Global equities and government bond prices remained under pressure on Friday, following comments from Federal Reserve Chairman Jay Powell.
Bond prices have fallen in the opening weeks of this year, in a move that has accelerated over the past two weeks. Some analysts and investors had expected Powell to use his lock at an event hosted by The Wall Street Journal on Thursday to provide at least verbal support for the market, perhaps even a sign that he was formally willing to keep interest rates low. to hold.
Instead, saying that the recent rise in interest rates – the flip side of falling prices – was “remarkable,” and that the US central bank would be “patient” in the face of a temporary rise in inflation, he said. no sense. of immediate alarm. Yields on 10-year US Treasuries rose 0.07 percentage points to 1.55 percent on Thursday and stayed in that area in Europe on Friday.
“It seems that words are not enough,” says Joost van Leenders, senior investment strategist at Kempen Capital Management. “There is still a lot of concern with rising yields. Historically rising returns aren’t bad for stocks, the reason it’s different this time around is that many stocks have high valuations, which are justified by low returns.”
In Europe, the regional Stoxx 600 index fell 0.7 percent during morning trading. The FTSE 100 benchmark in London fell 1.2 percent, while the German Xetra Dax lost 0.9 percent.
In Asia, China’s CSI 300 index of Shanghai and Shenzhen-listed stocks fell a whopping 2 percent, before pulling back to 0.3 percent by the end of the morning session, after Beijing set a target of ‘above 6 percent . For economic growth in 2021.
Prime Minister Li Keqiang praised China’s recovery from an ‘extraordinary’ year, saying the government wanted to create at least 11 million urban jobs at a meeting of the National People’s Congress, the annual meeting of the country’s rubber parliament.
“A target of more than 6 percent will enable all of us to put full effort into promoting reform, innovation and quality development,” said Li, adding that Beijing “would support healthy economic growth” at the start of the event. the new five-. annual plan.
However, analysts were less optimistic about China’s economic outlook, pointing to the clearly lower growth target compared to recent years.
“In fact, there isn’t much surprise from the government’s work report, other than the super-low GDP target,” said Iris Pang, chief economist for Greater China at ING, who estimated growth at 7 percent this year. “This makes me uncomfortable because I don’t know exactly what the government wants to tell us about the recovery path it expects.”
The S&P 500, which closed Thursday’s session at 1.3 percent, was tipped by the futures markets and fell an additional 0.4 percent when trading began on Wall Street.
Brent crude oil, the international benchmark, rose 1.5 percent to $ 67.77 a barrel. “The strong performance in commodities suggests it is an asset class that investors have moved to,” said van Leenders.