News

ECB Head, Lagarde warned that higher bond yields could lead to a “premature tightening of financing conditions”, which she labelled “undesirable”.

US markets were choppy in the morning ahead of a speech by Federal Reserve Chair Jerome Powell, before sinking in the early afternoon when he showed no sign of wanting to intervene to arrest the pace of rising bond yields. 

Closer to home, the RBA’s policy update yesterday turned out to be fairly routine, with rates guidance unchanged and the Bank reiterating that conditions for a hike were not likely until 2024 at the earliest.

As we have discussed previously, financial stocks  all else equal benefit from higher interest rates as it improves bank interest margins. 

Global markets were higher on Monday (S&P 500 index +2.4%) as bond markets calmed after a month-long selloff.

Global markets were mixed on Friday (S&P 500 index -0.2%) helped by a rise in economy-sensitive cyclical sectors, with the S&P 500 and the Nasdaq on track to end the week on a dull note as investors rotated out of technology-related companies.

Shares of Apple, Microsoft, Alphabet, Tesla, and Amazon resumed their slide from the previous week, with Tesla suffering the biggest hit, down -8.5%.

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The market is now expecting a full 25bps hike by August 2022. The prospect of higher NZ interest rates saw the currency surge, and it is now trading at 74.5 cents versus the US dollar.