Global Stock Markets Slow Down As Monetary Policy Shifts

Global stock markets have witnessed a decline amid mixed results from key indicators and earnings reports as well as an expected recalibration of a global monetary policy. The U.S has reported better-than-expected results for numerous measures such as job growth numbers, retail sales, industrial production and housing start, indicating a strengthening economy.

This has heightened expectations that the Federal Reserve might consider raising rates in later in the year. If the Fed does do so, it would be acting in divergence from other key markets in Europe and Asia where central banks are expected to ease bank rates this year.

In a statement, Marc Chandler, head of currency strategy at Brown Brothers Harriman said,

“It’s not so much that the market expects the Fed to raise rates next week or in September, but odds have crept up in December. The Bank of England is going to ease. The Bank of Japan is going to ease. It is the return of divergence.”

The odds of an increase in US interest rates were 43 percent this week, an increase from the 34 percent seen last week. The S&P 500 declined by 0.1 percent bringing it down from a record high. Other key indicators were volatile. Brent crude fell by 0.6 percent and the yen fell by 1 percent which bolstered the Nikkei 225 by 1.4 percent.

Other Asian markets had a downward slide as a result of a GDP report from China which showed that while the overall GDP growth was on target, the services component was declining. Hong Kong’s Hang Seng dropped by 0.6 percent while Shanghai Composite fell by 0.2 percent.

Government bonds showed improved performance even as the equity markets softened. The 10-year US Treasury yield went down by 3 basis points to 1.55 per cent. Analysts from Morgan Stanley expect government bonds to have a bull run in the next few quarters. They have said that the 10-year treasuries would register the lowest ever yield of 1 per cent during the first quarter of 2017. Have a look at the US binary options brokers to see if you can make the most of these changes.

Equivalent maturity gilts marginally declined by 2 basis points largely unaffected by the report that inflation in UK has increased by 0.5 percent while German benchmark Bund yields dropped by 1 basis points . The euro declined by 0.5 percent against the dollar on news that German consumer index had plummeted and also in wait of the European Central Bank’s policy meeting which is scheduled to be held later this week.

Charlie Harrison

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