March Madness May Await Markets After Poor February | – #March #Madness #Await #Markets #Poor #February
LONDON, Feb 28 (Reuters) – March Madness? After a euphoric January in which bonds and stocks sold off as interest rate hike bets were renewed by strong data, a dismal February could be followed by another wild swing for world markets.
USAof 10 annual Treasury yields are set to end February nearly 40 basis points higher on the month, the biggest monthly jump since September. Across Europe, inverse bond yields are near multi-year highs.
The S&P 500 is down about 2% after January’s 6% jump ( .SPX ), and stocks are broadly weaker across geographies and investment styles, with little clear direction.
In short, the future of the global economy way and interest rate uncertainty remains high.
If the data remains stable, the sell-off on expectations of further tightening of interest rates may continue.
But if the emerging signs that inflation and growth are slowing are strong enough to trigger a pause, if the data signals are not clear, assets prices may rise again.
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In a potential bearish signal for stocks whose valuations are supported by bond yields, the MOVE index (.MOVE), which measures expected volatility in the $24 trillion Treasury market, posted its biggest monthly jump since June in February. 20increased by more than %. 2022.
Investors january were confident that an economic slowdown would encourage rate-setters to pause after a series of aggressive rate hikes to curb inflation, but strong data since then have challenged that view. protest did
February is coming
on friday USA‘s main inflation The data boosted bets on an accelerated rate hike last month. Some economists believe that the Federal Reserve could even opt for a big 50 bps rate hike in March after a 25 bps hike in February.
“Investors have taken note of what central banks say is that inflation will return to target later than expected, meaning rates will be higher for longer,” said Guy Miller, chief market strategist at Zurich Insurance Group.
BACK TO EARTH
Stocks are still up slightly for the year, but have pulled back as interest rate hike jitters return.
MSCI’s broadest index of emerging market stocks january It is down 6.3% this month after gaining almost 8% last month.
Growth stocks, tracked mainly by MSCI’s index of technology companies, which do well when interest rates are low, are down 1.7% in February. Attractive high dividend yields when interest rates are rising offer MSCI’s index of value stocks, which are cyclical businesses, fell 2.4%.
In the meantime Europe data added to the sense of continued growth, with a key measure of euro zone business activity hitting a nine-month high.
As a result, investors are reconsidering soft landing scenarios and worry that central banks could tighten monetary conditions too much in response to good data and trigger a deep recession.
Trevor Greetham, head of multi-assets at Royal London Asset, said: “Economic data is starting to pick up again, but in a long-term sense it is good. news bad news because central banks have more work to do,” he said. Management.
Deutsche Bank, strategist Jim Reid warned that much of the impact of rate hikes by major central banks starting in late 2021 is still to come. “The real economic pain tends to be felt by Year 2 of the cycle,” he said.
Reuters graphics
Markets are pricing in Fed interest rate cuts by the end of the year quickly cancellation increased to 5.4% this year. The Fed’s key policy rate 20It is between 4.50-4.75%, the highest since 07.
traders, France with data on Tuesday showing inflation unexpectedly rose in February Europe The Central Bank estimates an additional 150 basis points price increase by the end of the year. The ECB has raised its key interest rate by 300 basis points to 2.5% since last July.
Which measures its value against other major currencies dollars index in February USAgaining 2.6%, marking its best month since September on new rate hike bets.
Meanwhile, many bond yields are still negative for the year. German Bonds Lose Investors 0.52% Since 2023 (.MERG0D0), Big Britain and 0.82% (.MERG0L0). US Treasuries are also red 0.28%, 7-10 shows the annual index (.MERG4O2).
Yardeni Research said markets could resume gains if the upcoming data weakens.
“But instead, the data released in March is the worst inflation if he approves his script, March Madness 10 could lift annual Treasury bond yields above their most recent 4.25% on Oct. 24, and the S&P 500 could fall. On October 12, its bear market minimum was 3577.03,” the note says.
Reporting by Dhara Ranasinghe and Naomi Rovnick; Yöruk Bakhchali’s additional report; Edited by Tomas Janowski
Our standards: Thomson Reuters Trust Principles.
2023-02-28 17:44:32
Source – reuters
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