Spreadex Market Update

Bond sell-off contributes to anxiety ridden markets




The government bond buying party showed signs of coming to an end today with a big sell-off leading the German 10-year Bund to reach a yield of 0.75%, a 2015 high and a stark contrast to the 0.07% yield seen in mid-April. Unsurprisingly this didn’t help the already sour trading atmosphere that had begun to smother the markets this morning, with the DAX, FTSE and Dow futures all posting over 100 point declines as the day went on.

Whilst the bond situation isn’t helping the markets, it is hard to ignore the election’s impact on the FTSE. When placed in context the FTSE’s current losses become even more remarkable; in 9 out of the last 11 election days the UK index has risen. To put it mildly, a similar outcome today looks unlikely.

With the situation in Europe awash with negativity, from bond sell-offs to election uncertainty and the perpetual Greek migraine, the US markets don’t have much hope of climbing out of the red this afternoon, especially after Janet Yellen ominously warned yesterday that share prices are ‘quite high’. Today’s unemployment claims are unlikely to change things given how the markets reacted to the ADP non-farm figures on Wednesday afternoon, with the complexities of the Fed debate currently not mattering to the swathes of anxiety ridden investors.

Tesla’s revenue rose by 52% year-on-year to a better than expected $893 million based on sales of 11600 cars in the first quarter, around a 1000 more than estimated. Yet despite this rapid revenue growth Tesla couldn’t avoid reporting a loss of $154 million, granted a smaller than expected loss, as it pledged to increase European prices by 5% to offset this cost. Chinese sales remain an issue for the company, as does the damaging-dollar trend that has been so prevalent in the past 2 earnings seasons, but Tesla is hoping to compensate for these areas with its new home batter product. Investors have been mixed in their reactions to Tesla’s results, with the company so far giving back the gains it made on Wednesday evening.



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