Yen’s Bad Performance and Rates Rise Drag Stocks Down
An update from electric automaker Tesla (NASDAQ: TSLA) rattled Wall Street on Thursday as bond rates increased ahead of the upcoming wave of significant central bank interest rate rises beginning next week.
The yen fell beyond the crucial psychological barrier of 150 versus the dollar to record a 32-year low, driving the price of crude oil on limited supplies, sparking new warnings of intervention from Japan’s finance minister. As a result of weaker Nasdaq and S&P 500 futures, Wall Street was going lower. Tesla’s pre-market decline was due to reports that the company anticipated missing its objective for vehicle deliveries this year.
Bonds at Years High
German 2-year government bond rates reached their highest level since December 2008, while U.S. 10-year Treasury yields reached a 14-year high.
According to Mike Hewson, chief markets analyst at CMC Markets, there is anxiety that the economy will be exceedingly challenging over the next 12 months, with the attitude significantly negative regarding corporate results. According to Hewson, investors are getting ready for the big rate increases expected from the European Central Bank, the U.S. Federal Reserve, and the Bank of England the next week. The MSCI all-country stock index dropped, adding to a year-to-date decline of 25%. The 600-company STOXX index in Europe was down 0.3% and nearly a fifth for the year.
Earnings thus far in the United States and abroad have shown resiliency, according to Eren Osman, managing director of wealth management at Arbuthnot Latham & Co. Many firms have exceeded forecasts. However, Osman said that markets have already factored in a significant portion of expected profit declines for the coming year, coupled with projected interest rate increases in the U.S. and abroad. The markets will have some assurance that the worst is over once we start to witness a decline in the ISM manufacturing statistics. Many people anticipate that moment of surrender, but Osman warned that it might not come.
