Market update: Markets still gripped with US tapering news – 24.06.2013

Source: Henderson Global Investors

US markets finished higher on Friday after bouncing back from two straight days of declines (Dow Jones and S&P 500 both up 0.3%). Last Wednesday’s announcement by the US Federal Reserve that it would start tapering its quantitative easing programme has led to the heavy falls in global markets. In fixed income markets, US Treasury yields continued to rise with the 10-year benchmark yield crossing the 2.5% mark (closed at 2.53%). As a result of the losses on Treasuries, major banking shares were hit hard on concerns for losses in their bond portfolios.

Asian markets began lower overnight as they headed for the biggest monthly loss in a year. The MSCI Asia Pacific Index was down 2.0% towards close of trading in Hong Kong, bringing the month-to-date decline to 7.1%. In China, domestic equity markets are near cyclical lows with financial stocks seeing the heaviest falls due to the continuing tight liquidity conditions in the interbank market.

European markets are also fragile this morning; at the time of writing the FTSE Eurofirst 300 was down 0.2%. However, this morning’s release of the latest German Ifo business climate index, which continued to rise in June, should help sentiment. The FTSE 100 also began down despite the news of Vodafone’s €7.7bn takeover bid to buy Kabel Deutschland, which saw Vodafone’s shares rise 1.5%. The index has recovered since and was up 0.2% at the time of writing.