Business World

Monday 24 July 2017

Bonds up, equities down as market pivots around central banks

Traders work on the floor of the New York Stock Exchange shortly after the opening bell
Traders work on the floor of the New York Stock Exchange shortly after the opening bell

Bond yields in the United States and Europe were poised for big weekly gains yesterday, weighing on major equity markets, while oil prices extended their rebound into a seventh session but were still set to post their worst first half since 1998.

The dollar was headed for its worst quarter in seven years against a basket of currencies.

Expectations for stronger economic data in Europe and rate tightening at central banks around the globe has knocked the greenback from its perch, pushing it 4.7pc lower for the April-June quarter, the worst performance since the third quarter of 2010.

Against the euro, the dollar has sunk more than 7pc for the quarter and is on pace to drop more than 2pc this week.

The S&P 500 and the Dow Jones Industrial Average were higher in late morning trading yesterday, while the Nasdaq was little changed as a recovery in tech stocks sputtered.

Nike rose by as much as 8pc after the world's largest footwear-maker said it would launch a pilot programme with Amazon.com. Yields on US benchmark 10-year notes touched their highest since May 17 in earlier trading.

Germany's benchmark 10-year bond yield was set for its biggest weekly gain since 2015, backed by increased expectations for tighter monetary policy from the ECB.

Money markets are pricing in around an 80pc chance that the ECB will hike rates over the next year. That's up from just 20pc earlier this month. The spectre of reduced stimulus from central bank policy makers also has weighed on European stocks.

The pan-European STOXX 600 fell 0.2pc yesterday and is headed for its biggest monthly loss in a year. The Iseq, however, was up a tenth of 1pc to 6,827.62. AIB ended its first week back on the markets at €4.95. Bank of Ireland rose slightly to 23 cent a share.

Reuters

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