The US bond yields continue to rise at the beginning of the week

The US bond yields continue to rise at the beginning of the week

According to the Fed officials who made statements yesterday, the start of the tapering program was taken for granted

Although everyone remarked that this decision was not a precedent for rate hikes, they were nonetheless optimistic about the evolution of the labour market. They predicted a prompt return to the conditions before the pandemic crisis, both in unemployment and inflation levels. If price levels do not fall, the Fed would have to advance rate hikes to counteract inflationary pressure.

And for the moment, energy prices continue to rise with new highs in Natural Gas and oil due to expectations of higher demand during the cold winter. Electricity generating plants could choose to use petroleum derivatives instead of Natural Gas, given the rise in the price of the main fuel in thermal electricity plants.

Oil broke the $74.27 per barrel resistance yesterday. It gains momentum towards the following benchmark levels of $75.50 and $76.80 a barrel.Interfaz de usuario gráfica, GráficoDescripción generada automáticamente

Rising energy prices are also beginning to be a destabilizing factor in the Chinese economy. The country suffers from an electricity shortage with cuts in production sites, pointing to one more argument favoring a slowdown in the Chinese economy. The country's authorities reported yesterday that they would guarantee supply, another sign that the problem is not minor.

Faced with this scenario of a potential slowdown in the world's second-largest economic power, with a possible default of one of its flagship companies with a liability of more than $300 billion, and with long-term interest rates on the rise in the United States, the outlook for the stock markets it does not look good, at least in the medium term.

The Nasdaq index fell more than 1% during the session, with leading technology companies losing more than 2%. However, there was a mismatch in the traditional correlation between North American indices due to a flow towards more cyclical securities such as banks. As they benefit from higher interest rates and the energy sector - due to the rise in the price of fuels - they pushed the USA30 index up for the fourth day in a row.

The benchmark, however, could not overcome the band that acts as close resistance around the 34,960 area.

GráficoDescripción generada automáticamente

Sources: Bloomberg.com, reuters.com

This information/research prepared by Miguel Ruiz (“the research analyst”) does not take into account the specific investment objectives, financial situation or particular needs of any particular person. The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views and consequently any person acting on it does so entirely at their own risk.

The research provided does not constitute the views of JME Financial Services (Pty)Ltd nor is it an invitation to invest with JME Financial Services (Pty)Ltd. The research analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.

As of the date the report is published, the research analyst and his/her spouse and/or relatives who are financially dependent on the research analyst, do not hold interests in the securities recommended in this report (“interest” includes direct or indirect ownership of securities).

The research analyst in not employed by JME Financial Services (Pty)Ltd. You are encouraged to seek advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit that conforms to your specific investment objectives, financial situation or particular financial needs before making a commitment to invest.

The laws of the Republic of South Africa shall govern any claim relating to or arising from the contents of the information/ research provided.

JME Financial Services (Pty) Ltd trading as ZA.CAPEX.COM acts as intermediary between the investor and Magnasale Trading Ltd, the counterparty to the contract for difference purchased by the Investor via ZA.CAPEX.COM, authorised & regulated by the Cyprus Securities and Exchange Commission with license number 264/15. Magnasale Trading Ltd is the principal to the CFD purchased by investors