Faltering risk appetite hits stocks, Bund yields register record lows

by Jonathan Adams

Global stocks retreated on Thursday, dragged down by lower European and Japanese equity markets, as appetite for riskier assets faltered, underpinning demand for safe-haven German Bunds whose yields hit record lows.

Investors have almost priced out the chance of a rate increase at the Fed Reserve’s June 14-15 policy review, and reduced the likelihood of a July rate hike to around 26 per cent. Compounded by worries about a possible British exit from the European Union also gathering, investors are uncertain whether the Fed will raise rates in the near term.

European shares fell for a second straight day, with a drop in Vodafone weighing on the telecom sector and Essentra hit by a profit warning. Earlier, Japan’s Nikkei fell 1 per cent, hurt by a stronger yen with financials and banking stocks leading the losses on falling bond yields.

All of which saw the MSCI world equity index, fall 0.4 per cent to 1,691.84. It had scaled a six-month high on Wednesday, when Wall Street’s benchmark S&P 500 was just shy of all-time closing highs, bolstered in part by the Fed’s stance and a recent weakness in the dollar.

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