Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Stock markets roiled by global bond whiplash

Stock MarketsFeb 26, 2021 04:45AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
3/3 © Reuters. Pedestrians are reflected in an electronic board displaying various stock prices at a brokerage in Tokyo 2/3

By Tom Arnold and Wayne Cole

LONDON (Reuters) - Global stocks fell on Friday, with Asian shares down by the most in nine months, as a rout in global bond markets sent yields flying and spooked investors amid fears the heavy losses suffered could trigger distressed selling in other assets.

MSCI's Emerging Markets equity index suffered its biggest daily drop in nearly 10 months and was 2.7% lower, while European shares opened in the red, with the STOXX 600 down 0.7%, recovering from heavier losses earlier in the session.

The MSCI world equity index, which tracks shares in 50 countries, was 0.9% lower and heading for its worst week in a month.

Asia saw the heaviest selling, with MSCI's broadest index of Asia-Pacific shares outside Japan sliding more than 3% to a one-month low, its steepest one-day percentage loss since May 2020.

For the week the index is down more than 5%, its worst weekly showing since March last year when the coronavirus pandemic had sparked fears of a global recession.

"It is not the beginning of a correction in equities, more a logical consolidation as price to earnings ratios were excessive," said Francois Savary, chief investment officer at Swiss wealth manager Prime Partners.

"What is reassuring is that Q4 2020 earnings were good and earnings per share suprisingly good and that means down the road we should get back to growth."

Friday's carnage was triggered by a whiplash in bonds.

The scale of the sell-off prompted Australia's central bank to launch a surprise bond buying operation to try and staunch the bleeding.

The European Central Bank is monitoring the recent surge in government bond borrowing costs but will not try to control the yield curve, ECB chief economist Philip Lane told a Spanish newspaper.

On Friday 10-year German government bond yields were down nearly 4 basis points at -0.267% and French and Austrian bonds were back in negative territory.

Yields on the 10-year Treasury note eased back to 1.4530% from a one-year high of 1.614% on Thursday.

"Bond yields could still go higher in the short term though as bond selling begets more bond selling," said Shane Oliver, head of investment strategy at AMP (OTC:AMLTF).

"The longer this continues the greater the risk of a more severe correction in share markets if earnings upgrades struggle to keep up with the rise in bond yields."

Markets were hedging the risk of an earlier rate hike from the Federal Reserve, even though officials this week vowed any move was long in the future.

Fed fund futures are now almost fully priced for a rise to 0.25% by January 2023, while Eurodollars have it discounted for June 2022.

Even the thought of an eventual end to super-cheap money sent shivers through global stock markets, which have been regularly hitting record highs and stretching valuations.

"The fixed income rout is shifting into a more lethal phase for risky assets," says Damien McColough, Westpac's head of rates strategy.

"The rise in yields has long been mostly seen as a story of improving growth expectations, if anything padding risky assets, but the overnight move notably included a steep lift in real rates and a bringing forward of Fed lift-off expectations."

Japan's Nikkei shed 4%, its biggest single-day fall since April, and Chinese blue chips joined the retreat with a drop of 2.4%.

EMERGING STRAINS

Overnight, the Dow fell 1.75%, while the S&P 500 lost 2.45% and the Nasdaq 3.52%, the biggest decline in almost four months for the tech-heavy index.

Tech darlings all suffered, with Apple Inc (NASDAQ:AAPL), Tesla (NASDAQ:TSLA) Inc, Amazon.com Inc (NASDAQ:AMZN), NVIDIA Corp (NASDAQ:NVDA) and Microsoft Corp (NASDAQ:MSFT) the biggest drags.

All of that elevated the importance of U.S. personal consumption data due later on Friday, which includes one of the Fed's favoured inflation measures.

Core inflation is actually expected to dip to 1.4% in January, which could help calm market angst, but any upside surprise would likely accelerate the bond rout.

The surge in Treasury yields caused ructions in emerging markets, which feared the better returns on offer in the United States might attract funds away.

Currencies favoured for leveraged carry trades all suffered, including the Brazil real, Turkish lira and South African rand.

The flows helped nudge the U.S. dollar up more broadly, with the dollar index rising to 90.390. It also gained on the low-yielding yen, briefly reaching the highest since September at 106.42. The euro eased a touch to $1.2144.

The jump in yields has tarnished gold, which offers no fixed return, and dragged it down 0.1% to $1,767.81 per ounce, having earlier fallen to its lowest since June 26.

Oil prices dropped on a higher dollar and expectations of more supply.[O/R]

U.S. crude fell 1.5% to $62.57 per barrel and Brent also lost 1.3% to $66.02.

Stock markets roiled by global bond whiplash
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (18)
Phil Ht
Phil Ht Feb 26, 2021 10:42AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Markets dont like new administration.
Jon Jones
Jon Jones Feb 26, 2021 8:12AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
everyone's knows there is only one bond........James Bond
Viking Fire
Viking Fire Feb 26, 2021 7:42AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Not falling for it. Interest, QE, where you going to go, crypto? Ha
The Chad Bull
The Chad Bull Feb 26, 2021 7:07AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
The economy still isn’t even close to bottoming out. Long way to drop
Dmitri Park
Dmitri Park Feb 26, 2021 3:23AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Im sad
Jacob Steinschlag
Jacob Steinschlag Feb 26, 2021 2:41AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
So, in other words: Markets are selling of because the economy is going to do well soon. That's how it's supposed to be!
me ish
me ish Feb 26, 2021 2:41AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
the economy has a vastly long way to go to a) catch up with stock market valuations and b) to any form of normality compared to proper growth and activity with millions unemployed and furloughed and many small and medium businesses bust or about to bust - kept alive on cheap debt. But a growing economy where money supply far outweighs productivity and with commodity input costs massively increasing, including oil, means high inflation - which then forces the FED to increase interest rates on debt - which then will destroy half the companies in the US stock market and beyond that are zombies - only surviving because of stupidly cheap money. The whole thing is a ponzi scheme.
TL Chan
TL Chan Feb 26, 2021 2:14AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
is it a hedge fund double act? Taking profit and short sell at the same times! This is not a normal taking profit pattern!
Biji Rajaku
Biji Rajaku Feb 26, 2021 2:04AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
You can make any reason but everything is in under wear ups, under control....
Ferdian Trias Sonjaya
Ferdian Trias Sonjaya Feb 26, 2021 1:39AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
financial times
Mike Chen
Mike Chen Feb 26, 2021 12:56AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Hot money in the world are taking profit now. The dollar will get strong when return to US. Fed will shrink the balance sheet earlier than expected because the economy is better than expected!
Viking Fire
Viking Fire Feb 26, 2021 12:43AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Institutions left a lot of bag holders as they took profit today but hey, you know gme and amc
Rob Fordham
Rob Fordham Feb 26, 2021 12:02AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Wow if the time to buy is when other are fearful based on the comment u guys are terrified so time to buy?
isaac kraho
isaac kraho Feb 26, 2021 12:02AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
just because 2-3 people on the comment section is fearful you gonna buy? lol. Don't take Warren Buffett at face value.
Silver Bull
Silver Bull Feb 26, 2021 12:02AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Buy while “they” sell
me ish
me ish Feb 26, 2021 12:02AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
that quote is supposed to be relevant when a market has already crashed and valuations are cheap - not when they are at nose bleeding highs. Context is everything.
chrisP bacon
chrisP bacon Feb 26, 2021 12:02AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
This is still considered a dip to buy from what everyone is saying.  Nobody has 'thrown in the towel' on the market. It will take months of chop and of not being able to breach a level with 4x 3% down days for an event like you are talking about to happen.
Connecticut Yankee
A_Jaundiced_Eye Feb 25, 2021 11:34PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
With Apple, Tesla, Microsoft & Amazon all down, Senator Elizabeth Warren can drop her 1% tax on the billionaires - they lost more than that today.
John Smit
John Smit Feb 25, 2021 11:09PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
The elastic band is about to snap.
Casino Crypt
CasinoCrypt Feb 25, 2021 10:00PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Never has there been more of a casino market than now and even Gold is stumbling under the influence. What safe haven is there any more ? Mars rocks ?
Show previous replies (1)
perplexed76 .
perplexed76 . Feb 25, 2021 10:00PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
cash $$$
perplexed76 .
perplexed76 . Feb 25, 2021 10:00PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
just noitice,guys, how reluctantly they give cash to people. Virtual money - no problemo! Cash? let's discuss for months.
VietAnh Tran
VietAnh Tran Feb 25, 2021 10:00PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Even your name tells the story lol
Silver Bull
Silver Bull Feb 25, 2021 10:00PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
They have made gold and silver’s price tied to a paper market. It wasn’t enough to give the bankers the power to make our currency fiat we gave them executive control over pricing of real money.
me ish
me ish Feb 25, 2021 10:00PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
bitcoin and Cardano - they may drop 40% in a quick shock, but within three months, they'll be higher than they are now. A proper escape from a broken financial system - and at small cap prices, they have so much higher to go as people eventually wake up to their use cases and value and potential.
Sean Livingstone
Sean Livingstone Feb 25, 2021 9:32PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Bonds up so they could sell it and then buy stocks. It always happen.
Ma Vo
Ma Vo Feb 25, 2021 9:29PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Australia saving the world
Indie LXXXVIII
Indie LXXXVIII Feb 25, 2021 9:20PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
The Fed will fix it. ).
Di Ni
Di Ni Feb 25, 2021 9:20PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
this goes even deeper from earlier today. Feds going bankrupt now. Failed bond auctions. Asian buyers not touching their toxic fiat overindebted ****
VietAnh Tran
VietAnh Tran Feb 25, 2021 9:20PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Di Ni you smoke or what ?
Silver Bull
Silver Bull Feb 25, 2021 9:20PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
They won’t fo bankrupt they will just turn the dollar into monopoly money while they short gold and siver on the crimex.
me ish
me ish Feb 25, 2021 9:20PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Di Ni  there is indeed a vast amount of debt that needs to be renewed this year and I just can't see any buyers apart from the FED - which is what happened to Japan, where the central bank and government own half the bond and stock market. it's a very serious situation.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email