LONDON (Reuters) – Global equities plunged on Monday as expectations for faster economic growth and inflation hit bonds and commodities rose, while rising real yields caused valuations to fall. the shares would have a more widespread appearance in comparison.
MSCI’s All Country World index, which tracks the actions of 49 countries, fell 0.4% after the start of European trade.
The pan-European STOXX 600 index fell 1%, the lowest in ten days. The German DAX, the French CAC 40 and the Spanish IBEX 35 index each fell 1%, the British FTSE 100 lost 0.85% and Italy’s FTSE MIB index fell 0.9%.
Futures S&P 500 fell to its lowest level since February 4, with a 1% drop on the day.
Bonds have been hit by the prospect of a stronger economic recovery and higher indebtedness as President Joe Biden’s $ 1.9 trillion stimulus package moves forward.
Federal Reserve Chairman Jerome Powell is presenting his half-yearly testimony to Congress this week and is likely to reiterate his commitment to keeping politics very easy for as long as it takes to raise inflation.
“Next week is relatively thin on the international data agenda, but after the recent rise in long bond yields, Fed Chairman Powell’s hearings in both houses of Congress (Tuesday / Wednesday) will attract great interest “said Elisabet Kopelman, an American economist. and SEB.
“The fact that the most recent increase in long-term bond yields has been driven by higher real interest rates and not just inflation expectations increases the likelihood of a message.”
European Central Bank President Christine Lagarde is also expected to look bad in a speech last Monday.
10-year Treasury bill yields have already reached 1.38%, surpassing the psychological level of 1.30% and bringing the year’s rise to 43 basis points.
BofA analysts noted that 30-year bonds had returned -9.4% during the year so far, the worst start since 2013.
“Real assets outperform large financial assets by 21, as cyclical, political and secular trends call for higher inflation,” analysts said in a note. “Rising goods, energy lag in vogue, materials in secular ruptures.”
Earlier in Asia, MSCI’s broader Asia-Pacific stock index outside of Japan remained flat, falling from a record high last week as the jump in US bonds produces restless investors .
The Japanese Nikkei recovered 0.8% and South Korea 0.1%, but the Chinese blue chips lost 1.4%.
A COPPER RECOVERY
One of the stars has been copper, a key component of renewable technology, which rose 7.7% last week to a nine-year high. The broader LMEX base metals index rose 5.5% in the week.
Oil prices have risen along the way, helped by a tightening of supplies and an icy climate, which has given Brent gains of 22% over the year so far. [O/R]
On Monday, Brent crude oil futures rose 0.7% to $ 63.33 a barrel. US crude added 0.7% to $ 59.65.
All this has been an advantage for commodity-related currencies, with the Canadian, Australian and New Zealand dollars so far higher.
The pound reached a three-year high at $ 1.4050, helped by one of the fastest vaccine launches in the world. British Prime Minister Boris Johnson will on Monday outline a path from the COVID-19 blockades.
The U.S. dollar index has been relatively limited, with downward pressure on the country’s expanding twin deficits balanced by higher bond yields. The index last stood at 90,342, not far from where the year began at 90,260.
Rising Treasury yields have helped the dollar gain against the yen to 105.60, as the Bank of Japan actively restricts yields at home.
The euro remained stable at $ 1.2104, between the support of $ 1.2021 and the resistance of about $ 1.2169.
One commodity that doesn’t do so well is gold, in part because of rising bond yields and in part because investors are wondering if cryptocurrencies can be a better hedge against inflation.
Gold stood at $ 1,793 an ounce, after starting the year at $ 1,896. Bitcoin was off 3.3% on Monday at $ 55,535, but started the year at $ 32,216.
Reports by Ritvik Carvalho; additional reports from Wayne Cole in Sydney; edition by Larry King