Gilt yields back towards mini-Budget levels
Gilt yields near mini-Budget levels again as investors continue to fear that three or even four interest rate hikes might be on the way.
The Bank of Canada’s surprise decision to hike interest rates yesterday sent yields up, as markets are now expecting interest rates to stay at 5.25% or higher until the Autumn of next year.
Two-year gilt yields rose to 4.56% yesterday, higher than any end-of-day figure in late May, when yields soared on the back of higher-than-expected inflation figures. The only time in recent years that yields were higher was in the wake of Kwasi Kwarteng’s catastrophic mini-Budget.
Rate rise jitters slow tech stocks, FTSE 100 seen lower
Tech stocks underperformed on Wall Street yesterday after Bank of Canada’s latest rates hike fuelled expectations that the US Federal Reserve may follow suit next week.
The Nasdaq Composite fell 1.3% from its recent one-year high and the FANG+ index of mega caps dropped almost 3% as investors rotated away from growth stocks most exposed to higher rates.
Canada’s central bank took the country’s interest rate to 4.75% in response to persistent excess demand, warning that inflation could get stuck materially above the 2% target.
The surprise hike contributed to a surge in global bond yields as traders positioned for further action by policymakers elsewhere. Deutsche Bank said futures markets now priced a 35% chance of a hike by the Federal Reserve on 14 June, up from 19% on Tuesday night.
Investors are also more sceptical that the Fed will end up cutting rates this year, with the interest rate priced in by the December meeting up to 5.03% at the highest point since the start of the US regional banking crisis.
The FTSE 100 index closed four points lower last night and is forecast by CMC Markets to fall 12 points to 7612 at today’s opening bell.
Fuel costs leave Wizz Air stuck in red
Wizz Air disappointed investors as its losses barely improved in the year to 31 March.
Revenue more than doubled to €3.90 billion at the low-cost carrier thanks to record passenger numbers, but fuel costs and capacity issues offset the growth, leading an to operating loss roughly level with the previousyear at €466.8 million.
“The effects of fuel price increases and structural capacity issues at airports remained features throughout the year, but we are mitigating these through decisive actions which helped to improve ex-fuel cost performance,” boss József Váradi said.
““As we look ahead, we are optimistic for the current financial year and our focus continues to be on returning to net profit in F24. This will be driven by low cost, operational excellence, including continued high aircraft utilization, productivity improvements and increased flight completion factors.”
