Global stocks and government bonds were sold off on Thursday as caution returned to the markets after a broad rally in the previous session after the Bank of England intervened to support UK government debt markets.
Wall Street’s S&P 500 fell 2 percent in morning trading after the index snapped a six-day losing streak on Wednesday to close 2 percent higher.
Long-term British government debt, which was the focus of Wednesday’s emergency intervention from the Bank of England, settled at yields of around 3.92 per cent. US 10-year bond yields, the global benchmark for borrowing, rose about 0.1 percentage point to 3.792 percent as investors sold off debt.
The moves came after the Bank of England on Wednesday announced a new long-term bond purchase program, saying that “significant re-pricing” of gold could pose a “material risk to the UK’s financial stability”. The action by the central bank sparked a sharp rise in British assets, which spread to other global markets.
Mark Heffel, chief investment officer at UBS Global Wealth Management, said he was skeptical that the more buoyant mood in the markets after Wednesday’s BoE move would “mark the end of a recent period of elevated volatility or risk sentiment”.
“For a more sustainable recovery, investors will need to see convincing evidence that inflation is under control, allowing central banks to become less hawkish,” he said.
The regional Stoxx 600 index in Europe fell 1.4 percent on Thursday, after ending Wednesday with a 0.3 percent increase. The FTSE 100 index in London lost 1.1 per cent.
In currencies, the pound rose 0.5 percent against the dollar to trade at $1,094. An index measuring the dollar against six peers fell 0.1 percent, reversing earlier gains.
The dollar has hit a string of new 20-year highs in recent months, buoyed by the relative weakness of other currencies, monetary policy tightening by the US Federal Reserve and the dollar’s traditional status as a safe haven in times of economic and market stress.
Analysts at ING said the BoE’s action represented “the first major intervention by a G10 central bank in this cycle to avoid a financial crisis. It may not be the last”.
“It serves as a reminder to policy makers around the world that any perceptions by the market of a wrong policy move will be severely punished,” they added, and with the Fed continuing to slow. . . These conditions may be with us for the next six to nine months.”
from San Jose News Bulletin https://sjnewsbulletin.com/global-stock-and-bond-prices-fell-after-gains-in-the-previous-session/
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