Shares fall further as US interest rates rise, worrying investors

Screens showing stock index prices and the Japanese yen against the US dollar are seen after the New Year’s ceremony marking the opening of trading in 2022 on the Tokyo Stock Exchange (TSE), amid the coronavirus disease pandemic (COVID-19), in Tokyo, Japan January 4, 2022. REUTERS / Issei Kato

Sign up now for FREE unlimited access to Reuters.com

  • European stocks are falling, US futures are also down
  • The US 10-year government interest rate is 1.8 per cent.
  • The dollar remained in the range despite rising interest rates
  • Traders are preparing for US inflation data, the company’s earnings

LONDON, Jan. 10 (Reuters) – Stock markets fell again on Monday as US government interest rates hit a new two-year high, with investors worried about the prospect of rising interest rates and a rise in COVID-19 infections.

Monday’s fall comes after a tough first week of the year, with a strong signal from the Federal Reserve that it would tighten policy faster to tackle inflation, and then data showing a strong US labor market, nervous investors pushing stocks to record high levels over the holiday period.

Technology stocks, which have risen in the past two years thanks in part to very low interest rates, led to the declines, while investors bought into lower-valued energy and financial stocks.

Sign up now for FREE unlimited access to Reuters.com

The decline on Monday was limited but across markets.

At 1150 GMT, Euro STOXX fell 0.37% (.STOXX), Germany’s DAX (.GDAXI) weakened 0.34% while the UK’s FTSE 100 (.FTSE) fell 0.05 pct.

Futures on Wall Street pointed to a weaker opening. The S&P 500 got off to its worst start of the year since 2016.

Asian stocks received the trend on Monday. MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) added 0.63%

A busy week sees US inflation data available on Wednesday, which analysts say could show that core inflation climbs to its highest in decades at 5.4%, a level that will almost confirm that a US rate hike comes in March. The corporate earnings season also starts this week, with major US banks reporting from Friday onwards. Read more

“The sustained rise in consumer inflation could further boost the Fed hawks, lead them to price a steeper path of normalization and, more importantly, boost the expectation that the Fed should quickly reduce the size of its balance sheet to avoid flattening the yield curve while it fights back. inflation, “said Ipek Ozkardeskaya, an analyst at Swissquote.

Ozkardeskaya added that there was “lots of hawkishness” yet to be recognized in assets.

While the payroll for December, published last week, missed forecasts, the decline in the unemployment rate to just 3.9% and the strength of wages indicated that the economy was short of labor.

Markets shifted rapidly to reflect futures risks, with a greater than 70% chance of an increase to 0.25% in March and at least two further increases at the end of the year.

CONTINUE TO RUN?

Yields on 10-year US government bonds hit 1.80% in early trading – levels last seen in early 2020, after rising 25 basis points last week in their biggest move since late 2019. The U / S interest rate later fell to 1.77%.

Real dividends

“We believe that the rise in long-term government interest rates should continue,” said Nicholas Farr, an economist at Capital Economics.

“Markets may still underestimate how far the federal funds rate will rise in the next few years, so our forecast is that the 10-year rate will rise by around a further 50bp to 2.25% by the end of 2023.”

Germany’s 10-year benchmark rate fell after an earlier rise to -0.025%, closer to the 0% level it was last traded at in 2019.

The dollar index rose to 95,911. The dollar has not been able to find significant support from rising government interest rates.

The euro stood at $ 1.1323, down 0.3% on the day, while the Japanese yen took a short break from its most recent bear run to trade up to 115.3.

In commodity markets, gold rose 0.26% to $ 1,800 per share. ounce, but below last week’s high of $ 1,831.

Oil prices fell but kept up with recent gains, after rising 5% last week, helped in part by supply disruptions from the unrest in Kazakhstan and disruptions in Libya.

Brent fell slightly to $ 81.69 per barrel. barrel, while U.S. crude traded 0.14% at $ 78.79.

Sign up now for FREE unlimited access to Reuters.com

Further reporting by Wayne Cole in Sydney, edited by William Maclean

Our standards: Thomson Reuters trust principles.

.

Give a Comment