(ABM FN) The Brussels stock exchange was sharply in the red on Friday, with concerns about inflation and interest rates emerging again in the background.
The Bel20 index fell by 1.3 percent to 3,434 points.
Attracted by increasingly attractive returns on a virtually risk-free investment, US investors invested more in deposits in the third quarter as stock and bond prices fell. This is evident from figures released by Morningstar.
US money market funds saw $184 billion in net inflows in the third quarter. That is almost 10 times higher than the net inflows into the bond mutual fund and ETF markets. Funds investing in other asset classes saw money flow out. Equity funds saw net outflows totaling $17.6 billion, according to Morningstar.
According to Frank Vranken of Bank Edmond de Rothschild, the recent decline in US bond yields is consistent with expectations of one, possibly two, interest rate cuts. The Fed, which previously stated that higher bond yields were doing the work for it, suddenly saw that logic disappear.
That is why it was time for Fed Chairman Powell to pull the plug on the bond party, Vranken noted. “We are not sure that current interest rate levels will be enough to bring inflation back to 2 percent,” Powell said on Thursday evening. That was enough to change sentiment in the bond markets.
But as if that wasn’t enough, the auction of 30-year US government bonds was a flop, according to Vranken. The bid-to-cover ratio and the low percentage of immediately accepted bids both indicated only moderate demand. Which caused huge swings in 30-year bond yields. On Thursday evening, the yield on 30-year US government bonds was in a range of 22 basis points. According to Vranken, that is simply gigantic.
Vranken therefore asked himself whether the American stock markets can recover without the help of the bond markets. And the big-cap stocks may continue their rally, while the Russell2000 index, the small-cap index, continues to fall.
The euro/dollar traded at 1.067 on Friday.
Risers and fallers
KBC was a notable decliner with a loss of 3.1 percent. Berenberg lowered the price target for the bank share after KBC’s quarterly results on Thursday morning.
Bpost announced better-than-expected figures on Thursday evening. The price then opened sharply higher, but could not fully maintain the gains achieved. KBC was positive for the quarterly update and maintained the buy recommendation for the share with a price target of 6.90 euros.
Aperam saw profitability under pressure in the third quarter, as had been warned. In response to the quarterly report, the price had to drop 2.9 percent. Degroof Petercam expects the coming quarters to be better.
The real estate sector performed poorly on Friday due to the renewed interest rate pressure.
Shurgard, which successfully raised fresh capital, lost about 5 percent and among the small caps, Atenor, which issues new shares at 5 euros, lost more than 15 percent.
Nyxoah, on the other hand, won more than 6 percent.
Source: ABM Financial News
ABM Financial News is a supplier of stock market news, video and data, both for real-time trading platforms and dealing rooms and for online and offline media publications. The information in this article is not intended as professional investment advice or as a recommendation to make certain investments.
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