European shares fall after international market collapse as a result of jitter-jitter-jitter
LONDON – European equities fell slightly on Friday after global markets were plagued by a sudden surge in bond yields that caused investors to flee high-valued segments of the market.
The pan-European Stoxx 600 fell 1% by noon, with basic resources being lost by 3.7% while healthcare was the only sector positive at 0.5%.
Asia Pacific stocks sold heavily during Friday’s trading, led by a 3.99% decline for Japan’s Nikkei 225, while the broadest MSCI index for Asia Pacific stocks outside of Japan rose 2.99 % fell.
US stock futures also fell in volatile premarket trade on Friday morning after the rise in interest rates drove the tech-heavy Nasdaq Composite into its worst trading session since October.
The yield on 10-year US Treasury bills briefly topped 1.6% on Thursday, its highest level in over a year, suggesting expectations of higher economic growth and inflation due to the introduction of Covid vaccines, the prospect of significant fiscal changes Incentives from Washington and Canada are attributable to pent-up consumer demand. The 10-year rate eased considerably on Friday morning, most recently at 1.4805%, which eased the stock market losses.
“Until recently, market participants could digest the upside in long-term interest rates, but it appears that the next hike in interest rates will be a major chew,” said Charlie Ripley, senior investment strategist at Allianz Investment Management.
“Given where real returns have been, they were just too low given growth expectations, and it is likely that long-term real returns will continue to rise as economic data improves.”
UK bond yields rose on Friday after Bank of England’s chief economist Andy Haldane warned that inflation could be difficult to tame, leading to more assertive policies.
In Europe, corporate earnings reports were from the IAG of British Airways, LafargeHolcim, BASF, Deutsche Telekom, Suez and Engie.
The IAG suffered a full year operating loss of 7.4 billion euros ($ 9 billion), the largest in history when the plane was grounded globally for a significant portion of 2020 with the Covid-19 pandemic. Shares rose 4% in hopes of global travel restrictions easing.
“You could argue that the worst of times may be over soon as people start thinking about booking vacations again,” said Russ Mold, investment director at AJ Bell stockbrokerage platform.
“The IAG is of course hesitant to issue a profit forecast for the new financial year, but one cannot help but believe that there is reason to be optimistic that there will be significantly more aircraft in the sky in six to nine months.”
In terms of the performance of individual stocks, Belgian telecom giant Proximus fell more than 9% to the bottom of the Stoxx 600 after forecasting lower core earnings in 2021.
At the top of the European blue-chip index, France’s teleperformance rose 6.5% after JPMorgan raised its target price on Thursday after a strong earnings report on Thursday.
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