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Markets put money on ECB rate hike amid rising European bond yields

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2 years ago

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Traders boosted bets for a European Central Bank (ECB) rate hike this week, sending Italy’s 10-year bond yield to a six-month high after a Reuters report that the central bank believes inflation will continue to hover around 3% next year.

The day’s main macroeconomic event for global markets is US inflation data released at 1230 GMT which will help shape the Federal Reserve’s rate decision later this month.

But there is plenty happening in Europe too, and traders are also bracing for the ECB’s meeting on Thursday – current market pricing reflects roughly a 75% chance the central bank will raise rates by 25 basis points, up from around a 40% chance on Monday and just 25% a week ago.

A further rate hike this year is now fully priced in.

The rise in rate expectations on Wednesday was, said Jan von Gerich chief analyst at Nordea, a result of a Reuters report late on Tuesday which said, citing a source with direct knowledge of the matter, the ECB’s quarterly projections will put inflation north of 3% in 2024.

That would support the case for a further rate increase, though the source said the rate decision was still a close call.

A pick up in market expectations also makes a rate hike more likely.

“The ECB isn’t as sensitive to market expectations as say the Fed is, but it is not totally insensitive so this kind of pricing on the margin increases the odds of hiking,” von Gerich said.

“It isn’t conclusive, but they do look at market expectations and worry that if they disappoint too much then you could see rates fall, and financing conditions ease, which they don’t want to at the moment.”

The yield on Italy’s 10-year bond hit 4.452% in early trading, its highest since mid-March, and was last at 4.44%, up 3 basis points (bps) on the day.

Germany’s 10-year yield rose 2.5 bps at 2.67%, meaning that the spread between the German and Italian 10-year yields touched 178 bps, its widest since June.

Bond yields move inversely to prices and higher rates from the ECB would typically weigh more heavily on the more-indebted European periphery.

Some market participants expect an acceleration of the ECB’s quantitative tightening measures – in which the central bank reduces its bond portfolio – to hurt peripheral bond prices.

Shorter-dated yields, more sensitive to interest rate expectations, also rose. Germany’s two-year yield was up 3 bps at 3.16%, having briefly touched a one-month high, and Italy’s two-year yield touched a two-month high and was last 7 bps higher at 3.9%. 

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Stock trading is booming and has surpassed the 116,000 level.

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5 hours ago

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With the major index surpassing 116,000 points, the Pakistan Stock Exchange (PSX) started the day on a high note.

In the hope of a positive conclusion from the current discussions regarding the loan tranche with the International Monetary Fund (IMF), the rising trend has continued in recent days.

The PSX surged 1,000 points, peaking at 116,626 in the early hours of the week’s opening day.

Later, the index gained 663 points and finished at 116,199.

The KSE-100 Index gained 441 points on Friday, closing at 115,536.

The PSX recently gained momentum on Thursday after experiencing ups and downs, with the major index exceeding 115,000 points.

The KSE 100-Index closed at 115,094.23 points after gaining 1,009.70 points, or 0.89 percent. 115,247.39 was the intraday high, and 14,429.93 was the lowest.

According to experts, one important factor is Moody’s Ratings’ upgrade of Pakistani banks. Investor confidence was further bolstered by the expectation of fruitful negotiations with the International Monetary Fund (IMF).

“We have changed our outlook on Pakistan’s banking system to positive from stable to reflect the banks’ resilient financial performance as well as improving macroeconomic conditions from very weak levels a year ago,” Moody’s said in its assessment last week.

Amidst the ongoing negotiations with the International Monetary Fund (IMF) regarding a loan tranche, the Pakistan Stock Exchange (PSX) has resumed its upward trajectory in recent days.

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Trade ties between Pak-Oman: Both nations decide to activate “Joint Business Council”.

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3 days ago

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Jam Kamal Khan, federal minister for commerce, visited Oman Chamber of Commerce and Industry in Muscat alongside chairman Faisal Abdullah Al Rawas.

To enable closer economic collaboration, both sides decided during the meeting to activate joint Business Council between OCCI and the federation of Pakistan Chambers of Commerce and industry.

Concurrent with the conference, the Embassy of Pakistan arranged a b2b networking event in association with OCCI to gather Omani Businessmen and Pakistani Business Delegates investigating trade prospects.

Speaking on the occasion, Jam Kamal Khan said, “Our present trade figures do not fairly represent the depth of our connection. We can quickly raise the current Trade volume to two or three times its present level by just eliminating logistical and communication barriers.

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Business

Despite economic gains, PSX remains strong.

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3 days ago

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Amidst the ongoing negotiations with the International Monetary Fund (IMF) regarding a loan tranche, the Pakistan Stock Exchange (PSX) has resumed its upward trajectory in recent days.

The KSE-100 Index gained 600 points on Friday, the penultimate working day of the business week, and then increased to 115,730 points as traders showed confidence and engaged in trading.

After experiencing fluctuations, the PSX gained strength on Thursday, as the major index surpassed 115,000 points.

The KSE 100-Index closed at 115,094.23 points after gaining 1,009.70 points, or 0.89 percent. 115,247.39 was the intraday high, and 14,429.93 was the lowest.

According to experts, one important factor is Moody’s Ratings’ upgrade of Pakistani banks. Investor confidence has also increased due to the expectation of a positive conclusion from the negotiations with the International Monetary Fund (IMF).

In its assessment, Moody’s stated, “We have shifted our outlook on Pakistan’s banking system from stable to positive to reflect the banks’ resilient financial performance as well as improving macroeconomic conditions from very weak levels a year ago.”

The major index of the Pakistan Stock Exchange (PSX) surpassed 115,000 on Thursday, indicating a surge in the market.

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