Falling Bonds, Nike Earnings, Porsche IPO

© Reuters.

By Geoffrey Smith

Investing.com — The slide in global bonds resumed and the dollar rallied higher after a strong rally in hedging short positions in risky assets on Wednesday. Stocks should open under pressure, accordingly. Nike and Micron are due to report results after the close, while Porsche is advancing on its IPO after pricing its IPO at the top of its range. In the UK, the pound, bonds and stocks fell again as Prime Minister Liz Truss reaffirmed her policy of lower taxes, while in Germany inflation continued to climb as the start of winter brought more alarming economic news. Here’s what you need to know in the financial markets this Thursday, September 29.

1. Resumption of decline in bond markets; GDP revision and jobless claims expected

The decline in global bond markets resumed and a fresh wave of demand for safe havens lifted the dollar after the importance of Wednesday’s emergency intervention by the Bank of England in the United Kingdom was slowly taken into account. account.

Yields on the benchmark bond jumped. The yield on the benchmark U.S. Treasury bond rose another 13 basis points to 3.84%, giving up much of Wednesday’s short-hedging rally. The yield on the note rose 12 basis points to 4.22%. The index for meanwhile rose 0.6% to 113.62, which remains well below the highs reached at the start of the week.

The US market is due to absorb the final US {{ecl-375||GDP} Q2 data at 2:30 p.m., as well as the , which is not expected to see any major change from last week. Federal Reserve speakers include James of St. Louis and Loretta of Cleveland.

Outside the US, further significant central bank rate hikes are expected in and , while and are expected to keep rates unchanged.

2. UK assets fall again as Truss steps up

UK assets fell again after Prime Minister Liz Truss reaffirmed her policy of unfunded tax cuts in a series of flimsy radio interviews.

His comments came a day after the Bank of England pledged to buy £65bn of UK government bonds in a bid to secure market liquidity, after Gilt yields rose sharply over the last week triggered massive selling by pension funds to meet margin calls on interest rate derivatives. The moves were accompanied by criticism from Mark Carney, the former BoE governor, who accused the government of ignoring the Bank and the Office for Budget Responsibility in its plans.

The BoE’s bond buying solves a short-term problem of market instability, but stands in stark contrast to the rest of its monetary policy. In addition to raising interest rates, the BoE intended to start selling its own portfolio of government bonds back into the market from October. By backtracking, it makes its task of reducing inflation even more difficult.

3. Stocks should open lower; the results of Nike and Micron are expected

U.S. stock markets are expected to open lower later, giving back some of the gains made on Wednesday.

By 1:20 p.m., were down 230 points, or 0.7%, while were down 1.0% and down 1.3%. The three main currency indices had all risen around 2% on Wednesday, in the wake of a strong recovery in short selling.

Among the values ​​likely to be the subject of particular attention are: Tyson Foods (NYSE:), following the announcement of a major management shakeup. CarMax (NYSE:) releases results before the open, while Nike (NYSE:) and Micron (NASDAQ:) share the stage after the close.

4. German inflation continues to climb as first cold snap triggers gas alert

Europe’s economic difficulties are going from bad to worse. Four German research institutes have cut their growth forecast for this year to 1.4%, from 2.7% six months ago, and now expect Europe’s largest economy to contract by 0 .4% next year, instead of growing by more than 3%.

Things could be even worse: under a risk scenario of cold winters and gas shortages, the institutes expect German GDP to contract by 7.9% in 2023 and 4.2% in 2024 It’s no wonder, then, that the country’s electricity grid regulator, the Bundesnetzagentur, called on households to cut consumption by 20%, after Germans took out the thermostat in response to the first cold snap of the last week.

Inflation in Germany continues to run high: figures from the largest German states beat expectations and paved the way for an overall figure of over 10% in September.

5. Porsche’s IPO offers respite from the gloom

German sports car maker Porsche (F:) rose some 5% in early trades in Frankfurt after pricing its IPO at the top of the market range, making it the biggest fundraising in Europe – and one of the largest in the world – since the beginning of the year.

The deal will raise 19.5 billion euros ($19 billion) for the electrification campaign of its parent group Volkswagen (ETR:), which will continue to hold a majority stake. It values ​​the group as a whole at 78 billion euros, more than double its closest rival Ferrari (NYSE:).

It also creates an intriguing arbitrage opportunity with Volkswagen as a whole, whose market value is only slightly higher, at 81.5 billion euros. This means that the market places virtually no value on all of VW’s other car manufacturing activities.

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