Markets.com Logo
euEnglish
LoginSign Up

Stocks recover as US real yields go negative

Aug 16, 2019
4 min read
Table of Contents
  • 1. Stocks push higher
  • 2. Real yields go negative
  • 3. Oil
  • 4. FX

In the US, bulls defended the herd yesterday as the Dow and S&P 500 stabilised after Wednesday’s bloodbath. The tech stocks were bruised on ongoing China fears, however, leaving the Nasdaq weaker. Weaker members of the herd are being picked off – US small caps fell again leaving the Russell 2000 nearly flat for the year.

It was a different story in Europe, where the major bourses tumbled again – The FTSE 100 took out a 6-month low, not helped by 30pts of ex-divis. But broadly Europe softened as the DAX declined 0.7%.

This was about a flight to high-quality, healthy balance sheet US companies  – Visa, Coca Cola, McDonalds, P&G were among the top risers. Walmart jumped on a thumping earnings beat. Boring helped drag the Dow higher too as it denied a report about delaying delivery of the 777-8.

Investors remain on the defensive but the glut of negative yields on bonds and drop in US yields undoubtedly forces them up the risk curve as they seek returns, offering support to high quality stocks and defensive sectors.

Stocks push higher

Asia has been mixed to a little better overall. Hong Kong and Shanghai higher, Tokyo, Sydney and Seoul down a touch.

Europe has a best foot forward set up with the support of the ECB in focus (see below). European indices bounced a little – on the open stocks were up a touch but as with yesterday we wonder if it can survive as investors seek direction. With the FTSE yesterday holding the 7060 line at stumps, there is hope for bulls that it’s found a bottom for now. We also need to look at the pound strength emerging in the last day or two as a potential drag though. As with all Europe – you have to ask yourself where the drivers of strength lie – valuations only.

Trade – more jawboning: Trump says China wants to do deal, in teeth of retaliation statements from Beijing.

Real yields go negative

Real US yields went negative for the first time since 2016 – a bullish signal for gold. As we indicated in the last two commodity strategy notes on this topic, a drop in real yields into negative territory could send gold to $1600.

The preferred benchmark, 10yr TIPS fell to -0.02% and we are seeing shorter dated real yields also move closer to entering negative territory.

Yields are near the lows but 2s10s is no longer inverted. 10yr at 1.55%.

Falling bond yields is helping gold recover. The drop in US benchmark debt yields and real yields should offer continued support. Moreover the inflation picture is not softening – core CPI looks solid and has moved noticeably higher over the last two months. Real yields look set to continue to decline.

Oil

Oil is failing to hold gains. Having driven to $57.50 WTI has retreated to $55. Brent is now sub $59. Concerns about global growth continue to defy any controlling of output.

Overnight data continues to show contraction in global growth. Singapore exports declined, New Zealand manufacturing contracted for first time in 7 years.

FX

Sterling has stabilised above 1.21. The Remain rebels are girding themselves for the assault. Signs maybe that it may be trickier for Boris to force through no deal.

EURUSD has declined to the 1.10 handle before paring losses to hit 1.110, where it seems to have found support. Rate-setter Oli Rehn says the ECB’s stimulus package coming in September will be a lot more than the market currently anticipates. Whilst we’ve seen the euro move lower on this, it’s not exactly tumbling, highlighting the kind of expectations that already exist. The market already expects the ECB to move mountains to get the phlegmatic, sclerotic Eurozone economy moving. There are also questions over whether the ECB even has the firepower to achieve much now – more a peashooter than a bazooka, is the market fear. Hence why European indices are not exactly rallying hard on this.


Risk Warning and Disclaimer: This article represents only the author’s views and is for reference only. It does not constitute investment advice or financial guidance, nor does it represent the stance of the Markets.com platform. Trading Contracts for Difference (CFDs) involves high leverage and significant risks. Before making any trading decisions, we recommend consulting a professional financial advisor to assess your financial situation and risk tolerance. Any trading decisions based on this article are at your own risk.

Written by
SHARE

Markets

  • Palladium - Cash

    chartpng

    --

    4.46%
  • EUR/USD

    chartpng

    --

    -0.12%
  • Cotton

    chartpng

    --

    -0.50%
  • AUD/USD

    chartpng

    --

    -0.25%
  • Santander

    chartpng

    --

    -1.87%
  • Apple.svg

    Apple

    chartpng

    --

    -0.52%
  • easyJet

    chartpng

    --

    -1.03%
  • VIXX

    chartpng

    --

    3.06%
  • Silver

    chartpng

    --

    3.53%
Table of Contents
  • 1. Stocks push higher
  • 2. Real yields go negative
  • 3. Oil
  • 4. FX

Related Articles

EU-US Trade Talks: Progress, Challenges, and Future Prospects

The EU and US are seeking a preliminary trade agreement to avoid rising tariffs. This analysis reviews the latest developments and potential challenges.

Ava Grace|1 day ago

Elon Musk, Tesla Stock, and Political Ambitions: A Rocky Road Ahead?

Tesla's stock faltered following Musk's announcement of forming a new political party, raising investor concerns about his focus and intensifying competition.

Emma Rose|1 day ago

Iranian President Claims Israel Attempted Assassination Amidst Nuclear Program Tensions

The Iranian President accuses Israel of attempting to assassinate him during the recent conflict and suggests a potential resumption of nuclear talks with the US while expressing doubts about trusting Washington.

Noah Lee|1 day ago
Markets.com Logo
google playapp storeweb tradertradingView

Contact Us

support@markets.com+12845680155

Markets

  • Forex
  • Shares
  • Commodities
  • Indices
  • Crypto
  • ETFs
  • Bonds

Trading

  • Trading Tools
  • Platform
  • Web Platform
  • App
  • TradingView
  • MT4
  • MT5
  • CFD Trading
  • CFD Asset List
  • Trading Info
  • Trading Conditions
  • Trading Hours
  • Trading Calculators
  • Economic Calendar

Learn

  • News
  • Trading Basics
  • Glossary
  • Webinars
  • Traders' Clinic
  • Education Centre

About

  • Why markets.com
  • Global Offering
  • Our Group
  • Careers
  • FAQs
  • Legal Pack
  • Safety Online
  • Complaints
  • Contact Support
  • Help Centre
  • Sitemap
  • Cookie Disclosure
  • Regulation
  • Awards and Media

Promo

  • Gold Festival
  • Crypto Trading
  • marketsClub
  • Welcome Bonus
  • Loyal Bonus
  • Referral Bonus

Partnership

  • Affiliation
  • IB

Follow us on

  • Facebook
  • Instagram
  • Twitter
  • Youtube
  • Linkedin
  • Threads
  • Tiktok

Listed on

  • 2023 Best Trading Platform Middle East - International Business Magazine
  • 2023 Best Trading Conditions Broker - Forexing.com
  • 2023 Most Trusted Forex Broker - Forexing.com
  • 2023 Most Transparent Broker - AllForexBonus.com
  • 2024 Best Broker for Beginners, United Kingdom - Global Brands Magazine
  • 2024 Best MT4 & MT5 Trading Platform Europe - Brands Review Magazine
  • 2024 Top Research and Education Resources Asia - Global Business and Finance Magazine
  • 2024 Leading CFD Broker Africa - Brands Review Magazine
  • 2024 Best Broker For Beginners LATAM - Global Business and Finance Magazine
  • 2024 Best Mobile Trading App MENA - Brands Review Magazine
  • 2024 Best Outstanding Value Brokerage MENA - Global Business and Finance Magazine
  • 2024 Best Broker for Customer Service MENA - Global Business and Finance Magazine
LegalLegal PackCookie DisclosureSafety Online

Payment
Methods

mastercardvisanetellerskrillwire transferzotapay
The markets.com/za/ site is operated by Markets South Africa (Pty) Ltd which is a regulated by the FSCA under license no. 46860 and licensed to operate as an Over The Counter Derivatives Provider (ODP) in terms of the Financial Markets Act no.19 of 2012. Markets South Africa (Pty) Ltd is located at BOUNDARY PLACE 18 RIVONIA ROAD, ILLOVO SANDTON, JOHANNESBURG, GAUTENG, 2196, South Africa. 

High Risk Investment Warning: Trading Foreign Exchange (Forex) and Contracts For Difference (CFDs) is highly speculative, carries a high level of risk and is not appropriate for every investor. You may sustain a loss of some or all of your invested capital, therefore, you should not speculate with capital that you cannot afford to lose. You should be aware of all the risks associated with trading on margin. Please read the full  Risk Disclosure Statement which gives you a more detailed explanation of the risks involved.

For privacy and data protection related complaints please contact us at privacy@markets.com. Please read our PRIVACY POLICY STATEMENT for more information on handling of personal data.

Markets.com operates through the following subsidiaries:

Safecap Investments Limited, which is regulated by the Cyprus Securities and Exchange Commission (“CySEC”) under license no. 092/08. Safecap is incorporated in the Republic of Cyprus under company number ΗΕ186196.

Finalto International Limited is registered  in the Saint Vincent and The Grenadines (“SVG”) under the revised Laws of Saint Vincent and The Grenadines 2009, with registration number  27030 BC 2023.

Close
Close

set cookie

set cookie

We use cookies to do things like offer live chat support and show you content we think you’ll be interested in. If you’re happy with the use of cookies by markets.com, click accept.