Prominent European indexes, including the FTSE, stumbled on Friday as a dip in UK inflation triggered lower public borrowing numbers. Across the pond, US markets also dropped in a twitchy response to jumping treasury yields.
Markets respond to lower UK inflation and jump in treasury yields
According to Yahoo Finance, September’s public net sector borrowing in the UK came in at £14.3bn, 10% less than the year before. This year-on-year drop followed a significant decline in debt interest payments from £7.9bn to £0.7bn.
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Having closed 1.2% lower on Thursday, the FTSE continued its downward trend, falling by a further 1.2% by Friday afternoon. The DAX in Frankfurt and CAC in Paris mirrored this pattern, each dropping by 1.3% and 1.2% respectively.
US stocks reacted to the Federal Reserve’s statement confirming its commitment to higher interest rates for more extended periods. This sentiment saw treasury yields gaining, with the yardstick 10-year yield increasing momentarily to 5% on Thursday.
While addressing the Economic Club of New York on Thursday, Jerome Powell, the Federal Reserve Chairperson, said:
Additional evidence of persistently above-trend growth, or that tightness in the labour market is no longer easing, could put further progress on inflation at risk and could warrant further tightening of monetary policy.
In response, the S&P 500 lost 0.8% in London, the Dow 0.4%, and the Nasdaq 1.3%. The brewing and escalating Israel-Hamas tensions on the Lebanon border are also stymying equity markets. Analysts warned that the persistently high rates may cause more market ruffles in the weeks to come.
