The consensus view that China’s cuts to banks’ required reserve ratios were a stimulative measure is negated by the mechanics of Chinese banking system itself, says Matthews Asia’s Andy Rothman.
Changing views on inflation are likely to signal a weakening of investors’ fixation with yield and duration and an improvement in perceptions of value, says Charles Long, manager of the GLG UK Select Fund.
After months of grinding yield compression the pressure valve on the German sovereign bond market was released, with 10-year bund yields jumping almost ten-fold in the space of a few days.
Aside from revising growth lower and putting an end to sterling’s election-led rally, The Bank of England’s May inflation report once more placed the spotlight firmly on productivity growth as the possible bad apple that could upset the whole cart.
Inflation should return to its 2% target within the next two years, the Bank of England said on Wednesday, but labour productivity remains the key uncertainty, as it downgraded its forecast for UK GDP growth from 2.9% for 2015, to 2.5%.
Recent ructions in bond markets have underlined how quickly market sentiment can change, particularly with regard to interest rate expectations.
Investors have been getting a rather sharp reminder of just how much interest rate risk is present within government bonds.
Policy divergence will reach a breaking point and either drag the US and UK back into quantitative easing or trigger widespread reflation, says Rathbones’ Bryn Jones.
Quantitative easing and its sister, zero interest rates are having a deflationary impact on the global economy says Fundsmith CEO, Terry Smith.
Bank of America Merill Lynch declared 2015 the ‘Year of the Blink’ on Thursday, pointing out in its latest Thundering Word note that both the Fed and the PBoC “blinked this year, allowing asset returns to remain buoyed by max liquidity”.
Asian markets could see capital outflows when the US raises interest rates, according to Hugh Young, managing director at Aberdeen Asset Management.
F&C Investment Trust saw its dividend per share rise for the 44th consecutive year in 2014, the group announced in its annual statement.
