LONDON - Resurgent trade tensions, concern over the outlook for corporate America and the growing risk of a chaotic Brexit in the United Kingdom dampened appetite for equities on Wednesday while keeping alive interest in the dollar and government bonds.
Wall Street which surged to record highs recently on back of the Federal Reserve’s rate-cut signals, has shown nervousness this week as big banks reporting quarterly earnings — Citi, JPMorgan and Wells Fargo — have shown drops in net interest margins, a sign low interest rates are squeezing bottom lines.
“If there is disappointment in earnings-per-share, that will drive more consolidation in the market.” MSCI’s index of Asian shares ex-Japan fell a quarter percent, while a pan-European index opened flat to weaker.. Savary said those expecting three rate cuts this year could be disappointed as that magnitude of easing would be “compatible with a recession.”
That alongside the trade uncertainty and soft equity markets kept bonds well-bid — U.S. Treasury yields, which rose after the retail data, inched lower again. Another ‘safe’ asset, German bonds, also saw a fall in yields.Fed expectations have not dented the dollar however. It stood around a one-week high against a basket of currencies after the previous day’s half-percent jump.