Business

Global stocks mixed as markets eye US interest rates

Wednesday, October 10, 2018

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NEW YORK, United States (AFP) — Global stocks finished mixed yesterday following a meandering session amid lingering worries over higher interest rates as the International Monetary Fund (IMF) cut its global growth forecast.

Investors have been nervous since the yield on 10-year US Treasury bonds surged above 3.0 per cent. The advance followed a stream of strong US economic data that was seen as boosting the likelihood that the Federal Reserve will persist in raising interest rates.

Yields continued higher early Tuesday but reversed and ended down at 3.21 per cent.

Earlier, the Italian Government appeared to have some success in talking yields down, with Finance Minister Giovanni Tria saying that fears over his country's financial health — and the consequent spike in borrowing costs for Rome — did not fairly reflect the situation in the Eurozone's third-largest economy.

Italian bond yields also rose early in the session before pulling back.

Bourses in Paris, Frankfurt and Paris all edged higher.

US stocks were mixed, with the Nasdaq scraping a modest gain, while the Dow and S&P 500 dipped.

“The broader market seemed reluctant to make a decisive move in any direction, as the S&P 500 index crossed back and forth across the unchanged line numerous times during the trading session,” said Briefing.com.

“An overnight spike in US Treasury yields spooked investors this morning.” Briefing.com added. “However, renewed buying interest drove prices up and yields down, which eased some of the early angst.”

Japan's Nikkei slid 1.3 per cent due to the stronger yen and worries about the Chinese economy.

 

IMF CUTS OUTLOOK

The International Monetary Fund cut its outlook for global gross domestic product (GDP) by two-tenths to 3.7 per cent for 2018 and 2019, citing an upswing in economic risks due to rising trade tensions and debt levels.

“Downside risks to global growth have risen in the past six months and the potential for upside surprises has receded,” the IMF said.

The IMF predicted China's economy would grow 6.2 per cent next year, down from an early forecast of 6.4 per cent, citing the “negative effect of recent tariff actions”.

China's rate of growth could decline by as much as a full percentage point or more by 2019 if a “worst-case” scenario materialises, involving further tariffs, a commensurate Chinese counter-response, and a collapse in confidence among businesses and markets, the IMF said.

American Airlines plunged 6.6 per cent after disclosing that it cancelled about 2,100 flights in September due to Hurricane Florence. Both Delta Air Lines and United Continental also shed more than two per cent.

Starbucks jumped 2.1 per cent after activist investor Bill Ackman announced he had built a stake in the coffee company.

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