Spanish construction rebuilds after market collapse

Property developer Olivier Crambade founded Therus Invest in Madrid in 2004 to build offices and retail space. For five years business went quite well, and Therus developed and sold more than €300m of properties. Then Spain’s economy imploded, taking property with it, and Mr Crambade spent six years tending to Dhamma Energy, a solar energy […]

Continue Reading


Euro suffers worst month against the pound since financial crisis

Political risks are still all the rage in the currency markets. The euro has suffered its worst slump against the pound since 2009 in November, as investors hone in on a series of looming battles between eurosceptic populists and establishment parties at the ballot box. The single currency has shed 4.5 per cent against sterling […]

Continue Reading


RBS falls 2% after failing BoE stress test

Royal Bank of Scotland shares have slipped 2 per cent in early trading this morning, after the state-controlled lender emerged as the biggest loser in the Bank of England’s latest round of annual stress tests. The lender has now given regulators a plan to bulk up its capital levels by cutting costs and selling assets, […]

Continue Reading


China capital curbs reflect buyer’s remorse over market reforms

Last year the reformist head of China’s central bank convinced his Communist party bosses to give market forces a bigger say in setting the renminbi’s daily “reference rate” against the US dollar. In return, Zhou Xiaochuan assured his more conservative party colleagues that the redback would finally secure coveted recognition as an official reserve currency […]

Continue Reading


Carney: UK is ‘investment banker for Europe’

The governor of the Bank of England has repeated his calls for a “smooth and orderly” UK exit from the EU, saying that a transition out of the bloc will happen, it was just a case of “when and how”. Responding to the BoE’s latest bank stress tests, where lenders overall emerged with more resilient […]

Continue Reading

Categorized | Capital Markets

Markets whipsaw on Fed uncertainty

Posted on May 31, 2013

General Views Of Trading At The NYSE©Bloomberg

The worst month for US Treasuries in two years ended on Friday with whipsaw trading in the bond and stock markets, reflecting investor uncertainty about when the Federal Reserve will curtail its stimulus policies.

The New York morning was marked by a continuation of the Treasury market selling that has pushed yields higher – and prices lower – in May. The yield on the benchmark 10-year note rose as much as 15 basis points to 2.21 per cent as investors saw a robust report on midwest manufacturing as a sign the Fed could cut back on its bond-buying programme as soon as this summer.

    But investors shifted gears in the afternoon, buying Treasuries and dumping stocks. After rising in early trading, the benchmark S&P 500 index closed 1.4 per cent lower – its biggest one-day loss since mid-April – while the yield on the 10-year Treasury finished at 2.13 per cent.

    Analysts said the late turn in stocks unsettled investors who had been betting on falls in bond prices – and higher yields. Declining equity prices often increase the allure of bonds as a haven.

    “No one likes to see equities close at their low on a Friday as it sets the market up for an ugly open the following week,” said Michael Kastner, managing principal at Halyard Asset Management, adding that short sellers in the Treasury market were closing positions later in the day.

    The nervous trading came at an important inflection point. Many investors have been favouring stocks because dividend yields – averaging 2.08 per cent on the S&P 500 – have been higher than Treasury yields. But when Treasury yields climbed above that level, the case for stocks diminished.

    The market moves highlight the tightrope central banks, led by the Fed, must walk in coming months. The Fed has kept rates low for years to stimulate the economy, encouraging investors to pile into stocks and riskier debt.

    However, as signs of a US economic recovery grew in May, investors worried the Fed would withdraw its stimulus, hitting prices for government bonds around the world, corporate and emerging-market debt and US mortgage-backed securities.

    In the UK, benchmark yields this week rose above 2 per cent for the first time since February. Yields in Germany and Japan were sharply higher.

    “We are seeing the ramifications of open-ended quantitative easing from the Fed,” said William O’Donnell, strategist at RBS Securities. “It helped markets at the start, but the hard part is the process of withdrawing such stimulus.”

    Much depends on the tone of the monthly US employment report due at the end of next week. David Ader, strategist at CRT Capital, said: “The Fed clearly doesn’t know how it will proceed other than to watch the data we’re all watching.”