The first week of October saw the U.S. 10-Year Treasury yield climbing to its highest level (3.23 percent) since mid-2011 with spillover effects on the other bond markets around the globe. The move hit stock markets as well, especially Asian and emerging markets (MSCI EM Asia down -5.44 percent, MSCI EM -4.50 percent). All the broad-based indices finished the week in negative territory (S&P500 -0.97 percent, MSCI EMU -1.69 percent, NIKKEI 225 -1.39 percent, MSCI World -1.49 percent in USD).
The spike in bond yields followed strong macro data in the U.S. and Powell’s comments on the ‘remarkably positive’ economic outlook and rates that might rise above “neutral”. Such news logically lifted the greenback. At the same time, crude oil booked solid gains after the National Security Advisor John Bolton called Iran the ‘the central banker of international terrorism’.
The energy sector was therefore the best performer, helped by oil and natural gas, among the few ones which stayed afloat. In contrast, a number of high price-to-earnings technology stocks led the decline due to growing concerns about the U.S.-China trade spat. Aided by the yield surge and signs Italy would cut its budget deficit and lower its debt in the coming years, financials rallied a bit in mid-week, but not enough to offset the initial losses.
Find the full report here : https://www.trackinsight.com/weekly-flow-report/2018-10-05/global