18 Jan

US Treasury bond approached the maximum levels in two years

January 18, 2022

by JustForex

Yesterday, the US stock market was closed because of the holiday; only futures for indices, currency, and raw materials were traded.

Yesterday, data from LCH Investments showed that the average return of the world’s most profitable hedge funds for 2021 failed to beat the S&P 500 (US500) index. The top 20 hedge funds’ returns averaged 10.5% as compared to a 28.7% rise in the S&P 500 (US500) index, including dividends.

US Treasury yields approached their highest levels in two years as traders and investors raised bets at a faster pace of rate hikes in the US. Ultimately, this could lead to bonds becoming much more attractive to big players than stocks. As a result, the US stock market could correct significantly this year.

European stock indices were mostly rising yesterday. German DAX (DE30) gained 0.32%, French CAC 40 (FR40) added 0.82%, British FTSE 100 (UK100) jumped by 0.91%, and Spanish IBEX 35 (ES35) increased by 0.36%. The ECB has started to talk about a 10-20 basis point interest rate hike by September-December 2022. So far, it is only a rumor, but markets may be put such scenarios in the price ahead of time. But analysts are confident that if inflation in the Eurozone does not grow or be accelerated by a slow pace, given the conservatism of the ECB, no changes to monetary policy should be expected before the end of 2022. In the UK, expectations are growing that the Bank of England will make another interest rate hike at its meeting in February.

Brent crude oil increased to its highest level in seven years as geopolitical tensions in the Middle East intensified and concerns about the impact of the Omicron virus on demand eased. Yemeni Hussein militants said they struck the United Arab Emirates, OPEC’s third-largest producer, causing an explosion and fire on the outskirts of the capital Abu Dhabi. Goldman Sachs Group Inc. raised its forecasts for Brent for 2022 and 2023, forecasting oil above $100 by the end of the year.

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Asia-Pacific stock indexes are mostly decreasing at the open on Tuesday. Japan’s Nikkei 225 Index (JP225) decreased by 0.27%, Australia’s ASX 200 (AU200) decreased by 0.11%, and Hong Kong’s Hang Seng (HK50) lost 0.8%. The Bank of Japan raised its inflation forecasts at its meeting on Tuesday, but as inflation is projected to be well below the 2% target in the coming years, it decided to keep monetary policy ultra-soft. Inflation in Japan is projected to be 1.1% in the fiscal year that begins April 1, 2022, as compared to the previously forecast 0.9%, and 1.1% in 2023 as compared to 1%. The inflation forecast for the current fiscal year, which will end in March, remains unchanged at zero. The short-term interest rate on commercial bank deposits remained at minus 0.1%, the target yield on ten-year government bonds is about zero. Moreover, Japan’s central bank lowered its GDP growth forecast for the current fiscal year (FY) to 2.8% from the previously expected 3.4% because of supply chain problems. GDP growth forecast for FY2022 was raised to 3.8% from 2.9%, and for 2023, it downgraded to 1.1% from 1.3%.

Main market quotes:

S&P 500 (F) (US500) 4,662.85 +3.82 (+0.08%)

Dow Jones (US30) 35,911.81 −201.81 (−0.56%)

DAX (DE40) 15,933.72 +50.48 (+0.32%)

FTSE 100 (UK100) 7,611.23 +68.28 (+0.91%)

USD Index 95.25 +0.09 (+0.09%)

Important events for today:
  • – Japan BoJ Interest Rate Decision (Tentative);
  • – Japan BoJ Monetary Policy Statement (Tentative);
  • – Japan BoJ Outlook Report (Tentative);
  • – Japan Industrial Production (m/m) at 06:30 (GMT+2);
  • – Japan BoJ Press Conference (Tentative);
  • – UK Average Earnings Index (m/m) at 09:00 (GMT+2);
  • – UK Claimant Count Change (m/m) at 09:00 (GMT+2);
  • – UK Unemployment Rate (m/m) at 09:00 (GMT+2);
  • – German ZEW Economic Sentiment (m/m) at 12:00 (GMT+2);
  • – Eurozone ZEW Economic Sentiment (m/m) at 12:00 (GMT+2);
  • – US NY Empire State Manufacturing Index (m/m) at 15:30 (GMT+2).

by JustForex

 

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.


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