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The record-breaking global bond market rally since earlier this year has fizzled out as mounting signs of persistent inflation are forcing investors to revise their views on the likely future trajectory of rate hikes.
Investors rushed into fixed income in the early weeks of 2023 as they grew in expectations that the US Federal Reserve and other major central banks would soon end their aggressive monetary tightening campaign.
A Bloomberg index that tracks high-quality government and corporate bonds rose as much as 4 percent last month, its best-ever start to the year.
But that gain is now gone after a searing US jobs report earlier this month sparked a raft of better-than-expected economic data on both sides of the Atlantic, ending expectations that left the Fed and European Central Bank on the verge of winning their battle Inflation.
The resulting surge in bond yields has also disrupted a stock market rally, with the S&P 500 down 2.7 percent over the past week.
“We did a reality check,” said Michael Metcalfe, head of macro strategy at State Street, adding that the monetary easing that markets were anticipating a few weeks ago “looked a little fanciful.”
Five more stories in the news
1. US wary of Chinese shipments of drones to support Russia in Ukraine Michael McCaul, the top Republican on the House Foreign Affairs Committee, said the US is increasingly concerned that Beijing is considering sending 100 drones and other deadly weapons to Russia , before an expected meeting between Russian President Vladimir Putin and his Chinese counterpart Xi Jinping next week.
2. Missing China Renaissance founder Bao Fan “cooperating” with a government investigation In a terse Hong Kong stock market announcement late Sunday, the company said its board “has realized that Mr. Bao is currently cooperating with an investigation conducted by certain authorities in the People’s Republic of China,” more than a week after the investment bank announced it could not reach him.
3. Shanghai’s return to business tests reopening in China After three years of Covid restrictions hampering travel and trade, the financial hub is reopening without much evidence of what has made it China’s most cosmopolitan city: foreign visitors. The revival will be a test of the country’s commitment to the outside world as policymakers begin a reopening years later than Western counterparts.
4. Adani stock market losses hit $145 billion a month after short seller attack rocked an empire spanning ports to airports to energy.
5. Trafigura Offered $15M From Suspected Nickel Fraudster Via Mauritian Bank The world’s largest private metals trader obtained a $625 million freezing order on Indian business tycoon Prateek Gupta and his business empire after accusing him of “systematic fraud.” It’s one of the biggest commodities lawsuits in London.
The day ahead
Crimea Today marks the ninth anniversary of the pro-Russian uprising in Crimea that led to the annexation of the peninsula. The 47-strong UN Human Rights Council will use the anniversary as a basis for discussions in Geneva on human rights crises around the world.
Continue reading: On February 22, 1946, George Kennan, a US diplomat in Moscow, sent a 5,000-word telegram to Secretary of State James Byrnes. Seventy-seven years later, it offers lessons about life with Vladimir Putin’s Russia.
Economic data February Euro-zone consumer confidence data for the EU will be released today.
Space Mission NASA’s SpaceX Crew-6 mission to the International Space Station is scheduled for launch this afternoon from Kennedy Space Center in Florida. You can follow the events live on the agency’s website.
What else do we read?
China’s Economy and a New Wave of Japanization New research from Citigroup suggests that China today looks “strikingly similar” to post-bubble Japan. The risks investors should be aware of are those of the banking system, writes Leo Lewis.
© Maria Hergueta
How much is Manchester United really worth? The club’s owners, the wealthy Glazer family, have put it up for sale with a reported target price of $6 billion to $7 billion including debt that would break records for any sports club. But the FT’s calculations suggest it’s worth around $1.6 billion.
Anime and The Last of Us transform Sony For longtime Sony viewers, The Last of Us television series symbolizes the culmination of a decades-long metamorphosis for the company. The transformation, which one analyst called “remarkable,” has steadily transformed Japan’s best-known consumer electronics brand into a lesser-known mix of specialist hardware maker and international media giant.
The lockdowns are over. WFH is not. Why? Almost three years after Italy instituted the first nationwide lockdown of the pandemic, much of the world is still in the grip of what economists Jose Maria Barrero, Nicholas Bloom and Steven Davis have dubbed “long social distancing.” There are several elements behind the shift, writes Tim Harford.
Metaverse creator Neal Stephenson on the future of virtual reality The author, who invented the Metaverse concept, sat down with Tim Bradshaw, FT’s global technology correspondent, to discuss why he decided to get involved in the development – and about the problems with AI. Read their conversation here.
Take a break from the news
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