Connect with us

Economy

Bond yields are up more than 5% and weighing on US stocks

Published

on

Bond yields are up more than 5% and weighing on US stocks

Bond yields hit 5% and put pressure on US stocks…and the Dow Jones lost 286 points

US stocks continued to decline in Friday trade, under pressure from a rise in the yield on ten-year Treasuries, which exceeded 5% for the first time since 2007, as major indexes ended the week in the red. The outbreak of conflict in Gaza adds further worries to global markets.

Losses accelerated in the final minutes of trading on the week’s final day, after the Dow Jones industrial average fell 0.86% on the day, losing 286 points, and the S&P 500 index lost 1.26%. The Nasdaq index gained 1.53%.

The yield on 10-year Treasuries crossed 5% for the first time in 16 years on Friday, seen as a new drag on US economic growth that could add to the strongest tightening policy the world’s largest economy has seen. For more than four decades. But the yield fell by the end of the day to 4.92%.

One analyst told CNN on Friday: “Markets don’t seem to believe the Federal Reserve will raise interest rates.”

U.S. bond yields, especially ten-year bonds, affect interest rates used for mortgages, credit cards and car loans, and stock markets lose a significant proportion of funds available for investment.

Relatedly, European stocks fell on Friday, posting their biggest weekly loss in seven months, as fears of escalating conflicts in the Middle East, rising government bond yields and disappointing earnings reports coincided.

The STOXX 600 index of European shares fell 1.4% to a seven-month low.

The index fell 3.4% on the week as fears of an escalating conflict fueled worries about oil supply disruptions and interest rates expected to remain high for a longer period of time, weighing on morale.

See also  Record improvement in non-energy private sector business operations

A rise in government bond yields in Europe and the United States led to risk aversion as central bank policymakers, including Federal Reserve Chairman Jerome Powell, indicated that interest rates would remain high in the long term.

Corporate profits did little to support sentiment, with rising interest and energy prices putting further pressure on profit margins, analysts warned.

The mining sector led the decline and fell 3.4%, hurt by a 7.2% decline in shares of Polityen after a bigger-than-expected drop in third-quarter profit due to higher costs.

The travel and leisure index fell 2.3%, and shares of InterContinental Hotel Group fell 4.5% after a slowdown in quarterly net growth.

Financials were also the biggest drag, with shares of UBS Bank falling 2.8%.

Oil prices fell on Friday after Palestinian resistance freed two American prisoners from Gaza, raising hopes that the Israeli-Palestinian crisis would not worsen, preventing it from spreading to other parts of the Middle East and disrupting oil supplies.

Brent crude futures settled down 22 cents, or 0.2%, at $92.16 a barrel.

U.S. West Texas Intermediate crude futures for November delivery, which expire after Friday’s settlement, fell 62 cents, or 0.7%, to settle at $88.75 a barrel. The most widely traded December contract for West Texas Intermediate crude was down 29 cents at $88.08 a barrel.

Abu Ubaidah, spokesman for the Izz al-Din al-Qassam Brigades, announced today Friday that two American prisoners, a mother and her daughter, had been released for “humanitarian reasons” in response to Qatar’s mediation efforts in the war with Israel.

Both crude oil futures rose more than a dollar a barrel in the first hour of today’s session, amid fears the conflict could intensify.

See also  The SVB crisis prompted us to shift our money to JPMorgan and Merrill Lynch.

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Economy

The world’s central banks are increasing their reserves… Details in 10 facts

Published

on

The world’s central banks are increasing their reserves… Details in 10 facts


Books – Islam Saeed

Sunday, December 3, 2023 at 03:00 AM

Central banks around the world continue to demand… Gold In 2023, gold trends for the third quarter of the current year 2023 as per the reports of the World Gold Council show that the demand for gold by banks has increased.

Central banks added 337 tonnes in the third quarter of 2023

The third largest buying level in the quarter reached by central banks

In the third quarter of 2022, banks bought a large amount of 459 tonnes of gold..

Since the beginning of 2023, demand by central banks has increased by more than 14%.

Total bank purchases of gold since the beginning of 2023 have reached a record high of 800 tonnes of gold.

Gold reserves reported by global central banks rose by a net 77 tonnes in September.

Central bank’s gold sale is only 1 ton.

– Fund outflows from gold investment funds continued in October, $2 billion

Since the beginning of the year, the funds’ investments have fallen 6%.

– Total cash outflows from gold-backed global investment funds have hit $13 billion since the start of the year



See also  The euro fell below $ 1.06 for the first time in five years
Continue Reading

Economy

Oil loses 2% as investors worry about OPEC plus cuts

Published

on

Oil loses 2% as investors worry about OPEC plus cuts

Oil prices settled up more than 2% – yesterday, Friday – after a volatile trading week as the market anxiously watched the latest round of OPEC Plus production cuts and a slowdown in global production activity.

Brent crude futures for February delivery were down 2.45% at $78.88 a barrel, while US West Texas Intermediate crude futures were down 1.9% at $74.07.

For the week, Brent posted a decline of about 2.1%, while the West Texas Intermediate posted a decline of more than 1.9%.

On Thursday, oil-producing countries in the OPEC Plus alliance – which includes members of the Organization of the Petroleum Exporting Countries (OPEC) and other countries including Russia – agreed to cut global oil production by about 2.2 million barrels on the world market. per day in the first quarter of next year, including… extending current voluntary cuts by 1.3 million barrels per day from Saudi Arabia and Russia.

The OPEC Plus alliance – which accounts for more than 40% of the world’s oil – is focused on cutting production, with prices falling from around $98 a barrel in late September, amid fears of weaker economic growth in 2024.

A survey showed that the US manufacturing sector is still weak, with the factory employment rate falling last November.

On Friday, talks to extend a week-long ceasefire between Israel and the Palestinian Islamist movement (Hamas) collapsed, leading to renewed fighting in Gaza that could disrupt global oil supplies, Reuters reported.

See also  China cuts interest rates again as youth unemployment hits new record high
Continue Reading

Economy

A private credit boom leads to a new crisis

Published

on

A private credit boom leads to a new crisis

If this is a “golden moment” for private lending, where will things go? What are the risks? Higher interest rates and turmoil in regional banks earlier this year have boosted confidence in the recovery of private credit. According to data provider Preqin, the market is expected to grow from $1.6 trillion to $2.8 trillion this year. BlackRock takes a more optimistic view, predicting the market will grow to $3.2 trillion.

Mark Rowan, CEO of private equity firm Apollo, sees “de-banking” in its early stages, while John Gray, chairman of BlackRock, coined the phrase “golden moment” to describe conditions in private capital at the start of the year. .

If the new banking rules under Federal Reserve regulations are considered a catalyst, capital requirements for the commercial banking industry in the US are likely to increase by up to 35%, according to Oliver Wyman, the world’s leading management consultancy. company — and no wonder Jamie Dimon said. , head of JP Morgan, said private lenders would be “very happy.”

How things develop in the market will be a key issue not only for large firms and banks in the private market, but also for traditional asset managers who have begun to use the capabilities of the private market to avoid the extreme rise of passive asset management. . This coincides with at least 26 traditional asset managers buying or launching new private credit units in the past two years.

This shift confirms the extent to which the structure of the financial market has changed. 20 years ago, when I was working at Morgan Stanley, I noted in a research paper that investor flows would split into barbells. On the one hand, investors would flock to passive, exchange-traded funds to get record returns. They are cheap and convenient. On the other hand, investors looking for higher returns will use asset allocation with specialist fund managers who invest in private equity, hedge funds and real estate. For traditional “major” fund managers, caught between the two, they will be pressured to make their investment machines more specialized or merge to increase their size, which has already been achieved.

See also  The SVB crisis prompted us to shift our money to JPMorgan and Merrill Lynch.

According to ETFGI, ETFs have grown from $218 billion in 2003 to $10.3 trillion last October, but what’s surprising is how unbalanced the situation has become in terms of returns, with management fees likely to account for half of the investment sector. to alternative asset managers in 2023 from 28% in 2003.

Central banks are now scaling back their quantitative easing, which was implemented to support economies and markets, which has traditionally supported corporate profits. Without these tailwinds, the pressures on fund managers become more severe. So, how will the transition to private lending proceed?

Currently, Preqin estimates that just 10 companies have received 40% of private credit resources in the last 24 months. There are three reasons why private credit growth has disproportionately favored these large firms.

First, a good amount of growth is expected from the sale of investment portfolios by regional banks, which have to reduce their debt and are forced to sell good assets. The central bank’s new rules signal an inability for big banks to step up. In light of the large portfolio sizes and the speed required for transactions, the acquisition of these assets is a specialized venture that is in the interest of large companies that can underwrite the risks.

Second, a growing number of deals require more money, and August saw a new record for the largest loan, reaching $4.8 billion for fintech firm Finastra. The third and most important reason is that banks prefer to enter into partnerships so as not to lose access to customers. Even though tougher rules mean they have to divest assets, banks want to continue lending and partnering to help manage deal flows, which could benefit larger firms.

See also  The euro fell below $ 1.06 for the first time in five years

Several major banks have already closed deals and more are expected to follow. Citi is the latest bank to report its intention to launch a new unit in 2024.

A changing interest rate regime will mean loan losses rise as funding costs normalize and exposed weak balance sheets, which will be a source of challenges for private lenders. It may be unwise for new companies to try to exploit the growth. This requires a strong focus on the risks and rewards of selection and contracts, and teams that specialize in reconciliation, which many of the major players in the market have.

Of course, there will be key opportunities, such as hard credit or energy infrastructure credit, that are places that efficient companies can tap into, but they may not be on the scale that traditional companies need to maximize opportunities.

In general, a complete and comprehensive shift in capital allocation awaits us, requiring a major shift towards private credit, as Howard Marks recently argued, but the coming tide will not smooth all boats.

Continue Reading

Trending

Copyright © 2023