Bonds slide after Japanese inflation scare; Stocks up
Saturday, April 26, 2008
GOVERNMENT bonds in developed economies fell yesterday after Japanese inflation hit a decade high and signs that firms are escaping the worst of the credit crisis tamed expectations for aggressive interest rate cuts.
Better-than-expected first quarter earnings reports in Europe and the United States pushed world stocks up towards this week's three-month high while the US dollar hit a one-month peak against major currencies after firmer US labour market data.
Japanese annual inflation jumped to 1.2 per cent in March, triggering one of the biggest ever sell-offs in yen bonds.
Rising inflation expectations as a result of a recent surge in oil and commodity prices from rice to tin come at a time the global economy faces a US-led slowdown as shock waves from the credit crisis threaten to hit consumers and corporates.
However, growing relief that corporate profitability is holding up and banks are making progress towards cleaning up their credit-related troubles has ignited a rally in risky assets and a sell-off in safe-haven government bonds.
"There's an improvement in risk appetite, growing confidence the worst is over in the financial sector and a growing conviction the Federal Reserve is close to the end of its easing cycle. Consequently there's a massive unwinding of safe-haven trades and position squaring," said markets strategist Nick Stamenkovic.
"It's a US-led phenomenon but it is evident across the globe in the major G7 bond markets."
Japanese government bond futures suffered their biggest one-day loss in five years with June 10-year futures falling 1.49 point to 135.59.
US Treasuries and euro zone government bond prices fell in tandem, pushing up yields across the board.
Improvement in risk appetite pushed stock indexes around the world. Tokyo stocks rose 2.4 per cent while the FTSEurofirst 300 index rose 1.2 per cent, thanks to strong Q1 earnings results from Ericsson and Volvo.
MSCI main world equity index were up 0.1 per cent. US stock futures were up 0.4 per cent.
"For investors, the financial sector crisis is moving more and more into the background, and growing hopes that it'll soon be over is bolstering sentiment in equities and credit markets," LandesBank Berlin said.Reuters
Better-than-expected first quarter earnings reports in Europe and the United States pushed world stocks up towards this week's three-month high while the US dollar hit a one-month peak against major currencies after firmer US labour market data.
Japanese annual inflation jumped to 1.2 per cent in March, triggering one of the biggest ever sell-offs in yen bonds.
Rising inflation expectations as a result of a recent surge in oil and commodity prices from rice to tin come at a time the global economy faces a US-led slowdown as shock waves from the credit crisis threaten to hit consumers and corporates.
However, growing relief that corporate profitability is holding up and banks are making progress towards cleaning up their credit-related troubles has ignited a rally in risky assets and a sell-off in safe-haven government bonds.
"There's an improvement in risk appetite, growing confidence the worst is over in the financial sector and a growing conviction the Federal Reserve is close to the end of its easing cycle. Consequently there's a massive unwinding of safe-haven trades and position squaring," said markets strategist Nick Stamenkovic.
"It's a US-led phenomenon but it is evident across the globe in the major G7 bond markets."
Japanese government bond futures suffered their biggest one-day loss in five years with June 10-year futures falling 1.49 point to 135.59.
US Treasuries and euro zone government bond prices fell in tandem, pushing up yields across the board.
Improvement in risk appetite pushed stock indexes around the world. Tokyo stocks rose 2.4 per cent while the FTSEurofirst 300 index rose 1.2 per cent, thanks to strong Q1 earnings results from Ericsson and Volvo.
MSCI main world equity index were up 0.1 per cent. US stock futures were up 0.4 per cent.
"For investors, the financial sector crisis is moving more and more into the background, and growing hopes that it'll soon be over is bolstering sentiment in equities and credit markets," LandesBank Berlin said.Reuters
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