There has been a further marked shift upwards in US rates and, to a lesser extent, UK rates, in Europe and the Far East they have held steady. The US 10-year yield has risen to 1.6%, up from 1.3% in February while the long bond yield (30 years) has climbed to 2.3% from 2.0%. Of course, this equates to a further 6.5% fall in the long bond’s capital value. The UK figures are: 10-year yield up to 0.8% and thirty-year to 1.3%. These moves have unsettled risk markets, but it does strike as odd that it should be a surprise that these rates should ‘normalise’, the S&P 500 got back to December 2019 levels more than six months ago…

The sell-off in bond markets has been fed with inflation concerns. Though we still expect a bumpy ride from the inflation statistics this year, comparisons to last year will be stark, this may well temper now, as the recovery in the price of oil appears to have run out of steam. Both US and UK 30-year yields are also now back up to end-2019 levels and 10-year yields are close, so we have probably see the bulk of this move in the short-term. However, if we are correct in expecting a stronger recovery than is generally expected this is one to watch carefully. Central banks are continuing to lean against any move in short-term rates and are clearly watching developments in the yield curve closely.

Stock markets have had an uncomfortable few weeks; overall, the S&P 500 has been down 5% and back up 5% to show little change, but the NASDAQ is still down 4% after being down by more than 10% at one stage. London stocks have followed a similar trajectory while European stocks have picked-up, led by a huge move in Volkswagen (up by more than 50% over this period) as they vie to steal Tesla’s crown (Tesla fell by 10%). The rotation around the sectors carries on apace, this time the consumer staples have begun to recover while the oil and mining stocks are turning down again. Pharmaceutical stocks have also begun to recover while performance among the financials has been highly variable.

The US dollar has continued to recover while the euro has lost ground against both sterling and the dollar. As mentioned above, the recovery in the price of oil appears to have run out of steam, gold continues to slide but copper is holding its recent strength.