Global shares fell on Tuesday, crushed by a surge in U.S. bond yields that lifted the U.S. dollar after Federal Reserve officials served a reminder that
Global equities fell for a second day on Tuesday, leaving the MSCI All-World index down 0.3%, near its weakest in four months. In Europe, just healthcare, consumer staples and financials managed to stay in the green, offsetting losses elsewhere to leave the STOXX 600 up 0.1%.The latest catalyst were two Fed officials saying on Monday monetary policy will need to stay restrictive for “some time” to bring inflation back down to the central bank’s 2% target.
The yen is a particular casualty of the dollar’s march to 10-month highs and the rise in Treasury yields right now, given the yawning gap between U.S. interest rates and those in Japan. Monetary authorities in Japan are sticking with a policy of keeping borrowing rates extra low - thereby removing an incentive for investors to own the country’s currency or its bonds.
In the last week, Suzuki has said authorities are watching the yen with either a “high” or “strong” “sense of urgency” seven times. Last September, Japanese authorities conducted their first intervention in 24 years, when the yen weakened past 145 per dollar. Speculation has mounted that they will step in again, given the yen is under constant pressure as benchmark 10-year U.S. yields now boast their largest premium over their Japanese counterparts since last November, at nearly 400 basis points. Last November, in turn, marked the largest gap in 20 years.
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