Stocks fall, bond yields fall as inflation concerns persist



  • MSCI World index drops despite strong US retail sales
  • Yields on US Treasuries mitigate their expected rise; gold down
  • Oil heads for biggest weekly drop since at least May

NEW YORK / LONDON, July 16 (Reuters) – Global stock markets ended lower on Friday as investors grappled with fears of rising inflation and a surge in coronavirus cases as the dollar edged up after bullish US retail sales data reaffirmed a strong recovery economy.

The Commerce Department said retail sales rose 0.6% in June, contrary to an expected drop, adding weight to those who say inflation will be faster than the Federal Reserve forecast and will force interest rates to rise sooner than expected.

Still, bond yields reduced most of the initial gains, with the benchmark 10-year US Treasury Index trading at 1.2987%, just 0.2 basis points higher on the day. The Fed’s accommodative outlook outweighed fears of a prolonged spike in inflation.

Equity markets retreated as investors became risk-averse, with defensive stocks gaining on Wall Street and in Europe.

The MSCI World Index (.MIWD00000PUS), an indicator of global stocks, closed down 0.62% at 719.17. The index hit a record high earlier in the week, but lost 0.61% by the end of the week.

In Europe, the FTSEurofirst 300 index (.FTEU3) fell 0.38% to 1,754.64. European defensive stocks rose, with real estate (.SX86P), utilities (.SX6P) and healthcare (.SXDP) increasing between 0.5% and 1% as concerns about the coronavirus mounted.

England’s coronavirus crisis could come back surprisingly quickly again, the UK government’s chief medical adviser said, before lifting all pandemic-related restrictions on Monday despite the increase in COVID-19 cases. Read more

In California, Los Angeles County will re-impose a mask warrant this weekend, the latest sign from public health officials grappling with the increase in cases of the Delta variant. Read more

The decline on Wall Street is surprising given that profits of companies that released second quarter results have so far exceeded estimates by 22.1%, Credit Suisse said in a note.

Removing comparisons from a year ago shows that profits have risen decently from levels two years earlier, and inflation is likely to hit around 2.6%, once the baseline is low. last year deleted, said Jason Pride, investment manager for private wealth at Glenmede in Philadelphia.

“This should ultimately be acceptable to the (equity) market and allow for continued upward progression,” Pride said. “My only hesitation is that stock valuations are high.”

Economically sensitive sectors, energy, financials, consumer discretionary and materials are expected to more than double their profits, while so-called big tech and non-cyclicals are expected to grow 36% and 10% respectively, Credit said. Swiss.

The Dow Jones Industrial Average (.DJI) closed 0.86%, the S&P 500 (.SPX) slipped 0.75% and the Nasdaq Composite (.IXIC) lost 0.80%.

Over the week, the Dow Jones lost 0.53%, the S&P 500 fell 0.97% and the Nasdaq lost 1.87%. The S&P 500 real estate index (.SPLRCR) hit a record high on Friday.

Gold prices fell as a stronger dollar dampened bullion’s appeal, while bond yields were subdued after Fed Chairman Jerome Powell this week pledged “strong support “to ensure that the US economic recovery does not falter. Read more

Mark Haefele, chief investment officer at UBS Global Wealth Management, advising many of the world’s super-rich, said he expected rates to rise as the recovery fully takes hold.

“We believe the downward trend in yields will reverse as confidence in the economic recovery increases. However, we expect 10-year yields to rebound to 2% by the end of the year. which is consistent with a continued rally in equities. “

In Europe, Germany’s 10-year yield fell to a new three-month low in cautious trade ahead of next week’s European Central Bank meeting.

Oil ended the week lower, undermined in volatile trading by expectations of increased supplies just as an increase in coronavirus cases could lead to lockdown restrictions and lower demand.

Brent crude stabilized 12 cents at $ 73.59 a barrel. US crude rose 16 cents to close at $ 71.81 a barrel.

US gold futures were down 0.8% to $ 1,815 an ounce.

On the currency front, major currencies were little changed on the day, but the dollar headed for its best weekly gain in about a month. The dollar index, which tracks the greenback against a basket of six currencies, rose 0.10% to 92.675.

The euro slipped 0.02% to $ 1.1810, while the yen rose 0.17% to $ 110.0500.

Overnight in Asia, the largest MSCI Asia-Pacific stock index outside of Japan (.MIAPJ0000PUS) fell 0.4%, weighed down by a 1.1% drop in China’s premier index. order (.CSI300) and a decline of 0.8% for Taiwanese stocks (.TWII).

Asian weakness was largely due to poor earnings at TSMC (2330.TW), Asia’s largest company by market cap outside of China, which saw its shares fall 4.1%. Read more

Reporting by Herbert Lash, additional reporting by Hideyuki Sano, Swati Pandey, Sujata Rao and Dhara Ranasinghe; Editing by Marguerita Choy, David Gregorio and Sonya Hepinstall

Our standards: Thomson Reuters Trust Principles.



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