Equities run ragged by bond market selloff

Heading into the close the FTSE 100 is down over 70 points, as markets around the globe are hit by bond market jitters. 

Canary Wharf
Source: Bloomberg

Bond market steals focus

Shockwaves from the turmoil in bond markets continue to be felt in other asset classes, particularly in equities, where the rally of recent days has run into the ground. The absence of plentiful quantities of economic data has meant that the focus of attention has been on the bond market, and to a lesser extent on the Greek crisis. The latter continues to transform itself into an ‘Alice in Wonderland’ environment, as the ever-more complex web of payments and transfers baffles all but the hardiest of market watchers.

Higher inflation concerns and the consequent worry that low yields do not provide the required insurance have sent the bond complex into turmoil, with the result that all asset classes are undergoing a re-rating. For the moment, it is still a correction rather than a complete rout, but we could see the situation worsen, with dire consequences for a stock market that already looks ripe for a major selloff.

The big loser of the day remains easyJet, which has seen all its gains for 2015 wiped out. As ever, the prospect of weak growth in the months to come trumps the better first-half performance.

Wall Street suffers losses

A second day of losses on Wall Street has shown that US markets are not immune from the bond selloff, while a poor reading on job openings for March marks a disappointing return to trend for US economic data.

Even big merger news could not lift the mood, perhaps because the Verizon/AOL deal has too many echoes of past hubris to be worth more than a temporary boost in share prices.

The focus now shifts to Yahoo, that other once-great internet firm, which may now find itself under pressure to find a buyer lest it find itself completely overtaken by the likes of Google, Apple and Facebook.

Crude higher amid production quota speculation

OPEC tends not to lower itself to such matters as denying press reports, but today it did just that, rubbishing a report that indicated $100 a barrel oil prices are not on the cards in the next decade and that the reintroduction of production quotas is being considered.

Quotas would perhaps provide a temporary balm, but the denunciation of bleak predictions where prices are concerned was enough to send crude prices moving higher again.

Sterling bulls push currency higher

After the latest batch of encouraging data, sterling bulls took the opportunity to push the currency higher against the dollar, but caution is beginning to take over as thoughts turn to tomorrow’s Bank of England Inflation Report.

Buy orders came in above the $1.56 level but with such big gains over the past few days the pound is looking vulnerable should Mark Carney and co. be more dovish than anticipated. 

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