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U.S. government bonds rose, the dollar was confirmed and Wall Street shares faltered as investors predicted a slowdown in the pandemic’s economic recovery.
The U.S. Treasury’s 10-year benchmark yield, which moves inversely to its price, fell 0.07 percentage points to a four-month low of 1.301 percent. The equivalent Bund yield in Germany fell 0.04 percentage points, to at least 0.309 per cent, the lowest since early April.
Fears that the Federal Reserve would respond to a rapid recovery in the United States and rising inflation with a rapid round of rate hikes caused the yield on the ten-year note to rise 1.8% in March. But these inconveniences had been replaced by expectations that growth in U.S. gross domestic product, which is expected to have reached an annualized rate of at least 9 percent in the second quarter, it was on the verge of reaching its peak, analysts said.
Data from the Institute of Supply Management on Tuesday also show service sector activity in the US rejected in June of the previous month.
“Bond markets are expressing their view that we are approaching the slowdown phase of the business cycle,” said Gergely Majoros, Carmignac’s portfolio manager.
In the stock markets, the S&P 500 rose 0.3% and the technology-focused Nasdaq Composite lost 0.3%, although both stock indices remained close to record highs. lunch time in New York. The Stoxx Europe 600 across the continent rose 0.8%, close to its record-breaking success last month.
The dollar index, which measures the greenback against major currencies, rose 0.3% to its highest level since early April. The euro fell 0.2% to $ 1.1795.
The intensification of the spread of the Delta variant of the coronavirus had hampered the “gangbusters’ narrative ”that had dominated markets for most of 2021, said George Saravelos, a strategist at Deutsche Bank.
Since drug manufacturers announced effective coronavirus vaccines last November and Joe Biden unleashed billions of dollars of stimulus after he was elected president of the United States, markets had been backed by “an unprecedented mix of pro-cyclical fiscal and monetary policy just as the economy was taking off, ”Saravelos said.
But now growth had to “depend much more on public sector spending than on public spending,” he added.
Later on Wednesday, the US central bank will publish the minutes of the June meeting, when officials presented projections on the first post-pandemic interest rate hike a year to 2023.
Tracks will be reviewed as to when the Fed plans to cut the $ 120 billion monthly emergency debt purchase, which began last March to boost markets through the pandemic, though economists don’t expect an announcement until end of year.
“Presumably, the bond market believes that the Fed is unlikely to raise rates near the peak of the last cycle,” said Jefferies strategist Sean Darby, “as structural forces,” such as public companies and companies debt, “Keep the Fed Close to Zero Limit.”
Elsewhere in the markets, Brent crude fell 2% to $ 72.97 a barrel, after falling 3.4% on Tuesday. This came after talks between members of the Opec + group from producing countries finished without any agreement on the liquidation of the Covid-19 supply curbs.
“If the current position is maintained, it is met [the] the share of production will eventually deteriorate, “Morgan Stanley analysts said.” Much of Opec’s spare capacity could reach the market quickly. “
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