London — Europe’s share markets spluttered and government bond yields burrowed lower on Thursday after the head of the US Federal Reserve dampened taper talk and traders struggled with the rapid global rise in Covid-19 Delta variant cases.
But markets’ delight after Jerome Powell told the US Congress he saw no need to rush the shift towards tighter post-pandemic monetary policy, had not lasted long. “The market is fearing the Delta variant could take a hold of different economies so you are almost seeing that we are back to the ‘bond yields lower, tech doing well’ scenario,” said Justin Onuekwusi, portfolio manager at Legal & General Investment Management.
He also said he is confident that recent price hikes are associated with the country's post-pandemic reopening and are driving up inflation will fade. The yield on inflation-protected bonds, sometimes called the real yield, dropped to minus 1.027%, near its lowest levels since February.“The CPI numbers were pretty shocking to me,” said Nobuyasu Atago, chief economist at Ichiyoshi Securities. “People say rises in used car prices are the main culprit but it's not just that. New cars, home electronic goods and services are all rising. And the past record shows when energy prices rise, that impact normally last for about two years.
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