People visit a shopping mall in the Israeli coastal city of Netanya on Feb. 21, 2021.
AFP via Getty Images
Global stocks struggled on Monday as bond prices continued to deteriorate, and as traders continued to bet the global economy will reflate as Covid-19 vaccines are administered and the Biden’s administration’s $1.9 trillion relief program winds its way through Congress.
The yield on the 10-year Treasury rose as high as 1.39%, after rising more than 14 basis points last week. Yields move in the opposite direction to prices.
Stock-market indexes in Europe and Asia dropped. While the Nikkei 225 rose 0.5% in Tokyo, the Hang Seng lost 1.1% and the Kospi Composite dropped 0.9%. The Stoxx Europe 600 fell 0.8%.
The TA-35 in Israel — the country furthest along in administering vaccinations — fell by 1% on Monday.
Futures on the Dow Jones Industrial Average fell by more than 200 points.
“The benign view is that we get a big enough yield rise (nominal or real, who cares?) to stop the general risk rally for a bit and as the bond market rallies in reaction and with a super-dovish Fed as backstop and vaccines to look forward to, risk assets recover, bond yields settle into new ranges and the dollar’s fall can resume. The alternative view is that the market becomes convinced both that higher inflation is coming and that the Fed is going to have to hurt the global economy to get it under control, so the move up in yields has a lot further to go,” said Kit Juckes, chief currency strategist at Société Générale.
“Negative real borrowing costs have been one of the greatest forces behind the stunning gains in equities this past year, so anything that changes this cheap-money dynamic is a real threat to the party. Consequently, futures point to a lower open on Wall Street today,” said Marios Hadjikyriacos, investment analyst at XM.
U.K. Prime Minister Boris Johnson is set to announce England’s plan to ease its lockdown, with reports saying the country will open schools in early March. Israel reopened shops over the weekend, but limited gym and swimming poll access to those who have had vaccines.
The House Budget Committee this week is due to start work on the $1.9 trillion relief package.
Corrections & Amplifications
Israel’s TA-35 has gained 6% in 2021. An earlier version of this story said it had dropped 6%.
