Stocks or bonds? Bonds or stocks?

The rise in US bond yields is continuing to disrupt global stock markets as the week draws to a close.

The rise in US bond yields is continuing to disrupt global stock markets as the week draws to a close.

Markets across Asia closed lower and European markets opened with a wobble as Treasurys increasingly become the flavour of the moment, underpinned by strong US economic growth and planned interest rate hikes.

The latest data shows that US jobless claims have fallen to a nearly 50-year low and the labour market is now not far from full employment, at least on paper. What has caught markets by surprise is not so much the strength of the job market and of the overall economy but the speed at which it is progressing. The high levels of employment has been feeding wage increases and fueling higher consumer spending, in turn leading to rising inflation. Now the speculation will start if the Federal Reserve will speed up its planned rate hikes this year and next thus giving bond markets more fuel for a further flare up in yields.

UK house prices fall

In the UK it is a different story. September is typically a good month for house buying as buyers come back from summer holidays and schools restart but this year not only did domestic house prices decline on the month but the rate of decline sped up against August numbers. It is too early to call a serious turnaround in housing price growth as the overall quarterly price is still up on the year but the slowdown in growth is becoming more embedded. This is unlikely to translate into an action point for the Bank of England at its next rate setting meeting on 1 November as the Bank has already said that it plans on keeping rates steady until it has more clarity over Brexit, but the news will add to concerns about the effects of Brexit on the UK economy.   

Unilever to keep London headquarters

A small group of the larger Unilever shareholders managed to apply the brakes on the Anglo-Dutch firm’s plans to close down its London headquarters.  Instead the consumer goods firm will continue operating a dual-headed structure. The firm would have needed approval from 75% of UK shareholders who were getting increasingly worried that the company may end up delisted from the FTSE 100. It is now caught between a rock and a hard place, reflected in a share drop of 0.29% this morning. The decision to abandon its Rotterdam plans means that the company’s hands may be tied over some other strategic issues and is unlikely to be positive for the firm in the long run.

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.