European stock markets experienced gains on Tuesday, following cautious gains at the start of the week. The Stoxx 600 index rose by 1.2%, with all sectors seeing an increase. Technology stocks led the pack, rising by 2.8%. French game publisher Ubisoft Entertainment saw an 8% increase in its shares after Microsoft announced it would divest several gaming rights to the company as part of a new deal submitted to UK regulators for its takeover of Activision Blizzard.
Bond selling during overnight trade caused the benchmark 10-year US Treasury note yield to reach its highest level since 2007, while the 30-year yield hit its highest level since 2011. Higher bond yields typically result in lower stock prices. Rupert Thompson, chief economist at Kingswood Group, stated that if there is a further downside risk to equities in the coming months, it is likely to come from bond yields at these levels. He also noted that cash is now yielding 5% in the US, providing real competition for equities.
In the UK, manufacturing output dropped significantly in the three months to August, according to a survey from the Confederation of British Industry. The gauge measuring output fell to -19 from +3, with the car industry and mechanical engineering among the worst performers. Total orders were also reported to be below normal levels in August. CBI economist Martin Sartorius stated that the survey’s results were gloomy, but easing price pressures could bring some relief to manufacturing firms and the broader economy.
In other news, the leaders of Brazil, China, India, and South Africa are meeting in Johannesburg for the BRICS summit, with Russia being represented by Foreign Minister Sergey Lavrov. Australian natural gas prices are being closely monitored due to the threat of strike action, which could disrupt 10% of the world’s liquefied natural gas flows.
What potential downside risk for equities is highlighted by Rupert Thompson in relation to bond yields
European stock markets experienced gains on Tuesday, with the Stoxx 600 index rising by 1.2% across all sectors. The technology sector led the way with a rise of 2.8%. Shares of French game publisher Ubisoft Entertainment also saw a boost of 8% after Microsoft announced a new deal that would see the company acquire several gaming rights from Activision Blizzard.
Meanwhile, bond selling during overnight trade caused the benchmark 10-year US Treasury note yield to reach its highest level since 2007, while the 30-year yield hit its highest level since 2011. This typically leads to lower stock prices, according to Rupert Thompson, chief economist at Kingswood Group. He believes that if bond yields remain at these levels, there is a potential downside risk for equities in the coming months. Thompson also highlighted that cash is now yielding 5% in the US, providing real competition for equities.
In the UK, a survey from the Confederation of British Industry revealed a significant drop in manufacturing output for the three months leading up to August. The output gauge fell to -19 from +3, with the car industry and mechanical engineering sectors performing poorly. Additionally, total orders were reported to be below normal levels in August. However, CBI economist Martin Sartorius suggested that easing price pressures could bring some relief to manufacturing firms and the broader economy.
In other news, the BRICS summit in Johannesburg brought together the leaders of Brazil, China, India, and South Africa, with Russia being represented by Foreign Minister Sergey Lavrov. The threat of strike action in Australia is also closely monitored due to its potential to disrupt 10% of the world’s liquefied natural gas flows.
