Bonds flash red again

Tesla, man and machine

Stronger European and US data overnight sent bond yields soaring again. Bond markets see the connection between economic improvement and higher interest rates as inextricable, despite central bank reassurances. The moves created a risk off atmosphere across asset classes, and high flying technology shares were hit hard.

The positive data surprises started yesterday in Australia with a better than forecast 3.1% print in fourth quarter GDP. Japan and Singapore also recorded better than expected PMIs. China PMIs were in line, but overnight readings on Italian, French, UK and US economic activity were on balance stronger than forecast.

The shift in short term market sentiment is widespread. European shares closed mixed, but US indices tumbled and the Nasdaq closed down 2.7%. Every technology sub-sector of the S&P 500 index closed firmly in the red, and market darling Tesla shed a further 5%. Asia Pacific investors are bracing for a rough start to stock trading today.

Commodity markets also reflected fear of higher interest rates as precious metals fell and gold moved back towards US $1,700. Copper fell, although crude oil rose after a record 13.5 million barrel weekly draw on US gasoline inventories. Crude traders appeared to shrug off the 21.6 million barrel build in oil stockpiles.

Cryptocurrencies enhanced their emerging reputation as an alternative haven. CMC’s All Crypto Index rose 5.8% in a healthy contrast to the weight falling on other assets. However they may yet succumb to current market concerns, and are under pressure in early trading.