Part of the reason why global markets are jittery is due to the chatter of U.S. economic data, for the second quarter, that is streaming in, which could easily cross current analysts’ forecasts of 4.1%. A higher growth rate is likely to result in faster interest rate hikes by the Federal Reserve.
On Tuesday, global bond markets were jittery due to ongoing talks that the Federal Reserve may tighten its monetary policy as their take on the risks facing the U.S. economy. On the other hand, stellar results from Alphabet Inc have provided a base for Asian tech stocks.
With the news reaching the market, Alphabet Inc’s shares rose by 3.6% to hit a record high in after hours trading valuing the group at a record $870 billion.
The S&P 500 index gained 0.18% while the Nasdaq rose by 0.28%.
Stocks in Shanghai got a shot in the arm when Beijing said, it would adopt a more “vigorous” fiscal policy, including company tax cuts.
Chinese blue chip stocks rose by 1.6% while MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.47%.
The bulls in Japan’s bond market were smarting from speculation that the country’s central bank is close to announcing measures to scale back its massive monetary stimulus, a risk that lifted long-term borrowing costs globally. Japanese investors were worried that they would have less incentive to hunt offshore for yield, opined Felicity Emmett, an economist at ANZ.
“The 10 basis-point steepening in the Japanese yield curve is massive in the context of a market that rarely moves more than 1 basis point,” said Emmett. “It reflects a broader fear that central banks are reducing their purchases while U.S. bond supply is set to rise significantly.”
As a result, ten year U.S. Treasury yields jumped by 2.,96% to their highest in five weeks.
Part of the shift in yields is due to incoming economic news chatter that data on second-quarter U.S. economic growth (GDP) due on Friday would easily cross current forecasts of 4.1%.
A strong outcome is likely to add to the risk of faster rate hikes from the Federal Reserve, which would underpin the greenback.
On Monday, the USD was hovering at 94.607 against a basket of currencies while the euro was at $1.1690, having run into profit-taking at a peak of $1.1750 overnight.
The Chinese yuan however slipped to its 1-year low on the dollar with Beijing saying its value was driven by market forces. The United States is investigating whether the value of the Chinese yuan is being manipulated by Beijing.