Stock market: global flight from bonds spreads to stock markets; Milan (-1.3%) brings up the rear
Bonds are having to contend with oil prices above $92 a barrel and the impact of Warsh’s ‘hawkish’ comments, which are increasing the likelihood of a rise in interest rates in September. The FTSE MIB on the Milan Stock Exchange has slipped below the 52,000-point mark
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(Il Sole 24 Ore Radiocor) - A domino effect is being felt across the markets, where inflation and the surge in oil prices are pushing government bond yields to levels not seen for twenty years, thereby fuelling fears of rate rises by the Fed and the ECB. Indeed, the flight from government bonds is currently the talk of the town amongst investors, whilst US-Iran tensions and the crisis in the Strait of Hormuz are pushing Brent crude towards $92 a barrel and weighing on the markets. The surge in prices is also evident in the eurozone, where the inflation rate in August rose to 3.3 per cent, well above the Eurotower’s target (which is set to raise interest rates at its next meeting). “Headline inflation has returned to above 3 per cent, whilst the moderation in core inflation indicates that underlying price pressures have not followed the same trend,” note analysts at Moneyfarm - For the ECB, the challenge will now be to determine whether the rise in energy prices is a temporary factor or whether it could translate into more persistent inflationary pressures on the economy as a whole.
Milan is the worst performer in Europe, with the FTSE MIB falling by 1.3 per cent and dropping back below the 52,000-point mark to 51,915, back to late-July levels. Frankfurt also saw a fall of more than 1 per cent, whilst Paris limited the damage (-0.39 per cent).
Wall Street falls amid fears over rising bond prices and yields
Wall Street also saw losses, due to fears over inflation and rising oil prices, which are pushing up bond yields in the United States and abroad, fuelling concerns about a possible tightening of monetary policy by the Federal Reserve later this month. Meanwhile, the US labour market is showing signs of a modest slowdown, with job vacancies (JOLTS) standing at 7.27 million, below the forecast of 7.31 million but above June’s figure (7.18 million, revised down from 7.35). Unemployment figures are due on Friday.
On the stock market, technology shares are experiencing across-the-board falls. Heavy Nvidia Corp and Advanced Micro Devices and Micron Technology . Down also for Microsoft Corp and Alphabet Class A – Google’s parent company.
Shopping rewards Novartis Ag , thanks to the positive results of clinical trials on the multiple sclerosis drug. Novartis stated that remibrutinib ‘significantly’ reduced the relapse rate in patients with multiple sclerosis compared with other treatments. Duolingo also performed well, after Evercore ISI raised its rating, as did Medtronic, after the medical equipment company revised its forecasts for the 2027 financial year upwards.
