London
The financial markets continued to be rattled in the month of October as U.S. government bond yields surged to 5%, marking the highest level since 2007. Escalating tensions in the Middle East, particularly Israel’s hints at a potential full-scale invasion of Gaza, prompted investors to seek refuge in safe-haven assets, intensifying market volatility.Amid the apprehensive environment, Europe’s share markets faced a decline of 1%, while Asian stocks plummeted to an 11-month low. Wall Street was also poised for another setback, following a 2% loss over the last two days. The Bank of Japan’s intervention in the bond market was another significant move as the 10-year JGB yield hit a ten-year high.The apprehension in the market was exacerbated by the news of Tesla shares tumbling due to concerns over demand and China’s constraints on graphite exports. These factors contributed to a downbeat mood across European shares, resulting in the steepest weekly rise in borrowing costs since July.Although the Federal Reserve Chairman Jerome Powell acknowledged the recent surge in bond yields, he emphasized the robustness of the U.S. economy, suggesting a potential slowdown in the pace of rate hikes. Bank of America analysts highlighted the significant rise in U.S. nominal GDP over the past three years, leading to a robust 7-8% annualized growth rate in Q3.The market sentiment indicator, the Bull & Bear gauge, pointed toward an extreme bearish stance, signaling a potential opportunity for contrarian investment. However, the prevailing market perception of the Federal Reserve being behind-the-curve and the need for fiscal restraint to curb excessive spending in Washington continued to be major concerns among investors.
