Saturday 24 March 2018

Markets and bond yields slump as world shudders

Traders work on the floor of the New York Stock Exchange (NYSE) shortly after the opening bell. Photo: Reuters
Traders work on the floor of the New York Stock Exchange (NYSE) shortly after the opening bell. Photo: Reuters

Fear of instability in the European Union and of decades of global stagnation sent stock markets sharply lower yesterfday as Britain's pound sank below $1.30 for the first time in more than three decades.

After a steadier few days as investors digested the shock of Britain's decision to leave the European Union, the implications of another round of financial losses, interest rate cuts and central bank money-printing to prop up growth have begun to set in.

Japanese and Korean markets led Asia lower, falling by 1.8pc.

Indices in Frankfurt, London and Paris all sank and the European banking index - a major focus of concern this year - fell by as much as 2.7pc.

Sovereign bond yields were lower across the board.

Government debt in Germany now returns less than nothing for the next 15 years, essentially suggesting that there will be no inflation or economic growth in that period.

In Switzerland, yields are at zero for the next half century.

The bond market reaction is the clearest signal of how investors are now interpreting the economic hit from Brexit - yet another shock to a vulnerable global economy, another wave of central bank easing and possibly the starting gun for a new round of currency, tax and even trade wars. "We've seen strong selling interest across the board this week," said Michael Hewson, chief market analyst at CMC Markets in London.

"While some have speculated that some 'leave' voters may have undergone some form of buyer's remorse, it would seem that the same could also be said of the investors who took part in last week's stock market rebound," he added.

The suspension of a handful of property funds, a reflection of concerns that Britain's real estate market could sink in the face of a Brexit, has been the trigger for a new wave of selling of the pound and UK assets.

In Ireland, the ISEQ Overall Index was 2.17pc lower near the close, at 5,402.65, bringing it back to levels it hasn't been at since January 2015.

Bank of Ireland - which has been hammered over the pasty couple of weeks - was 1.8pc lower before the close, at 17 cent.

Ryanair was 1.8pc lower at €10.97, while CRH was 2.67pc lower at €24.28.

Shares in packaging giant Smurfit Kappa were 4.7pc lower at €19.18. Shares in Origin Enterprises also fell over 4pc.

The UK's FTSE-100 was 1.6pc lower near the end of the session.

Germany's DAX fell 2.1pc, and France's CAC-40 was down 2.2pc.


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