Shares look at year’s longest losing streak
US BOND YIELDS RISE PAST 3%, 2011 HIGHS NEXT FOCUS
Shares were on their way to the longest losing streak of the year on Wednesday, as an advance in US bond yields beyond 3 per cent and warnings from top global firms about rising costs fed fears that a boom in earnings may have peaked |
Shares were on their way to the longest losing streak of the year yesterday, as an advance in US bond yields beyond 3 per cent and warnings from top global firms about rising costs fed fears that a boom in earnings may have peaked.
“The now healthier global economy justifies these higher yields,” JPMorgan Asset Management’s Seamus Mac Gorain said.
“We expect 10-year Treasuries [yields] to end the year between 3 and 3-1/2 per cent. A move beyond this level would likely require an acceleration of inflation in the Eurozone and Japan, which is not yet evident.” Eurozone bond yields — yields are a proxy of borrowing costs — were dragged up in the slipstream of the US moves though Thursday’s looming European Central Bank (ECB) meeting ensured there was a touch of caution.
Falls in Asia’s and then Europe’s main bourses pushed the 47-country MSCI world share index down for a fifth day running to its lowest level for more than two weeks. US stocks opened slightly lower, extending the market’s losses, after several companies reported weak results or warned of higher costs. Scandal-hit social media firm Facebook was expected to release results later in the day.
“We’ve seen quite a lot of companies announcing aboveestimate earnings and their shares falling sharply,” Mitsubishi UFJ Morgan Stanley Securities senior investment strategist Norihiro Fujito said.
Bumper growth
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Reuters data shows that analysts are now estimating bumper 21.1 per cent growth in the January-March quarter among US SP500 firms.
Fujito noted major financial shares such as Goldman Sachs and Citigroup as well as Google parent Alphabet, the first major tech firm to report earnings, have followed a similar pattern.
“The market reaction so far feels as if we are starting to see an end of its long rally since 2009. Investors could be thinking that the best time will be soon behind us,” he said.
Facebook’s results are due after the closing bell. Revenues are expected to be up sharply but focus will all be on what impact the scandal over the misuse of tens of millions of its users’ data has had on usage of the social media site.
Creeping gains in US Treasury yields are also fuelling nerves that portfolio managers may move money into safer fixed-income securities at the expense of riskier assets such as stocks and emerging markets.
The 10-year US Treasuries yield rose to as high as 3.02 per cent. A break above its January 2014 peak of 3.041 per cent could turn investors even more bearish.