Bloomberg mainpoints(2021/7/8)
Bloomberg mainpoints (2021/7/8)
Risk off
Investors seem to be having a hard rethink about the prospects for the global economy. Easing inflation expectations in the U.S. are helping push Treasury yields lower, with the 10-year dropping below 1.27% this morning. Falling inflation expectations amid the rise of the delta variant of the coronavirus is the main driver for the risk-off move. The 20-day correlation between futures for the S&P 500 and Treasuries turned negative for the first time since February as bonds return to their traditional role as a hedge for falling stock portfolios.
Markets fall
The rally in sovereign bonds is a global phenomenon and so is the selloff in equities. Overnight the MSCI Asia Pacific Index slid 1.2% while Japan’s Topix index closed down 0.8%. In Europe the Stoxx 600 index had dropped 1.2% by 5:50 a.m. with every industry sector in the red as cyclical stocks led the losses. S&P 500 futures pointed to amore-than-1% fall at the open, oil fluctuated around $71 a barrel and gold rose.
Coming up... Mexico, Brazil and Chile all report June CPI readings this morning. Latest U.S. crude oil inventories data is at 11:00 a.m. is expected to show a significant drop in stockpiles. President Joe Biden is scheduled to speak on the Afghanistan drawdown at 1:45 p.m. Levi Strauss & Co. and Duck Creek Technologies Inc. are among the companies reporting results.
What we've been reading
Here's what caught our eye over the last 24 hours.
And finally, here’s what Joe’s interested in this morning. Equity futures are selling off this morning, but for the most part, major stock indices in the US are very close to all-time highs. The real action lately has been in the bond market, where the recent moves have been extraordinary.
Just two or three months ago, everyone was talking about reflation, and how maybe even the Great 40-Year Bond Bull Market might finally be coming to an end thanks to this era of loose monetary policy and fiscal expansion.
There seemed to be this newfound unanimity that rates had nowhere to go but up. There was even talk about the Fed losing control of the long end in some way. And yet hear were are, this morning, with the 10-year yield below 1.3%.
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