In early trading on Thursday, European stocks fell, while bonds rallied, as investors analyzed central bank actions and forecasted how the economy would perform next year without as much support. The yield on the 10-year U.S. Treasury TMUBMUSD10Y, 1.267 percent dipped to 1.27 percent on Thursday after falling roughly 5 basis points on Wednesday. The yield on the US 30-year TMUBMUSD30Y, 1.887 percent, dipped to 1.89 percent on Wednesday, after falling to its lowest level since February 10.
The yield on the German 10-year bund TMBMKDE-10Y, -0.334 percent, has dropped to -0.32 percent. Yields follow prices in the opposite direction. “The bond market appears to be sending a message that investors believe future inflation will be more muted, and future growth will be more subdued, implying that monetary policy will not need to tighten as much to keep price pressures in check,” said Michael Brown, senior market analyst at Caxton FX. After closing at its second-highest level on record on Wednesday, the Stoxx Europe 600 SXXP, -1.35 percent fell 1.2 percent. The fall was driven by miners such as Rio Tinto RIO, -2.85%, and banks such as HSBC Holdings HSBA, -1.82 percent. US stock futures ES00, -1.03 percent NQ00, -1.04 percent also fell, with the Dow contract YM00, -1.14 percent shedding more than 300 points. It was the first chance for international investors to react to the new minutes from the Federal Open Market Committee in the United States, which revealed a split on whether to reduce the rate of bond purchases. That wasn’t surprising, given how officials have been voicing their opposing viewpoints in public. In the meantime, the European Central Bank is scheduled to release the conclusions of its policy review, in which the bank is expected to shift from targeting inflation below but near to 2% to a symmetrical 2% target, in line with other central banks. The announcement will take place at 1 p.m. local time, or 7 a.m. Eastern, and will be followed by a press conference with European Central Bank President Christine Lagarde. “In actuality, it won’t make much of a difference in our opinion because the majority of council members were probably aiming for it anyway,” said Holger Schmieding, Berenberg’s chief economist. He believed the news conference had the potential to sway markets. He believes it will disclose more about the present balance of hawks and doves on the council. The worst performer in the Stoxx 600 was software maker TeamViewer TMV, -12.85 percent, which lost more than 13 percent after reporting lower-than-expected second-quarter billings./n
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