Dow plunged 810 to below 30K, there are only 226 advancers on the NYSE & NAZ sank 457. The MLP index dropped 6+ to the 194s & the REIT index sank 9 to the 388s (off 100+ from its recent highs), Junk bond funds drifted lower & Treasuries saw buying (more below). Oil was flattish in the 115s & gold went up 12 to 1832.
AMJ (Alerian MLP index tracking fund)
Treasury yields rose, as traders weighed the latest policy moves taken by the Federal Reserve & central banks around the world to curb global inflationary pressures. The yield on the benchmark 10-year Treasury note traded 1 basis points higher at 3.404% & the yield on the 30-year Treasury bond climbed more than 4 basis points to 3.453%. The 2-year Treasury rate, which is more sensitive to US monetary policy changes, jumped 9 basis points to 3.372%. Yields move inversely to prices & 1 basis point equals 0.01 percentage point. Today's moves came after the Swiss National Bank overnight raised rates for the first time in 15 years. The Bank of England was set today to raise rates for the 5th straight time. Yesterday, the Fed raised rates by 75 basis points, marking is biggest rate hike since 1994. The central bank's aggressive move to rein in inflation came after the consumer price index rose by an annual 8.6% in May, its largest year-on-year increase since 1981. Members of the Federal Open Market Committee reiterated the Fed's commitment to stabilizing inflation & indicated that a stronger path of rate increases lies ahead. Officials also cut their 2022 economic growth outlook to just 1.7% from 2.8%. Analysts were divided as to the market implications & the scale of the likely recession coming down the pike.
Treasury yields rise as central banks around the world get more aggressive in fighting inflation
The Bank of England implemented a 5th consecutive hike to interest rates as it looks to rein in soaring inflation. The Monetary Policy Committee voted 6-3 to increase the Bank Rate by 25 basis points to 1.25%, with the 3 dissenting members voting for a 50 basis point hike to 1.5%. The committee said that it will “take the actions necessary to return inflation to the 2% target sustainably in the medium term,” with the the scale, pace & timing of any further hikes depending on the economic outlook & inflationary pressures. “The Committee will be particularly alert to indications of more persistent inflationary pressures, and will if necessary act forcefully in response,” the bank added. The £ dropped against the $ shortly after the announcement, but rebounded to gain 0.4% & trade above the $1.22 handle by mid-PM local time. Policymakers face the unenviable task of bringing consumer prices back under control against a backdrop of slowing growth & a rapidly depreciating currency, while the UK faces a major cost of living crisis.
Bank of England hikes rates for the fifth time in a row as inflation soars
There are increasing signs that Western unity over the war in Ukraine could be starting to crack as the conflict drags on and leaders face public discontent over rampant inflation & the cost-of-living crisis. There are widespread concerns over how long the war could continue, with some strategists saying it has all the hallmarks of a war of attrition where no side “wins” & the losses & damage inflicted by both sides, over a protracted and prolonged period, are immense. The US, UK & Eastern Europe appear staunch in their position that Russia must not be able to succeed or “win” in Ukraine by carving out (or reclaiming, as Moscow sees it) swathes of territory for itself, saying that could have major global geopolitical repercussions. They have also been clear that it is Ukraine that must decide if, & when, it wants to negotiate with Russia over a peace deal. For its part, Kyiv has said it is willing to conduct talks but that it has red lines, chiefly, that it is not willing to concede any territory to Russia. Nonetheless, there appears to be a faction within Europe — namely France, Italy & Germany — that are hoping for a peace deal sooner rather than later. Yesterday, French Pres Emmanuel Macron said Ukrainian Pres Volodymyr Zelenskyy & his officials will have to negotiate with Russia “at some point.” Macron & his German & Italian counterparts (who are all in Kyiv today) have all called for a cease-fire & for a negotiated end to the war, urging Russian Pres Vladimir Putin to hold peace talks with Zelenskyy, to no avail. In the meantime, Ukraine continues to plead for more weapons from its Western allies, with NATO officials meeting this week in Brussels to discuss Kyiv's urgent need for more arms. It comes as Russia makes gains in eastern Ukraine largely as a result of its relentless artillery bombardment of the Donbas. Russian forces are making slow but steady progress in seizing more parts of the Luhansk & Donetsk regions where 2 pro-Russian separatist “republics” are located, which Moscow is intent on, as it says, “liberating” from Ukraine.
The West’s unity over Ukraine is starting to crack just as Russia gains ground
Dow Jones Industrials
No comments:
Post a Comment