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Government bond markets rally on fears over economic slowdown

by WDC News 6 Staff

Authorities bond markets rallied on Thursday after weaker than anticipated eurozone enterprise surveys intensified worries in regards to the well being of the worldwide financial system.

Germany’s 10-year Bund yield dropped 0.19 share factors to 1.43 per cent, reflecting a pointy rise within the worth of the benchmark debt instrument, after a survey of eurozone enterprise exercise registered a studying of 51.9 for June — decrease than consensus estimates of 54.

An S&P International buying managers’ index for Germany, spanning companies and manufacturing, gave a studying of 51.3 — down from expectations of 53.1. Any determine above 50 signifies growth.

“Excluding pandemic lockdown months, June’s slowdown [for the eurozone] was essentially the most abrupt recorded by the survey for the reason that top of the worldwide monetary disaster in November 2008,” stated Chris Williamson, chief enterprise economist at S&P International Market Intelligence.

Thursday’s gloomy European survey information got here after US Federal Reserve chair Jay Powell stated on Wednesday, throughout the first of two days of congressional testimony, that recession was “definitely a chance” for the world’s largest financial system — although he argued that it was sufficiently resilient to resist more durable financial coverage.

The yield on the 10-year US Treasury be aware dropped 0.08 share factors to three.07 per cent on Thursday, whereas the policy-sensitive two-year US yield fell 0.12 share factors.

In fairness markets, Wall Road’s S&P 500 gauge added 0.4 per cent in early dealings. The technology-heavy Nasdaq Composite edged 0.2 per cent larger. Europe’s Stoxx 600 index misplaced 0.9 per cent, whereas the UK’s FTSE 100 fell 0.8 per cent.

“The market is already down over 20 per cent within the US; about the identical in Europe,” stated Marco Pirondini, head of US equities at Amundi. “Lots is already available in the market, which is telling you there’ll be a slowdown.”

Oil costs slipped 0.3 per cent decrease to only over $111 a barrel on Thursday, extending steeper losses from the day before today.

Package Juckes, international fastened earnings strategist at Société Générale, stated shopper demand in Europe and the US remained sturdy regardless of charge rises from central banks — although he advised that there could be little readability in markets till after the summer season.

“It’s all as clear as mud,” he stated. “It doesn’t matter how a lot you set rates of interest up now, demand goes to be crimson sizzling this summer season after which it might cool off or possibly it carries on; we’ll need to see.”

Thursday’s strikes in fairness and bond markets additionally got here as Norges Financial institution joined a wave of central banks elevating rates of interest aggressively to deal with inflation, lifting borrowing prices by 0.5 share factors to 1.25 per cent in its first such enhance since July 2002. Norway’s charge rise adopted on from the Fed elevating charges by 0.75 share factors final week, its greatest enhance since 1994.

The Financial institution of England and the Swiss Nationwide Financial institution additionally raised charges final week, whereas the European Central Financial institution spelt out plans for its first enhance in additional than a decade subsequent month.

Erica Dalstø, chief Norway strategist at Scandinavian financial institution SEB, stated hawkish strikes from different central banks had enabled Norges Financial institution to deviate from its steerage. “It’s apparent that Norges Financial institution is turning into far more frightened about inflation dangers to the extent that they’re not referring to the danger on households.”

In Asian markets, Hong Kong’s Cling Seng share index gained 1.3 per cent and Japan’s Topix index was flat.

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