Global Stocks, on Wednesday, April 25, move towards their longest losing streak of the year, as a rise in U.S. bond yields above 3 percent and warnings from top global firms about rising costs fed fears a boom in earnings may have peaked.
Falls in Asia’s and then Europe’s main bourses pushed the 47-country MSCI world share index .MIWD00000PUS down for a fifth day running to its lowest level in over two weeks.
All eyes will be on scandal-hit social media firm Facebook later when it reports its results though there was plenty keeping investors occupied till then.
Tech-heavy Taiwan shares .TWII had hit two-month lows as global worries about a slowdown in gadget demand spread, while fast charging oil firms .SXEP also eased back as crude prices LCOc1 came off 3-1/2 year highs.
The benchmark U.S. 10-year Treasury yield was still pushing further beyond 3 percent US10YT=RR in early European trade though, having broken the key level on Tuesday for the first time since the start of 2014.
It has been down to a mix of factors. A strong U.S. economy and rising commodity prices which are upping the chance of more U.S. interest rate hikes, as well higher debt and improving relations between Washington and China and North Korea.
“The now healthier global economy justifies these higher yields,” said JPMorgan Asset Management’s Seamus Mac Gorain.
“We expect 10-year Treasuries to end the year between 3 and 3-1/2 percent. A move beyond this level would likely require an acceleration of inflation in the euro zone and Japan, which is not yet evident.”
Euro zone bond yields — yields are a proxy of borrowing costs — were dragged up in the slipstream of the U.S. moves though Thursday’s looming European Central Bank meeting ensured there was a touch of caution.
Markets want to know when the ECB plans to wind down its 2.55 trillion euro stimulus program. One of its policymakers, France’s Francois Villeroy de Galhau, said on Tuesday the weaker run of recent economic data was expected to pass.
The pan-European STOXX 600 equity index was last down 0.6 percent, as worries over rising bond yields trumped a slew of well-received earnings updates from Kering and Credit Suisse.
S&P E-mini futures ESc1 slipped 0.2 percent too. Wall Street shares had skidded on Wednesday, with the S&P 500 .SPX slumping 1.34 percent, the most in two-and-a-half weeks.
Industrial heavyweight Caterpillar (CAT.N) beat earnings estimates due to strong global demand but its shares tumbled 6.2 percent after management said first-quarter earnings would be the “high water mark” for the year and warned of increasing steel prices.
Reuters data shows that analysts are now estimating bumper 21.1 percent growth in the Jan-March quarter among U.S. S&P500 firms.
Creeping gains in U.S. Treasury yields are also fuelling nerves that portfolio managers may move money into safer fixed-income securities at the expense of riskier assets like stocks and emerging markets.
The 10-year U.S. Treasuries yield US10YT=RR rose to as high as 3.02 percent. A break of its January 2014 high of 3.041 percent could turn investors even more bearish.
Fed Funds rate futures prices <0#FF:> have been constantly falling this month, pricing in a considerable chance of three more rate hikes by the end of this year.
The impact is already reverberating in many emerging markets, with JPMorgan’s emerging market bond index .JPMEPR hitting a two-month low.
In Indonesia, a market with one of the largest exposures to foreign portfolio holdings, the authorities have been intervening heavily to put a floor under the rupiah IDR=, which has been flirted with two-year lows.
