Wall Street cautious, with the Dow Jones gaining 0.25% to 34,831 points; the Nasdaq which rises by 0.30% to 14,623 points, the S&P 500 which is + 0.29% to 4,404 points. Purchases are being held back by Goldman Sachs’ decision to cut the outlook on US GDP growth this year and next and, in general, the fear of stagflation which is returning to hit markets around the world.
Today the US Treasury market is closed for the Columbus Day holiday.
But the trend in the sovereign debt rates of many advanced countries is evident, all pointing upwards, discounting a more sustained than expected increase in inflation.
The sell off started in the UK, hitting UK government bonds following inflation-related comments released over the weekend by Bank of England Governor Andrew Bailey and his colleague Michael Saunders.
Disposals mainly affected short-term gilts, as yields jumped to a record early 2020.
Swiss government bond rates also rose sharply, with ten-year rates which, while remaining negative, rose to a record since the end of 2018, around -0.067%.
German Bund ten-year rates tested their highest since May, advancing by more than 2 basis points to -0.116%, after rising more than 20 basis points last month, almost approaching positive territory.
Sales do not spare the sovereign debt of the made in Italy, with the ten-year BTP rates also rising to a record since last May, exceeding the 0.90% threshold and advancing up to 0.926%. On the other hand, the ECB has now also launched the alert on inflation with the words of Klaas Knot, governor of the central bank of the Netherlands and member of the Eurotower Governing Council. “I still believe that the increase in inflation is mostly temporary, but we have to consider other scenarios, characterized by structurally higher inflation and higher interest rates. “, warned the central banker.
Last week, 10-year Treasury rates broke the 1.60% mark.
On Wall Street, the rise in yields and the expectation for the balance sheets of the giants of Wall Street are assisting the securities of the banks.
JP Morgan goes up, as does Goldman Sachs.
Returning to the note from Goldman Sachs, analysts now forecast for 2021 an expansion of US GDP equal to + 5.6% on an annual basis, against the + 5.7% previously expected, and for 2022 a growth of 4% , against the + 4.4% previously estimated.
Goldman estimates “a more delayed recovery in consumer spending, and a longer-lasting impact of the Covid pandemic on spending on those services most vulnerable to the virus.”
Furthermore, according to the experts of the US banking giant, “the supply of semiconductors will not improve until the second half of 2022”, and this “factor will postpone the phase of re-accumulation of stocks”, to the detriment of GDP.
Wall Street opens the week of trading after last week’s positive performance, which saw the Dow Jones climb 1.2%, thus bringing back the best week since last June 25th.
The benchmark index of the S&P 500 also recovered, recovering from the loss of 4.8% in September. The list has been up 2% since the beginning of October and is 3% below its record level.
Protagonist among the Merck stocks, after the American pharmaceutical giant announced that it had submitted a request to the US authorities for the release of the authorization for the emergency use of the pill against Covid-19, which it developed together with Ridgeback. Merck announced a few days ago that taking the anti-viral drug had reduced the risk of hospitalization or death by 50% for mildly or moderately ill patients.