difficult to press ahead while the political uncertainty continues.”
"Oil prices retreated once again, as concerns about a global supply shortage continued to fade."
"The US formally imposed sanctions on Iranian crude exports on Monday but granted temporary waivers to eight countries, including China and Japan, allowing them to continue to purchase oil from Tehran."
"In New York, the S&P 500 rose 0.6 per cent to 2,755, after trading between 2,737.08 and 2,756.82, with the basic materials and industrial sectors leading the way."
The day’s gain left the index up 1.2 per cent for the week so far.
"The Dow Jones Industrial Average rose 0.7 per cent while the tech-heavy Nasdaq Composite index ended 0.6 per cent higher, its first rise in three days."
"In Europe, the pan-regional Stoxx 600 index slipped 0.3 per cent as Frankfurt’s"
"Xetra Dax slipped 0.1 per cent and London’s FTSE 100 shed 0.9 per cent, held back by the firmer pound."
"Japan’s Topix stood out in a mixed Asian session, rising 1.2 per cent."
"The dollar index was barely changed at 96.30, with the euro up 0.1 per cent at $1.1415."
The greenback was 0.2 per cent higher versus the yen at ¥113.42.
Sterling was up a further 0.4 per cent against the dollar at $1.3093.
"Just a week ago, the pound was languishing around the $1.27 level."
The euro was off 0.3 per cent against the pound at £0.08718.
"The 10-year US Treasury yield was up 2 basis points at 3.22 per cent, with the 30-year yield 1bp higher at 3.44 per cent."
An auction of 10-year paper on Tuesday attracted solid demand as participants shrugged off midterm concerns.
"Brent crude settled at $72.13 a barrel, down 1.4 per cent — its lowest since mid-August — while US West Texas Intermediate was 1.5 per cent lower in late trade at a seven-month low of $62.18."
"Gold was down $4 at $1,226 an ounce."
Additional reporting by Michael Hunter in London and Alice Woodhouse in Hong Kong
Monday 21.00 GMT
S&P 500 gains 0.6%; Nasdaq Composite falls 0.4%
Oil prices rally as US imposes sanctions on Iran
Italian bond yields rise as budget worries continue
ISM service sector index slips but beats forecasts
Sterling holds above $1.30 amid Brexit optimism
"US stocks made a mixed start to the week, with the S&P 500 and Dow Industrials gaining ground but"
the tech-heavy Nasdaq Composite suffering a fresh decline as participants braced themselves for the impending midterm elections.
The Nasdaq was held back by another weak showing from Apple following reports that the company had asked suppliers of its new iPhone model not to increase production.
But the wider market found support from strength in the energy sector as crude prices staged a rebound following steep falls last week and as ExxonMobil and Chevron reported sharp increases in earnings.
The US formally imposed sanctions on Iranian crude exports on Monday but gave eight countries temporary waivers allowing them to continue buying oil from Tehran.
"Across the Atlantic, Italian bank stocks came under pressure after Goldman Sachs downgraded some of the country’s biggest lenders."
The sector was also hit by an early sell-off for Italian bonds as the row over the country’s proposed 2019 budget rumbled on.
"EU finance ministers urged Rome to bow to calls from Brussels to revise the draft budget plans, which breach spending rules."
It has until November 13 to submit a fresh proposal.
"There was some broadly encouraging news on the US economy, with the Institute for Supply Management’s October non-manufacturing index easing from a 21-year high but still coming in slightly ahead of expectations."
"However, Andrew Hunter at Capital Economics noted that recent ISM data had been increasingly at odds with other survey evidence."
"“With the boost from fiscal stimulus now fading, we . . "
"expect a further slowdown in GDP growth in the fourth quarter,” he said."
The data failed to lift either the dollar or Treasury yields.
Sterling held above the $1.30 level against the dollar — well off last week’s low just above $1.27 — as the markets took heart from reports that the UK was near to reaching a deal to leave the EU that would include an all-UK customs arrangement.
"In New York, the S&P 500 ended 0.6 per cent higher at 2,738, with the energy sector up 1.4 per cent and financials 1.5 per cent higher."
The Dow Jones Industrial Average rose 0.8 per cent.
Berkshire Hathaway stood out with a gain of more than 5 per cent after it said operating profits in the third quarter had doubled.
The Nasdaq Composite fell 0.4 per cent — having been down as much as 1.4 per cent at one stage.
"Apple shares fell 2.8 per cent, for a two-day drop of nearly 8 per cent."
The stock briefly fell below $200 for the first time in three months.
Amazon was another big faller after it unveiled plans to offer free shipping to all US customers during the holiday season.
"In Europe, the pan-regional Stoxx 600 index and the Xetra Dax in Frankfurt both shed 0.2 per cent, although London’s FTSE 100 inched 0.1 per cent higher, even as the pound rose against the dollar."
The dollar index was down 0.3 per cent at 96.31 as the euro rose 0.2 per cent to $1.1410 and the greenback traded flat against the yen at ¥113.18.
"Sterling was up 0.5 per cent at $1.3040, after earlier hitting a two-week high of $1.3062."
"The yield on Italy’s 2-year debt rose as high as 1.23 per cent before closing at 1.13 per cent, up 2 basis points on the day."
The 10-year yield ended 1bp higher at 3.32 per cent after touching 3.39 per cent.
"The 10-year US Treasury yield was down 1bp at 3.20 per cent, with the two-year yield flat at 2.91 per cent."
"Brent oil settled at $73.17 a barrel, up 0.5 per cent after sliding more than 6 per cent last week."
US West Texas Intermediate was 0.6 per cent lower in late trade at $62.76.
"Gold was down $2 at $1,230 per ounce."
Additional reporting by Hudson Lockett in Hong Kong and Michael Hunter in London
Friday 20.00 GMT
S&P 500 falls 0.6%; Nasdaq 1.2% lower
Apple shares down more than 6 per cent
Kudlow comments fuel uncertainty about US-China agreement
Robust US wage growth pushes up Treasury yields and dollar
Oil prices continue to fall
"US stocks turned lower after three straight days of solid gains, as a steep fall for Apple led a retreat for the broader technology sector and participants took a less optimistic view of the prospects of a thaw in US-Sino trade relations."
"European equities pared their early gains although the Stoxx 600 index still registered its best week since December 2016, while emerging market stocks — as measured by the FTSE EM index — extended their recent rally to reach a four-week high."
"The retreat for Wall Street also came as a robust US employment report helped reinforce expectations that the Federal Reserve would raise interest rates again next month, pushing Treasury yields and the dollar higher."
Apple’s decline came in response to a disappointing outlook for holiday season sales from the company.
"“The fact the group will no longer report unit sales of iPhones and iPads suggests they don’t want to draw attention to the numbers, possibly because we might be near peak iPhone sales,” added David Madden, analyst at CMC Markets UK."
Apple’s worrying outlook followed disappointing guidance from a number of other big-name US companies during the quarterly reporting season.
"Meanwhile, there was plenty of uncertainty about the prospect of a trade deal between the US and China."
"Reports on Friday suggested that Donald Trump, US president, was looking to reach a deal before the end of this month and had asked officials to draw up a draft of a potential agreement"
"But Larry Kudlow, Mr Trump’s top economic adviser, appeared to throw cold water on the prospect of an imminent agreement when he said there were no such plans in the works."
"“We’re not on the cusp of a deal,” Mr Kudlow said."
"Some observers suggested that Mr Trump’s remarks might be little more than an attempt to calm markets ahead of next week’s midterm elections, following the turbulence seen in October."
"Further positive news on the US economy came from the latest non-farm payrolls report, which showed that 250,000 jobs had been created last month — more than expected — and that average hourly earnings increased by 0.2 per cent month on month, pushing the annual growth rate to 3.1 per cent."
That was the first time US wage growth had exceeded 3 per cent since the global financial crisis.
"“With wage inflation rising and employment continuing to grow at a heathy pace, we think that a December rate hike is all but guaranteed,” said Hubert de Barochez at Capital Economics."
“We also believe that the Fed will then raise rates twice more before mid-2019.
"This is slightly faster than investors are forecasting, so we think that the small increases in Treasury yields and the dollar following the employment report have a bit further to run.”"
"The dollar index recovered some of the previous day’s sharp fall, while the yield on the 10-year Treasury touched its highest point in more than three weeks."
"Oil prices remained on the back foot, with Brent extending its drop from the October 3 high of $86.74 to about 16 per cent."
"“A number of factors have influenced the recent sell-off, but the Trump administration announcing that it will be issuing waivers to certain countries allowing them to maintain reduced levels of Iranian oil imports was key in getting the last of the bulls to capitulate,” said Ryan Fitzmaurice, strategist at Rabobank."
"In New York, the S&P 500 ended 0.6 per cent lower at 2,723, having risen as much as 0.6 per cent in early trade."
"However, the index was up 2.4 per cent for the week, its best showing since May."
"The Nasdaq Composite fell 1.2 per cent, with Apple 6.6 per cent lower, while the Dow Jones Industrial Average shed 0.4 per cent."
"Across the Atlantic, the Stoxx 600 Europe index ended 0.3 per cent higher, after gaining 1.3 per cent earlier in the day."
The Xetra Dax in Frankfurt gained 0.4 per cent but
’s FTSE 100 closed 0.3 per cent lower.
"Not surprisingly, the early optimism about a US-China trade deal pushed Chinese stocks sharply higher."
The CSI 300 index of mainland stocks rose 3.6 per cent while the Hang Seng index in Hong Kong climbed 4.2 per cent.
The Topix index in Tokyo rose 1.6 per cent.
"China’s onshore renminbi strengthened 0.7 per cent to Rmb6.8680 per dollar, a level last seen on October 11, as participants took heart from hopes for improved international trade relations."
The dollar index was up 0.2 per cent at 96.50 — having shed 0.9 per cent on Thursday — as the euro slipped 0.1 per cent to $1.1392 and the greenback rose 0.4 per cent against the yen to ¥113.20.
"The 10-year US Treasury yield was up 7 basis points at 3.21 per cent, with the two-year yield up 6bp at 2.91 per cent."
Sterling was 0.34 per cent weaker versus the dollar at $1.2963 after climbing almost 2 per cent in the previous session on persistent hopes for a deal on the terms of Brexit.
The Bank of England signalled on Thursday that it might need to raise interest rates at a faster rate if the UK has a smooth exit from the EU.
"Oil prices were lower, with Brent settling at $72.83 a barrel, down 0.1 per cent, and West Texas Intermediate down 1.3 per cent in late trade at $62.88."
"Gold was flat at $1,232 an ounce."
Additional reporting by Michael Hunter in London and Alice Woodhouse in Hong Kong
Thursday 21.01 GMT
Apple shares fall in after-market trading following results
Supportive earnings helps extended stocks rebound
Pound jumps after BoE sends hawkish signal on rates in event of Brexit deal
China equities gain after latest stimulus pledge
"US stocks kicked off November on a solid footing, as a combination of corporate earnings and hopeful comments from US president Donald Trump on trade talks with China helped sentiment."
"Equity markets had ended a grim October on a brighter note, as some investors judged that the worst month for global stocks in six years generated buying opportunities."
Anxiety that a slowing global economy is beginning to hurt corporate America
"’s profitability contributed to October’s sell-off, but there was at least some reassurance on that front on Thursday."
"Shares in DowDuPont, the US chemicals company, surged as much as 10 per cent after its third-quarter results beat"
analysts’ expectations and executives said their global operations had not seen signs of a slowdown.
"The S&P 500 index, which is up 2.5 per cent for the year, extended its gains after Mr Trump tweeted that he had enjoyed a “long and very good conversation with President Xi Jinping of China”."
"The index of large US companies ended the day with a 1.1 per cent gain, while the Nasdaq climbed 1.8 per cent."
"However, the first hat-trick of consecutive daily advances for the US stock market ended on a glum note after Apple, the biggest listed company in the world, said that sales in the fourth quarter would likely come in below Wall Street expectations."
That sent Apple’s shares down 5 per cent in after-market trading.
"Europe’s stocks rally came after well-received third-quarter figures from the UK telecoms operator BT, the Dutch chipmaker ASM and the Swedish technology company Hexagon."
"The Stoxx Europe 600, a benchmark for Europe, gained 0.4 per cent."
There were also sustained gains for China
"equities after authorities signalled a new round of economic stimulus measures to shore up confidence, as China faced headwinds from slower growth and the US-China trade war."
"China’s CSI 300 rose 0.7 per cent, with Hong Kong’s Hang Seng up 1.8 per cent."
Sterling soared as much as 2.1 per cent to beyond the $1.30 mark after the Bank of England signalled that it would have to raise interest rates at a faster pace
should the UK achieve a smooth exit from the EU.
The UK currency had received a boost earlier in the day after a report that Downing Street and the EU had reached an agreement on trade in financial services after Brexit.
"The report was later described as “misleading” by Michel Barnier, the EU’s chief Brexit negotiator."
"Against the euro the pound climbed as much as 1.1 per cent, with 87.66p required for a unit of the shared European currency."
“The pound’s rally says nothing about the negotiations more broadly and nor does it say anything about the domestic political hurdles the government has here in the UK.
"“I still like looking for opportunities to get short again, though we may have to be patient.”Stephen"
"Gallo, head of European FX strategy, Bank of Montreal"
"The US dollar index was 0.9 per cent weaker at 96.266, easing from a 16-month high on Wednesday."
"The yield on US 10-year Treasuries dipped 1 basis point to 3.13 per cent, while the yield on the 10-year UK government bond rose 1bp to 1.45 per cent."
"Brent crude tumbled 3.1 per cent at $72.74 a barrel, while gold was 1.5 per cent higher at $1,233.2 an ounce."
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Wednesday 20:30 GMT
Wall Street keeps its momentum after rebound in Europe and Asia
Dollar index at highest level since June 2017 as euro continues to struggle
Pound higher after Raab says Brexit deal is ‘in sight’
Oil prices slip
"Wall Street rose on Wednesday after gains across Europe and Asia, as robust earnings news helped to offset the worst of investors’ fears that corporate profitability could have peaked."
"Meanwhile, the dollar index hit its highest level since June 2017, with the euro under sustained pressure after lacklustre economic growth data for the eurozone earlier this week."
"Nonetheless, the day’s gains on stock markets represent no more than a rebound at the end of a grim October."
"“While upbeat earnings numbers have helped the US stock market find its feet again in the past couple of days, the bigger picture is that the S&P 500 has tumbled in recent weeks despite healthy earnings,” analysts from Capital Economics said on Wednesday."
"“We think that this reflects worries about the outlook for them, which in our view are likely to intensify as actual earnings growth slows sharply next year.”"
"The month was the worst since 2012 for world stocks, one that casts doubt on the decade-long bull market for equities."
October’s nervous tone to trade came amid concern at rising US interest rates coinciding with slowing global growth.
"Furthermore, worries that US corporate earnings have peaked came just as investors face a range of geopolitical risk factors, not least the trade dispute between the US and China."
"But after a run of well-received third-quarter earnings news in Europe, the steep decline looked to have run far enough, at least for the time being."
"Forecast-beating results from General Motors in the US also helped to improve the mood, sending its stock up more than 9 per cent."
"Wall Street’s S&P 500 rose 1.1 per cent, while the Nasdaq Composite added 2 per cent."
"London’s FTSE 100 added 1.3 per cent, with Frankfurt’s Xetra Dax 30 up 1.4 per cent and the region-wide Stoxx 600 also rising 1.7 per cent."
"China’s CSI 300 closed up 1.4 per cent, rounding out a turbulent month in which regulators have worked to underpin a market battered by slowing economic growth and the US-China trade war."
The bounce higher cut the index’s decline for October to 6 per cent.
"The Hang Seng index in Hong Kong added 1.6 per cent, helped by demand for technology stocks, which led the earlier selling."
It fell just under 10 per cent for the month.
"“With still positive economic growth but elevated uncertainty, investors may wish to consider a more balanced asset allocation than has made sense for most of the last nine years."
"Bell, global market strategist at JPMorgan Asset Management"
The dollar index hit a
16-month high after climbing in the previous session as soft eurozone growth data weighed on the shared currency.
The euro remained under pressure — down 0.2 per cent at $1.1320 — after data showing the highest increase in eurozone inflation in six years did not offset a lacklustre rate of economic growth published during the previous session.
Sterling gained 0.5 per cent at $1.2772 as hopes rose for an imminent solution to the EU divorce negotiations between the UK and Brussels.
"A deal was “now firmly in sight”, according to a letter sent to a parliamentary committee by Dominic Raab, the UK’s Brexit secretary."
"“This is good news at the margin but not a solid sign that a Brexit deal is close,” cautioned analysts at Nomura."
"Against the euro, the UK currency traded 0.7 per cent stronger at £0.88635 to the euro."
The yield on UK 10-year gilts climbed 4 basis points to 1.43 per cent on reports of Mr Raab’s comments.
"The 10-year US Treasury yield was 3 basis points higher at 3.15 per cent after a closely watched report that showed stronger than expected growth in the jobs market, even though the unemployment rate has sunk to its lowest level since 1969."
"Private payrolls increased by 227,000 jobs in October, up from 218,000 in the previous month, according to ADP."
Oil prices continued to fall amid concern about the outlook for demand amid slower global economic growth.
Brent crude slipped 0.6 per cent to $75.47 a barrel after falling almost 2 per cent in the previous session.
"Gold was down 0.6 per cent at $1,216 an ounce."
Tuesday 21:30 GMT
Dollar reaches 10-year high versus renminbi
Wall Street recovers after GE slashes dividend
European stocks move lower after early gains
Chinese stocks end choppy day higher
"The US dollar traded at its highest level in more than a year against its major trading partners, buoyed by a series of stings affecting other currencies."
"The dollar index — which tracks the currency against a basket of six global peers — rose 0.4 per cent on Tuesday to 97.001, its highest level since June 2017."
"Gains were pronounced against the Chinese renminbi, which sank to a 10-year low close to the psychologically important level of Rmb7 against the buck."
"Against the Japanese yen, the greenback was up 0.7 per cent."
"Analysts said the rally was driven largely by “non-dollar” issues, such as the release of disappointing economic growth data for Italy and the eurozone."
"The firmer tone for the dollar was matched by gains for US stocks, which shrugged off news of a big cut in the dividend payout of General Electric."
"The S&P 500 index, the main US equity benchmark, added 1.6 per cent."
"The tech-heavy Nasdaq, which has been under pressure for most of October, also rose 1.6 per cent."
"After-hours, whipsaw trading of Facebook shares followed mixed earnings for the company."
"European equities, meanwhile, ended in the red following the release of data that showed a slowdown in economic growth across the eurozone in the third quarter."
"Real eurozone gross domestic product rose just 0.2 per cent in July-September, below analysts’ expectations."
Germany’s Dax index and France
"’s CAC 40 clawed back early losses to end down 0.4 per cent and 0.2 per cent respectively while the Stoxx Europe 600, a pan-European benchmark, ended Tuesday’s session virtually unchanged."
"In London, the FTSE 100 surrendered early gains to end just 0.1 per cent higher after BP reported stronger-than-expected results."
"The energy company announced that earnings more than doubled in the third quarter, compared with the same period a year ago."
Chinese equities opened lower on Tuesday after a report that US president Donald Trump was considering announcing tariffs on remaining Chinese imports in December if scheduled talks with his Chinese counterpart
Xi Jinping failed.
Sentiment was then helped after Mr Trump told Fox News that he expected a “great deal” with China.
The CSI 300 index of the main Shanghai and Shenzhen stocks was up 1.7 per cent on the day after China’s securities regulator said it would encourage share buybacks and investment from insurance companies.
Shares in the big manufacturers of memory chips in South Korea received a boost after the US government restricted exports of key American parts to the Chinese chipmaker Fujian Jinhua.
"SK Hynix jumped 5.1 per cent and Samsung Electronics rose 3.8 per cent, helping lift the broader Kospi Composite 1 per cent."
"China’s renminbi slipped to a 10-year low against the dollar, amid concerns the weakening currency could drive capital outflows and further pressure policymakers in Beijing."
"The onshore renminbi, which trades within a daily band set by China’s central bank, was 0.1 per cent weaker at Rmb6.9672 to the dollar."
"Chaoping Zhu, a JPMorgan Asset Management strategist, said the weak Chinese currency reflected “tenuous confidence” in the economy’s growth."
"The dollar also strengthened slightly against the UK pound and the euro at $1.2706 and $1.1345, respectively."
"In sovereign debt markets, the yield on US 10-year Treasuries was up 4 basis points at 3.12 per cent."
"While that remains shy of the 3.23 per cent touched at the start of the month, it remains comfortably above the 3 per cent level despite the squall in stock markets."
"Brent crude, the international oil benchmark, was down 1.9 per cent at $75.91 a barrel amid fears that a slowdown in global economic growth will crimp energy demand."
"Gold, which has rallied in October as investors have sought haven assets, was off 0.5 per cent at $1,222 an ounce."
Monday 20:00 GMT
S&P 500 ends 0.7% lower; Nasdaq sheds 1.6%
"US preparing further tariffs on Chinese imports, say reports"
Italian bond yields fall after country avoids rating downgrade
Euro little moved by Merkel’s decision to quit as CDU leader
Carmakers energised by talk of China tax break
"A strong opening rebound for US stocks following the steep losses incurred last week proved shortlived, as the recent turbulence that has afflicted global markets showed little sign of abating."
"The reversal of fortune came as participants digested reports late in the day that the US was preparing to impose fresh levies on all remaining Chinese imports yet to be hit with tariffs by December, if talks between Donald Trump, US president, and Xi Jinping, China’s premier, faltered."
"The reports played to concerns that the outlook for US corporate profits remained challenging, particularly given the potential impact of Mr Trump’s protectionist trade polices on the global economy."
"Sam Buckingham, analyst at Thomas Miller Investment, highlighted that the recent equity sell-off had occurred during a period when US companies were reporting annual earnings growth, on average, of more than 20 per cent."
"“It seems to us these stellar earnings have intensified ‘end of the cycle’ fears as they have most probably peaked now as the tax cuts start to fade out as we move into 2019,” he said."
"Technology stocks were once again at the forefront of the sell-off, although carmakers provided a positive beacon after talk that China was considering halving the tax on new-vehicle purchases."
"The mood early in the day was also helped by relief that S&P Global had kept the country’s credit rating two notches above “junk” status, although it revised its outlook from stable to negative."
"The move came as markets awaited further developments on Italy’s proposed 2019 budget, which was rejected by the EU last week for breaking fiscal rules."
"The gap between Italian and German 10-year bond yields, watched as a gauge of the perceived risk of holding Rome’s debt, fell below 300 basis points."
"Meanwhile, there was a relatively muted market impact from"
Angela Merkel’s announcement that she would stand down as leader of Germany’s ruling Christian Democratic Union after 18 years.
"“[The news] has limited implications for the German economy since she will stay on as chancellor for now and her likely successors broadly support her policies,” said Jennifer McKeown at Capital Economics."
"“But it may well slow decision-making over Italy, adding to risks facing the eurozone as a whole.”"
Brazilian stocks hit a record high and the real touched its strongest point against the dollar since May after far-right candidate Jair Bolsonaro won Sunday’s presidential election.
"However, the strength proved shortlived, with both the Bovespa index and the currency turning negative."
Mexican assets fell sharply after the country voted overwhelmingly to scrap a $13bn airport that is already under construction.
"In New York, the S&P 500 ended 0.7 per cent lower at 2,641.25 — marking a decline of 9.8 per cent from the record closing high of 2,930.75 set in September."
A drop of 10 per cent from a cyclical peak is the usual definition of a correction.
"The index had climbed as much as 1.8 per cent earlier in the day, after shedding 4 per cent last week and turning negative for the year."
"The tech-heavy Nasdaq Composite also reversed a strong early rise to close 1.6 per cent lower, while the Dow Jones Industrial Average fell 1 per cent."
Ford Motor rose more than 3 per cent and General Motors gained 1.5 per cent.
IBM fell 4.1 per cent amid concerns about the company’s $34bn purchase of software pioneer Red Hat.
Red Hat shares soared 45 per cent.
"In Brazil, the Bovespa index rose more than 3 per cent in early trade before turning tail to end 2.3 per cent lower."
IPC stock index shed 4.2 per cent.
"European stocks also came off the day’s best levels, with the pan-regional Stoxx 600 index ending 0.9 per cent higher, after trading 1.8 per cent higher at one stage."
"The Xetra Dax in Frankfurt finished 1.2 per cent higher, with Daimler up more than 2 per cent, and the UK"
FTSE 100 gained 1.3 per cent as chancellor Philip Hammond’s Budget statement had little discernible impact.
Italian stocks outperformed with a rise of 1.9 per cent for the FTSE MIB index.
China’s CSI 300 ended Monday down 3 per cent following a late sell-off.
"That left the index about 1 per cent above its closing low for 2018 reached earlier in October, which took it back to levels last touched in June 2016."
China’s onshore renminbi rate held near a 10-year low within sight of the Rmb7 per dollar as the markets remained focused on the currency
’s role in the US-Sino trade dispute.
"“Chinese authorities are walking a tightrope between allowing sufficient depreciation to cushion the blow to exporters of the tariff war with the US, while not spurring expectations of a greater depreciation and hence large and potentially destabilising capital outflows,” wrote ANZ analysts in a note."
"The euro was down 0.1 per cent against the dollar at $1.1386, helping to push the dollar index up 0.2 per cent to 96.58."
"Sterling was 0.2 per cent lower at $1.2804, while the greenback was up 0.3 per cent versus the yen at ¥112.21."
"The Brazilian real was 1.7 per cent weaker against the dollar, with the Mexican peso down 3.4 per cent."
"In the fixed income arena, Italy’s 10-year bond yield fell 9 basis points to 3.34 per cent, after touching 3.27 per cent, and its spread over German Bunds narrowed to 295bp."
"The 10-year US Treasury yield was flat at 3.08 per cent, having earlier risen to 3.117 per cent, while the two-year yield was steady at 2.81 per cent."
The 10-year German Bund yield rose 3bp to 0.38 per cent.
"Gilt prices marginally outperformed, with the 10-year yield inching up 1bp to 1.40 per cent, after the UK’s debt office cut its issuance forecast for the year."
"Oil markets remained unsettled by concerns about the global economic outlook, with Brent crude settling at $77.34 a barrel, down 0.4 per cent, and US West Texas Intermediate 1.7 per cent lower at $66.45."
"Gold, which hit a three-month intraday high on Friday, was down $3 at $1,229 an ounce."
Additional reporting by Michael Hunter in London and Alice Woodhouse in Hong Kong
Friday 21.00 BST
S&P 500 ends 1.7% lower; Nasdaq slides 2.2%
Guidance from Google and Amazon overshadows US GDP data
US 10-year Treasury yield hits 3-week low
Renminbi hits weakest point versus dollar since 2008
Oil prices rally but suffer weekly falls
Global stocks resumed their downward path after Amazon and Google joined the list of high-profile companies whose earnings outlooks unsettled markets over the course of the week.
"The latest equity sell-off helped fuel further gains for Treasuries — with the 10-year yield hitting its lowest level for three weeks — “haven” currencies such as the Japanese yen, and gold."
Technology stocks were once again at the forefront of the selling as participants fretted that the sector could be hurt the most by any downturn in global growth.
The S&P 500 was back in negative territory for the year — and briefly traded more than 10 per cent below September’s
"record high, the usual definition of a correction — while the pan-European Stoxx 600 index touched its lowest point since December 2016."
"The jittery market tone this week came as a number of companies highlighted risks to future earnings from factors including the Trump administration’s protectionist trade policies, the prospect of further rate rises by the Federal Reserve, and the strong dollar — heightening recent concerns about the outlook for global growth."
"The Chinese renminbi yesterday touched its weakest point against the US currency for a decade, reflecting pressure from the continued trade dispute between the two countries."
"Furthermore, markets have had to deal with uncertainty surrounding Italy’s proposed 2019 budget, long-running concerns about the UK’s exit from the EU, and deteriorating relations between Saudi Arabia and the rest of the world."
"“The tensions between a long list of global risks and the ability of investors to keep faith in a US expansion that is closing in on being 10 years in the making have triggered bouts of volatility that have taken in Italian bonds, emerging market currencies and now global equities,” said Chris Iggo, CIO fixed income at Axa Investment Managers"
"“Tensions could keep volatility elevated but 2019 should see better return prospects if the worst case outcomes for the trade war, Italy and Brexit are avoided.”"
"Some in the markets suggested that the recent slide in stock markets was hard to square with the 3.5 per cent annualised gain in third-quarter GDP announced on Friday, which followed a 4.2 per cent rise in the second quarter."
"“Looking at the details of that economic growth, however, there are signs that higher interest rates are already restraining spending, which could partly justify the weakness in equities,” said Paul Ashworth at Capital Economics."
“The current strength of the economy is largely due to the boost from the massive fiscal stimulus at the start of this year.
"At the same time, monetary policy is becoming a more significant headwind.”"
"The GDP figures offered little in the way of support to the dollar, although the US currency continued to hover near a 10-week high against a basket of peers."
And there was little relief for the euro this week from the European Central Bank’s confirmation that it would halt its asset purchase programme by the end of the year.
Oil prices had a bad week as global growth worries mounted and worries about supply disruptions faded.
Brent crude suffered a five-day drop of 2.7 per cent.
"In New York, the S&P 500 ended another volatile session at 2,658, down 1.7 per cent — below its close of 2,673.61 at the end of 2017 — but off the day’s low of 2,628.16."
"The benchmark hit a record intraday high of 2,940.91 on September 21."
"The Nasdaq Composite fell 2.2 per cent, having earlier fallen 3.6 per cent, while the Dow Jones Industrial Average shed 1.2 per cent."
"Amazon shares fell 7.8 per cent while Alphabet, the parent company of Google, pared an early fall to end 1.8 per cent lower."
"The Cboe Global Markets Vix index of implied equity volatility touched 27.52, not far from an eight-month high hit earlier this month, before easing back slightly."
"Across the Atlantic, the Stoxx 600 Europe index ended 0.8 per cent lower, after sliding as much as 1.9 per cent during the session."
The Xetra Dax in Frankfurt and London’s
FTSE 100 both fell 0.9 per cent.
"There were more muted falls for Asian stock indices, with the Shanghai Composite slipping 0.2 per cent and the Topix in Tokyo shedding 0.3 per cent."
The dollar index was down 0.3 per cent at 96.35 — but still in sight of August’s one-year high of 96.98 — as the euro inched up 0.3 per cent to $1.1405.
"Nevertheless, the single currency was still down about 1 per cent over the week."
The US currency was down 0.6 per cent against the yen on Friday at ¥111.75 while sterling was up 0.1 per cent at $1.2831.
"The renminbi touched Rmb6.9462 to the dollar, its weakest level since 2008 on Friday."
"That raised concern over the risk to offshore listed Chinese companies from foreign exchange adjustments and transaction losses, as well as broader capital outflows from China, according to Goldman Sachs analysts."
The yield on the 10-year Treasury was down 6 basis points at 3.08 per cent and the two-year was 6bp lower 2.81 per cent.
"The 10-year German Bund yield fell 5bp to 0.35 per cent, the lowest since early September."
"Oil prices managed to rally at the end of the week, with Brent crude settling at $77.62 a barrel, up 1 per cent on the day, and West Texas Intermediate 0.4 per cent higher in late trade at $67.57 — although both contracts were lower over the week."
"Gold was up $4 at $1,235 an ounce."
Additional reporting by Michael Hunter in London; Edward White in Taipei and Hudson Lockett in Hong Kong
Thursday 21.00 BST
S&P 500 rallies 1.9%
; Nasdaq jumps 3%
Focus remains on earnings after recent concerns
Euro slips and Italian bond yields rise
ECB to leave monetary policy on hold as expected
Oil prices fall further on increased Saudi output
"US stocks staged a solid rebound after the previous day’s savage sell-off, as forecast-beating earnings reports from the likes of Microsoft, Ford and Twitter provided a more encouraging backdrop."
"The main equity indices on Wall Street recouped much of Wednesday’s losses, which had wiped out all the gains made by the S&P 500 in 2018 and left the Nasdaq Composite nursing its biggest one-day fall for seven years."
"Yet the underlying mood remained cautious as recent uncertainty about corporate earnings growth — given the Trump administration’s protectionist policies, the strong dollar and the prospect of further rate rises from the Federal Reserve — kept market participants unsettled."
"“So far, the US earnings season has been decent, with approximately 30 per cent of the S&P 500 companies by market capitalisation having reported and 83 per cent of those having beaten analysts’ expectations,” said Kerry Craig at JPMorgan Asset Management."
"“The anxiety now in markets stems from whether this is the peak in earnings and growth, as higher input costs from rising wages, the impact of tariffs and higher funding costs start to impinge on corporate margins.”"
"Meanwhile, the euro slipped to a two-month low against the dollar while Italian bond yields fell as the European Central Bank sprang no surprises at its policy meeting— reiterating that it would halt its asset purchase scheme by the end of 2018, despite recent market turbulence and uncertainty over Italy’s budget."
"“The recent weakening of the eurozone economy’s momentum has not changed the ECB’s central view of a continued recovery and a gradual rise in inflation towards its aim,” said analysts at BNP Paribas."
“This confirms the ECB’s strong bias to end net asset purchases in December.
The message on Italy was conciliatory but firm — monetary policy won’t come to the rescue.”
Oil prices rallied in tandem with stocks — after retreating sharply earlier this week in response to speculation about increased supplies and slowing global economic growth.
"In New York, the S&P 500 ended 1.9 per cent higher at 2,705, after rising as high as 2,722.70, while the Nasdaq Composite gained 3 per cent."
"The two barometers fell 3.1 per cent and 4.4 per cent, respectively, on Wednesday."
The Dow Jones Industrial Average rose 1.6 per cent on Thursday.
"Microsoft shares rose 5.8 per cent, while Ford gained nearly 10 per cent and Twitter jumped some 15 per cent."
Amazon rose more than 7 per cent in official trade on Thursday but fell sharply in after-hours dealings.
"Across the Atlantic, the Stoxx 600 Europe ended 0.5 per cent higher — after sliding as much as 1 per cent earlier in the day."
The Xetra Dax in Frankfurt rallied 1 per cent and London’s FTSE 100 gained 0.6 per cent
"In Asia, Chinese stock indices ended broadly flat, although the Topix in Tokyo shed 3.1 per cent and Seoul’s"
Kospi index lost 1.6 per cent.
"The euro was down 0.2 per cent versus the dollar at $1.1368, just off the day’s low of $1.1356, but was up 0.3 per cent against sterling at £0.8869."
"The pound was also down another 0.5 per cent against the greenback at $1.2813, its lowest point since early September, amid lingering concerns about the possibility of a “no-deal Brexit”."
"The US currency was 0.2 per cent firmer against the yen at ¥112.51, helping to push the dollar index up 0.2 per cent to 96.64, the highest level since mid-August."
The yield on the 10-year US Treasury was up 1 basis point at 3.14 per cent and the two-year was flat at 2.86 per cent.
Italy’s 10-year yield fell 11bp to 3.50 per cent.
Brent oil settled 1 per cent higher at $76.89 — after earlier dipping to $75.35 — as it continued to pull away from Wednesday’s two-month intraday low of $75.11.
"Just three weeks ago, the international crude benchmark touched a four-year high of $86.74."
"Gold was down $4 at $1,229 an ounce."
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Wednesday 21:00 BST
Philadelphia SE Semiconductor index slides 6.6%
S&P 500 nears correction territory
Euro falls to 2-month low as weak PMI report raises concerns
Canadian dollar gains after BoC lifts rates
Oil prices rise after inventories data
"A sell-off for US stocks accelerated into the close, leaving the S&P 500 negative for the year and on the verge of entering correction territory, as concerns about the outlook for the chipmaking sector deeply unsettled the market."
"The Philadelphia SE semiconductor index fell more than 6 per cent to its lowest close since September 2017, with Texas Instruments’ shares falling sharply after its revenues and earnings forecast disappointed."
STMicroelectronics also tumbled after the Franco-Italian chipmaker signalled a slowdown in Chinese demand.
"On Tuesday, industrial bellwethers Caterpillar and 3M set alarm bells ringing when their forecasts reignited concerns about the impact of trade tariffs on corporate profits."
"“While the strong US economy has underpinned corporate earnings, investors are increasingly concerned about the future amid signs of rekindling inflationary pressures and rising interest rates, along with the consequences of the US-led trade protectionism,” said Action Economics."
"The latest sell-off in US equities helped fuel further gains for US Treasuries and German Bunds, while the Japanese yen inched higher against the dollar and gold rose modestly."
"The earnings and trade war concerns this week have further weighed down markets already unsettled by the prospect of a clash between Brussels and Rome over Italy’s planned 2019 budget, uncertainty over the UK’s Brexit plans, and worries about the relationship between the US and Saudi Arabia."
"Meanwhile, the euro hit a two-month low below $1.14 after an unexpectedly sharp decline in the eurozone composite purchasing managers’ index “pointed to the slowest pace of quarterly GDP growth [in the region] for two and a half years”, according to Capital Economics."
"“Amid the fiscal stand-off between Rome and Brussels, as well as increasingly jittery global markets, the European Central Bank is likely to stress at its meeting [today] that monetary policy tightening remains dependent on the incoming data.”"
"The Canadian dollar rose after the country’s central bank raised interest rates, as expected, and struck a hawkish tone in its comments."
Brent oil extended Tuesday’s 4.3 per cent tumble taking it closer towards the $75 a barrel mark — as the latest data from the Energy Information Administration showed another rise in crude stockpiles last week but big drops in US gasoline and distillates inventories.
"In New York, the S&P 500 fell for a sixth successive session to end 3.1 per cent lower at 2,656 — leaving it 0.7 per cent down for the year, and 9.7 per cent below September’s record high."
The usual definition of a correction is a 10 per cent dip from a cyclical peak.
"The Nasdaq Composite index ended 4.1 per cent lower, taking it more than 12 per cent down from the intraday record high hit at the end of August."
It was the worst day for the tech-heavy index since August 2011.
The Dow Jones Industrial Average shed 2.4 per cent and also fell into negative territory for 2018.
"The Philadelphia SE semiconductor index ended 6.6 per cent lower, with Texas Instruments’ shares down 8.2 per cent."
The Cboe Global Markets Vix volatility index topped the 25 level.
"In Europe, the pan-regional Stoxx 600 ended 0.2 per cent lower, with STMicro down 10 per cent."
The Xetra Dax in Frankfurt shed 0.7 per cent but London
"’s FTSE 100 edged up 0.1 per cent, helped to some degree with a steep drop for sterling."
"Chinese stocks had a volatile time, with the CSI 300 index of major Shanghai and Shenzhen companies closing up just 0.2 per cent, as a rally that took it more than 1 per cent higher faded."
The Hang Seng China Enterprises index of Hong Kong-listed Chinese blue-chips edged down 0.1 per cent
"The euro was down 0.6 per cent against the dollar at $1.1397, the lowest since August 17 — but was 0.1 per cent higher versus sterling at £0.8842 — after the release of the PMI figures, which showed the headline reading for falling to 52.7 in October, the lowest figure for 25 months"
The pound was down 0.7 per cent at $1.2886 as participants continued to fret about the possibility of prime minister Theresa May facing a leadership challenge.
"The dollar index was up 0.4 per cent at 96.36, the highest since the middle of August."
The US dollar was down 0.3 per cent against its Canadian namesake at C$1.3043 after the Bank of Canada raised interest rates for the third time this year.
The yield on the 10-year US Treasury was down 6 basis points at 3.11 per cent while that on the 10-year German Bund fell 3bp to a six-week low of 0.39 per cent.
Italy’s 10-year yield inched up 3bp to 3.61 per cent.
"Brent crude settled at $76.17 a barrel, down 0.4 per cent, having earlier touched $77.57."
US West Texas Intermediate was 0.2 per cent lower in late trade at $66.30.
"Gold edged up $2 to $1,232 an ounce."
Additional reporting by Michael Hunter in London and Alice Woodhouse in Hong Kong
Tuesday 21:00 BST
S&P 500 ends 0.6% lower after falling as much as 2.3%
Growth worries halt rally for Chinese stocks
Caterpillar highlights impact of trade tariffs
Italian bond yields rise after European Commission rejects budget plan
Brent oil slides below $77 a barrel
A volatile session on Wall Street saw the main US equity indices claw back the worst of their steep early losses as participants “bought the dips” in spite of a variety of concerns ranging from worries about global growth and Italy’s budget to the fallout from the death of dissident Saudi journalist Jamal Khashoggi.
"Oil prices came under heavy pressure, with Brent heading for its biggest one-day drop since July, after Saudi Arabia eased supply concerns by saying it could provide more crude quickly if needed."
"So-called “haven assets” pared early gains after the yield on the 10-year US Treasury tested key support at 3.12 per cent, gold rose to levels not seen since mid-July and the yen strengthened to a one-week high against the dollar."
Chinese stocks set the ball rolling after they gave back a big chunk of the gains made over the previous two sessions as concerns about the outlook for the economy resurfaced amid lingering trade war worries.
The retreat provided a miserable backdrop for European equity markets already burdened by uncertainty about Italy.
"The European Commission, as expected, rejected the country’s draft 2019 budget — keeping Rome and Brussels on collision course and helping to push Italian government bond yields back towards last week’s highs."
"On Wall Street, disappointing earnings outlooks from industrial bellwethers Caterpillar and 3M provided further reason for caution and drove the companies’ share prices sharply lower."
Caterpillar highlighted higher metals prices as a result of the Trump administration’s tariffs.
"“These figures bring home loud and clear the ramifications of the brewing trade war and come at a time when traders are starting to realise that the chances of a US-Sino trade deal being achieved are diminishing,” said Fiona Cincotta, senior analyst at City Index."
“Costs are increasing and fears that tighter trade conditions will slow global growth are making even the most level-headed trader nervous.”
"In New York, the S&P 500 finished 0.6 per cent lower at 2,740 — having dropped as much as 2.3 per cent earlier in the day to its lowest point since May."
"At its worst, the index was down about 8.5 per cent from the record high set in September."
"The Dow Jones Industrial Average slipped 0.5 per cent, while the Nasdaq Composite closed with a loss of 0.4 per cent."
Caterpillar shares fell more than 7 per cent while 3M shed more than 4 per cent.
The Cboe Global Markets Vix volatility index still pushed back above its long-term average of 20.
"In Europe, the pan-regional Stoxx 600 index fell 1.6 per cent to its lowest close for 22 months, while the Xetra Dax in Frankfurt shed 2.2 per cent and London’s FTSE 100 lost 1.2 per cent."
"Italian stocks outperformed following recent weakness, with the FTSE MIB closing 0.9 per cent lower."
"A two-day rally for Chinese equities came to an abrupt halt, with the CSI 300 index of major Shanghai and Shenzhen stocks closing 2.7 per cent lower, while Hong Kong’s Hang Seng China Enterprises index of major Chinese blue chips listed in the city dropped 2.4 per cent."
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"The dollar was down 0.4 per cent against the yen at ¥112.37, after briefly dipping below ¥112, as the Japanese currency’s “haven” credentials came to the fore."
The euro was up less than 0.1 per cent against the greenback at $1.1469 while sterling was up 0.2 per cent at $1.2981.
The dollar index was down 0.1 per cent at 95.93.
"The 10-year US Treasury yield was down 2 basis points at 3.17 per cent, having touched 3.111 per cent, while the two-year US yield was 3bp lower at 2.88 per cent."
"Italy’s 10-year government bond yield rose 11bp to 3.58 per cent — not far from last week’s intraday peak of 3.783 per cent, which was the highest since early 2014."
"Brent oil touched $75.88 a barrel, the lowest since early September, before rallying back to settle at $76.44, still down 4.3 per cent on the day."
US West Texas Intermediate was down 4.4 per cent in late trade at $66.29.
"Gold was up $8 at $1,229 an ounce."
"The metal touched $1,239 earlier in the day, the most expensive since July 17."
Additional reporting by Edward White in Taipei and Michael Hunter in London
Monday 21:00 BST
S&P 500 down 0.4%; Nasdaq up 0.3%
Chinese stocks have best day since 2015
Budget worries fuel choppy day for Italian assets
Brexit concerns drive pound back below $1.30
Brent oil stuck below $80 a barrel
"US and European stock markets made a cautious start to the week, even after Chinese equities had their best day for almost three years and worries that Italy’s sovereign rating could be downgraded to “junk” proved premature."
Energy stocks were among the worst performers in the S&P 500 as Brent oil struggled to regain the $80-a-barrel mark after Saudi Arabia said it was likely to increase crude output.
A broadly disappointing round of US corporate earnings added to the cautious mood.
China grabbed the headlines in early trade as renewed strength for Chinese stocks left the Shanghai Composite index up 6.8 per cent over the past two sessions.
The gains came after concerted efforts by Chinese authorities to shore up confidence in the country’s economy and stock market.
"Meanwhile, Italian stocks and bonds initially rallied following news late on Friday that Moody’s had kept Italy’s sovereign rating stable."
But the country’s equities went into reverse and its bond yields came off the day’s
lows as uncertainty over Italy’s
fiscal plans remained centre stage.
"In response to strong criticism from Brussels of its proposed 2019 budget, Rome said it would stick to its planned sharp increase in public spending, which it said would not threaten the EU’s financial stability."
The European Commission was expected to request a resubmitted budget plan on Tuesday.
"The FTSE MIB equity index ended 0.6 per cent lower — having risen as much as 2 per cent in early trade — while Italy’s benchmark 10-year bond yield ended at 3.47 per cent, down 10 basis points, after touching 3.31 per cent."
The euro gave back an early advance that took it as high as $1.1550.
Crude prices also had a choppy day as Saudi Arabia’s
comments calmed speculation that it could use oil production as leverage in the Khashoggi case.
Brent settled below the $80 mark for the third day in a row.
Sterling stood out in the currency markets as it dipped back below $1.30 for the first time in more than two weeks amid fresh concern that tension over Brexit could fuel a leadership challenge to the prime minister.
"“Talk of Tory centrists — not just Brexiters — handing in letters of ‘no confidence’ in Theresa May has us and the market spooked,” said Jordan Rochester at Nomura."
"In New York, the S&P 500 fell 0.4 per cent to 2,755 and the Dow Jones Industrial Average shed 0.5 per cent, although the tech-heavy Nasdaq Composite overcame early weakness to end 0.3 per cent higher."
"Across the Atlantic, the pan-European Stoxx 600 index fell 0.4 per cent, while Frankfurt’s Xetra Dax ended 0.3 per cent lower and the FTSE 100 shed 0.1 per cent."
"The CSI 300 index of Shanghai and Shenzhen-listed stocks climbed 4.3 per cent, its largest one-day rise since November 2015."
That added to an advance of 3.1 per cent on Friday.
The Shanghai Composite rose 4.1 per cent on Monday and Hong Kong’s Hang Seng gained 2.3 per cent.
"Sterling fell below the closely watched $1.30 level — trading at $1.2967, down 0.8 per cent on the day — while the euro rose 0.5 per cent versus the pound to £0.8840."
The dollar index was up 0.3 per cent at 95.99 — within striking distance of a recent seven-week high of 96.16 — amid optimism about the outlook for the US economy and expectations for further interest rate rises by the Federal Reserve.
"The euro was down 0.4 per cent on the day at $1.1469, while the greenback was up 0.2 per cent against the yen at ¥112.75."
"In the fixed income arena, the yield on the 10-year Treasury was down 1 basis point at 3.20 per cent, with that on the two-year note flat at 2.91 per cent."
The spread between 10-year Italian and German sovereign yields stayed above 300bp.
"Oil prices had a choppy time, with Brent, the international crude benchmark, settling at $79.83 a barrel, up fractionally on the day, after earlier falling to $78.99."
US West Texas Intermediate was 0.2 per cent higher in late trade at $69.25.
"The firmer dollar helped push gold down $3 to $1,222 an ounce."
Friday 21.00 BST
"S&P 500 ends slightly weaker, Nasdaq Composite falls 0.5%"
Encouraging earnings reports have limited impact
Sentiment remains wary after China’s quarterly economic growth slows
Italian stocks and bonds swing wildly amid budget concerns
Brent oil back above $80 as drag from inventories data fades
"US equities closed out another difficult week on a cautious note, with tech stocks once again coming under pressure, even as worries over Italy’s"
"2019 budget receded, Chinese stocks rallied sharply and the latest batch of corporate earnings provided encouragement."
Italian government bonds staged a remarkable turnround following reports that EU officials had sought to reduce tension with Rome over the populist government’s contentious budget plans.
"Conciliatory comments from Pierre Moscovici, the European economic affairs commissioner, came after the EU rebuked Italy over the “unprecedented” break with its budget promises to Brussels."
"The yield on Italy’s 10-year government bond — which touched 3.78 per cent, its highest level since 2014 — ended 8 basis points lower at 3.59 per cent."
The spread between Italian and German 10-year debt tightened substantially while Italian stocks also recovered from an early tumble and the euro bounced off a one-week low against the dollar.
"“Italy’s fiscal policy will certainly remain in focus over the coming week,” said analysts at Daiwa Capital Markets."
“The Italian authorities have until noon on Monday to reply.
"“But, assuming that the cabinet is able to reach agreement on a response — something which cannot be taken for granted given the pressures within the ruling coalition and the erratic behaviour of the leading members — it seems unlikely to do so in a constructive manner."
“And so the confrontation seems likely to continue with obvious implications for the markets.”
The rally for Italian debt prices helped other “peripheral” eurozone government bonds recoup early losses.
"Meanwhile, the Shanghai Composite equity index registered its biggest one-day rise for more than two months after Chinese officials attempted to calm worries about the economic outlook."
Data on Friday showed that the economy had grown at the slowest pace for almost a decade in the third quarter.
"“China’s economic outlook still looks very challenging,” said Hao Zhou, an analyst at Commerzbank."
"“Clearly, the trade frictions with the US will continue to weigh on market sentiment towards the medium to long-term economic prospects."
"Against the weak economic backdrop, we believe that the Chinese authorities will remain proactive to cushion the slowdown.”"
"Market participants were also keeping a wary eye on developments regarding Saudi Arabia, although a solid start to the US corporate earnings season provided reason for optimism."
"Procter & Gamble’s results exceeded expectations, helping its shares rally strongly."
quarterly profits also beat estimates.
"And the markets appeared relatively comfortable with the prospect of further interest rate rises in the US — even after the minutes of the Federal Reserve’s latest meeting, released on Wednesday, heightened expectations that the central bank would at some point raise rates above its measure of neutral."
"Oil prices weakened over the course of the week, with Brent heading for a second successive finish below the $80 a barrel mark as the mood was soured by news of a fourth successive weekly rise in US crude inventories."
"In New York, the S&P 500 finished a shade lower at 2,787, having earlier risen as high as 2,797.77."
"For the week, the benchmark index recorded a marginal gain."
"The Dow Jones Industrial Average edged up 0.2 per cent, led by a 9 per cent rise for P&G, although the Nasdaq Composite fell 0.5 per cent."
"The Europe-wide Stoxx 600 ended 0.1 per cent lower, as Frankfurt’s Xetra Dax fell 0.3 per cent and the FTSE 100 in London ticked up 0.3 per cent."
"In Milan, the FTSE MIB ended flat."
"In China, the Shanghai Composite rose 2.6 per cent, taking it above a four-year low."
The CSI 300 rallied 3 per cent.
"The euro climbed 0.5 per cent against the dollar to $1.1504, and gained 0.8 per cent versus the yen to ¥129.51."
"The dollar index was down 0.2 per cent at 95.74, but stayed in sight of a recent seven-week high of 96.16, as the greenback rose 0.3 per cent against the Japanese currency to ¥112.56 and sterling gained 0.3 per cent to $1.3061."
"China’s onshore renminbi, which is permitted to trade 2 per cent either side of a daily midpoint set by the country’s central bank, held steady following the release of the GDP data at Rmb6.9348 per dollar."
"The onshore renminbi touched a 21-month low on Thursday after China escaped being labelled a currency manipulator by the US, pushing the currency closer to the Rmb7 line, which would mark its lowest level in a decade."
"The yield on the 10-year US Treasury was up 2 basis points at 3.20 per cent, with the two-year yield 4bp higher at 2.91 per cent."
The 10-year German Bund yield edged up 1bp to 0.43 per cent.
"Oil prices bounced back, with Brent settling 0.6 per cent higher on the day at $79.78 a barrel — although the international crude benchmark slipped 0.8 per cent over the week."
US West Texas Intermediate was 1 per cent higher in late trade at $69.34.
"Gold was up $1 at $1,226 an ounce."
Additional reporting by Michael Hunter in London and Alice Woodhouse in Hong Kong
Thursday 21.00 BST
S&P 500 falls 1.4%;
Nasdaq down 2.1%
Federal Reserve minutes point to more rate rises
Renminbi touches 21-month low as China escapes “manipulator” label
Mnuchin pulls out of Saudi investment conference
Italian-German 10-year yield spread at widest since 2013
Brent oil below $80 a barrel
"An early sell-off on Wall Street gathered pace as sentiment was hit by renewed concerns about US-China trade tension, the prospect of further interest rate rises by the Federal Reserve and mounting worries about Italy’s budget proposals."
Uncertainty over relations between the US and Saudi Arabia provided a further reason for risk aversion after US Treasury secretary Steven Mnuchin said he would not attend a high-profile investment conference in Riyadh.
The S&P 500 index registered its biggest one-day decline since last week’s bout of extreme turbulence while emerging market stocks and currencies also suffered hefty falls.
Brent oil settled below the $80 a barrel mark for the first time in almost a month.
"So-called “haven” currencies such as the dollar and Japanese yen gained ground, while US Treasury prices recouped early losses and gold edged higher."
"Indeed, the dollar index was heading for a two-day gain of 0.9 per cent as the minutes of the Fed’s meeting last month, released late on Wednesday, heightened expectations that the US central bank would at some point raise rates above its measure of neutral."
"“The probability of [the Fed funds] rate being above 3 per cent by the end of next year has risen back to 30 per cent,” noted Kit Juckes, strategist at Société Générale."
"Against that backdrop, the Chinese renminbi slipped to its lowest level against the US currency since January 2017, within a whisker of the key Rmb7 per dollar level, while the Shanghai Composite equity index slid to a four-year low."
The latest bout of weakness for the renminbi came as the US Treasury failed to label China a currency manipulator.
"The renminbi’s weakness “reflected bearishness towards [China’s} economic and currency outlook, said Hao Zhou, analyst at Commerzbank."
"“There is increasing speculation that the People’s Bank of China will not be able to defend the Rmb7 hurdle in the coming months,” he said."
"“It is worth noting that the official renminbi index has continued to reach new lows in recent months, indicating that the weakness is broad-based.”"
"Meanwhile, Brussels rebuked Italy’s populist government for breaking EU deficit rules in its first budget, fuelling fresh selling of Rome’s debt."
"Italy’s deviation from prior promises was “unprecedented in the history” of EU budget rules, according to a letter to Rome from top EU economic officials."
"The spread between Italian and German 10-year government bond yields, a key gauge of investor nervousness, widened to the most in more than five years."
"There was renewed weakness for oil, with Brent back below $80 a barrel, in the wake of data on Wednesday that showed US crude inventories had risen far more last week than the markets had expected."
"In New York, the S&P 500 fell 1.4 per cent to 2,768, leaving it little changed since the end of last week, while the tech-heavy Nasdaq Composite finished 2.1 per cent lower."
European markets eased back in line with Wall Street’s early weakness.
Frankfurt’s Xetra Dax ended 1.1 per cent lower and the FTSE 100 in London fell 0.4 per cent.
The region-wide Stoxx 600 Europe index fell 0.5 per cent.
The FTSE MIB index in Milan fell 1.9 per cent.
"In China, the CSI 300 lost 2.4 per cent."
"The Shanghai Composite tumbled 2.9 per cent, taking it back to levels last seen in late 2014."
The FTSE All-World Emerging Market equity index was down 1.3 per cent.
The dollar index was up 0.4 per cent at 95.94 — not far from last week’s intraday peak of 96.16 — as the euro slipped 0.4 per cent to $1.1450 and sterling shed 0.7 per cent to $1.3019.
"But the greenback was down 0.4 per cent against the yen at ¥112.19, with the euro down 0.8 per cent versus the Japanese currency at ¥128.51."
There were some big falls for EM currencies against the dollar.
The Mexican peso and Turkish lira were both 1.5 per cent weaker while the South African rand softened 1.6 per cent.
"In the fixed income arena, the yield on the 10-year US Treasury rose as high as 3.217 per cent before easing back to trade flat at 3.18 per cent."
The two-year yield was down 1bp at 2.87 per cent.
"Italy’s 10-year yield jumped 12bp to close at 3.67 per cent, and climbed further in after-hours trade to levels not seen for four years, while that on Germany’s 10-year Bund fell 4bp to 0.42 per cent."
Oil prices continued to fall after data on Wednesday showed that US crude stockpiles had risen for a fourth successive week.
"Brent settled at $79.29 a barrel, down 1 per cent, after touching $78.69, while US West Texas Intermediate was down 1.2 per cent at $68.89 in late trade."
"Gold was up $4 at $1,226 an ounce."
Additional reporting by Edward White in Taipei and Federica Cocco and Michael Hunter in London
Wednesday 21:00 BST
US central bank to forge ahead with more rate increases
Wall Street falters after previous day’s gains
Results push Netflix higher but
Energy stocks fall as oil prices test key levels
Italian bond yields push higher
The dollar extended early gains and Treasury yields ticked higher — while US equities surrendered some of the previous day’s hefty gains — as participants digested the minutes of the Federal Reserve’s September policy meeting.
"These showed that following a unanimous decision by the central bank’s Open Market Committee to raise interest rates by 25 basis points, there was a general agreement to press ahead with further increases."
"Nicholas Stamenkovic, an economist at NatWest Bank, said the minutes were more hawkish than expected."
"“Notably a number of members saw the need to raise the funds rate above the long- run level, hinting at a restrictive stance,” he said."
"Meanwhile, the day’s corporate earnings releases provided far less of a positive boost for stock markets than on Tuesday — despite stellar subscriber figures from Netflix — with IBM under notable pressure after its quarterly revenue fell more than expected."
"Barclays analysts said that while this quarterly earnings season was likely to be strong, it could well prove to be a peak."
"“Our base case is that of a sharp earnings slowdown after the current quarter since most of the drivers this year were one-time in nature,” Barclays said."
Macroeconomic data were also less supportive than in the previous session.
"US housing starts fell by an unexpectedly large 5.3 per cent last month, while building permits and completions also dropped, hitting shares of US homebuilders."
"“Starts were restrained by a big decline in the south, reflecting the impact of Hurricane Florence,” noted Action Economics."
“Hurricane-related weakness should continue in October due to Hurricane Michael.”
"In Europe, carmaking stocks were hit hard after figures showed sales across the region fell heavily in September — in part reflecting “payback” after a big rise in the previous month — and analysts highlighted that weakening demand from China pointed to a tough quarter ahead."
Brent oil tested the $80-a-barrel level — snapping a three-day run of gains — after data from the Energy Information Administration showed US crude stockpiles rising by far more than expected last week.
It was the fourth successive increase in inventories.
US benchmark West Texas Intermediate crude briefly fell below the $70 mark.
"Italian government bond yields resumed their upward momentum as concerns mounted that the country’s draft budget for 2019 would not meet EU guidelines, analysts warned."
"In New York, the S&P 500 ended marginally lower at 2,809, having fallen as low as 2,781.81 at one point."
"The index rose more than 2 per cent on Tuesday, its best one-day rise since late March,"
"The Nasdaq Composite also ended slightly lower, while the Dow Jones Industrial Average fell 0.4 per cent."
The Dow’s underperformance came as IBM shares fell more than 7 per cent.
Netflix rose 5.3 per cent.
Momentum also ebbed from European bourses after mixed corporate results closer to home.
The region-wide Stoxx 600 Europe index pared an early rise to end 0.4 per cent lower as the Xetra Dax in Frankfurt shed 0.5 per cent and London’s
FTSE 100 fell 0.1 per cent.
German healthcare provider Fresenius fell 8.9 per cent after it cut its annual profit guidance.
"The Stoxx carmaking index fell 1.9 per cent, while the measure tracking Europe’s tech sector, which is dominated by hardware and component makers, rose 0.4 per cent"
"The dollar index extended an early rise to stand 0.6 per cent higher at 95.58, pushing it back towards a seven-week high hit last week."
"The euro fell 0.6 per cent to $1.1506 and sterling shed 0.5 per cent to $1.3124, not helped by softer than expected UK inflation figures."
The US currency was up 0.2 per cent against the yen at ¥112.53.
The yield on the 10-year US Treasury was up 4 basis points at 3.20 per cent — not far from last week’s seven-year peak of 3.261 per cent — and the two-year yield was 3bp higher at 2.89 per cent.
"Germany’s 10-year Bund yield ended at 0.46 per cent, down 3bp."
Italy’s 10-year government bond yield rose 12bp to 3.58 per cent.
"Brent oil settled at $80.05 a barrel, down 1.7 per cent, after falling as low as $79.17 earlier in the day while WTI was down 2.6 per cent in late trade at $70.05."
"Gold was flat at $1,223 an ounce."
Additional reporting by Michael Hunter and Federica Cocco in London and Hudson Lockett in Hong Kong
Tuesday 21:00 BST
Dow gain 2.2%; Nasdaq jumps 2.9%
Bank earnings provide boost to confidence
Italian stocks and bonds jump as government agrees draft budget
Pound strides higher on strong wages data
Brent oil holds above $80 a barrel
"Reassuring earnings from the likes of Goldman Sachs and Morgan Stanley helped instil a far more confident feel to US and European equity trading following last week’s steep losses, with the S&P 500, Nasdaq Composite and Dow Jones Industrial Average"
all registering their biggest one-day gains since late March.
"Technology stocks — which suffered some of the sharpest falls during the sell-off — led the way higher on both sides of the Atlantic, while the US healthcare sector also moved higher after UnitedHealth’s results beat expectations."
"In Europe, Italian stocks and bonds outperformed after the government met a deadline to submit its draft budget to the European Commission."
"The FTSE MIB equity index rallied more than 2 per cent, while the country’s two-year bond yield tumbled 16 basis points."
But analysts warned that mixed messages from politicians on the budget had set the stage for a confrontation between Rome and Brussels.
"“The EC can declare Italy’s budget as non-compliant and demand changes over the next two weeks,” noted Jim Reid at Deutsche Bank."
"“Our economists think this type of confrontation is likely, and will likely require some sort of market or political pressure to force Italian policymakers to change tack.”"
"The UK’s FTSE 100 share index lagged behind its regional peers, as sterling continued to gain ground, with robust earnings data helping to offset lingering uncertainty over Brexit."
Oil prices were higher — with Brent holding above the $80 a barrel level — as participants kept a wary eye on diplomatic tensions between Washington and Saudi Arabia and awaited the release of US crude inventories data.
The day’s main US economic releases were encouraging.
Industrial production rose 0.3 per cent last month — more than economists had pencilled in — while the number of US job openings climbed to a fresh record high in August and a gauge of US homebuilder confidence inched up in October.
"In New York, the S&P 500 and Dow Jones Industrial Average both rose 2.2 per cent, to 2,809 and 25,798 respectively, while the tech-heavy Nasdaq Composite gained 2.9 per cent."
It was the best day for all three measures since March 26.
"Morgan Stanley shares rose 5.7 per cent, with Goldman Sachs up 3 per cent."
UnitedHealth added 4.6 per cent.
The rebound came after the S&P 500 suffered its biggest weekly decline for seven months last week as it shed 4.1 per cent
The pan-European Stoxx 600 rose 1.6 per cent as Frankfurt
Xetra Dax rose 1.4 per cent.
London’s FTSE 100 ended 0.4 per cent higher.
Asian market put in more mixed performances.
"CSI 300 fell 0.8 per cent, while Hong Kong’s Hang Seng was up 0.1 per cent."
The Topix in Tokyo ended 0.7 per cent higher after a volatile session.
Sterling rose as high as $1.3235 against the dollar before easing back to $1.3189 — still up 0.3 per cent on the day — after data showed wage growth in the UK hitting its highest level since the financial crisis.
"Against the euro, the pound also strengthened 0.3 per cent"
"The dollar index was flat at 95.06, with the euro barely changed at $1.1578."
The dollar was up 0.4 per cent against the yen at ¥112.23.
"The yield on the 10-year US Treasury was down 1 basis point at 3.16 per cent, while that on the two-year was flat at 2.87 per cent."
The 10-year German Bund yield slipped 1bp to 0.49 per cent.
"Brent crude settled at $81.41 a barrel, up 0.8 per cent on the day — having earlier slipped back below the $80 a barrel mark."
US West Texas Intermediate was 0.1 per cent higher in late trade at $71.88.
"Gold was down $2 at $1,224 an ounce, after hitting an 11-week high of $1,233 on Monday."
Additional reporting by Michael Hunter in London and Edward White in Taipei
Monday 21:00 BST
"Late sell-off leaves S&P 500 down 0.6%, Nasdaq falls 0.9%"
Haven assets in demand as sentiment stays cautious
Saudi concerns add to market uncertainty
Dollar falls back after US retail sales data disappoint
Pound holds above $1.31 as investors track Brexit outlook
"A late burst of selling left US equity indices lower after a day in which participants struggled to put last week’s extreme volatility behind them, with the underlying mood of nervousness supporting so-called haven assets such as the yen, Swiss franc and gold."
"“Last week’s outbreak of fear is receding, although not as quickly as it arrived,” said Chris Beauchamp, chief market analyst at IG."
"“Caution is still the watchword, but the more days that pass without another lurch lower, the better investors will feel.”"
Tension between the US and Saudi Arabia over the disappearance of journalist Jamal Khashoggi provided a fresh layer of uncertainty for markets already unsettled by trade war worries and the prospect of further interest rate rises by the Federal Reserve.
"Oil prices initially jumped after Saudi Arabia said it would use its economic firepower if targeted by US sanctions, although Brent crude swiftly retreated from an early high of $81.92 a barrel."
Saudi bond prices fell sharply.
"Sterling was another big focus for the markets, as the currency fell as much as 0.5 per cent against the dollar after Brexit talks reached a stand-off in Brussels ahead of a summit later this week."
"However, the pound subsequently clawed back its decline."
"Meanwhile, the dollar index continued its steady retreat from a seven-week high struck last week, even as Treasury yields edged higher."
"The US currency found little support from the day’s main economic data release, which showed headline retail sales rising by a disappointing 0.1 per cent last month,"
But Capital Economics noted: “The weaker headline reading masked another strong rise in underlying retail sales.
The current strength of underlying retail spending isn’t a huge surprise in light of the continued boost to incomes from the tax cuts enacted at the start of the year.”
Italy’s bond market had a muted session ahead of the deadline for the Treasury to present its draft budgetary plan to the European Commission.
"“The current plans for a budget deficit of 2.4 per cent is in clear violation of EU spending rules, and the collision course that Rome has been headed for with the EU could come to a head this week,” said Kathleen Brooks at Capital Index."
"In New York, the S&P 500 ended 0.6 per cent lower 2,750, following a 4.1 per cent slide last week — its biggest weekly decline since March."
"The Dow Jones Industrial Average shed 0.4 per cent, while the tech-heavy Nasdaq Composite fell 0.9 per cent."
"Across the Atlantic, the pan-European Stoxx 600 index eked out a 0.1 per cent rise, as the Xetra Dax in Frankfurt rose 0.8 per cent and London’s FTSE 100 ended 0.5 per cent higher."
But Asian markets had a far more difficult session as trade worries remained at the fore.
"Japan’s Topix slid 1.6 per cent to a five-week intraday low, with all sectors ending in the red."
Hang Seng index fell 1.4 per cent.
"In China, the CSI 300 index of Shanghai and Shenzhen-listed stocks fell 1.4 per cent."
"Cui Tiankai, China’s ambassador to the US, told Fox News Sunday that Beijing did not want a trade war but had “to respond and defend our own interests”."
Currencies and fixed income
"Sterling rallied off an early low against the dollar of $1.3081 to trade flat on the day at $1.3148, with the euro also little changed versus the pound at £0.8805."
"The dollar index was 0.2 per cent lower at 95.08, after reaching 96.16 last Tuesday, as the euro edged up 0.1 per cent to $1.1575."
The US currency was down 0.3 per cent against the yen at ¥111.84 — having touched ¥111.63 — and was 0.4 per
cent lower versus the Swiss franc at SFr0.9871.
The yield on 10-year US Treasuries was up 2 basis points at 3.16 per cent — but still some way off last week’s seven-year high of 3.261 per cent — while the two-year yield was 2bp higher at 2.86 per cent.
The 10-year German Bund yield held steady at 0.50 per cent.
"Oil markets had a choppy session, with Brent oil finally settling at $80.78 a barrel, up 0.4 per cent, after bouncing off a low of $79.85."
US West Texas Intermediate was 0.4 per cent higher in late trade at $71.63.
"Gold was up $7, or 0.6 per cent, at $1,225 an ounce, after hitting $1,233 — its highest point since late July."
Additional reporting by Michael Hunter in London and Alice Woodhouse in Hong Kong