Global Markets

US stocks struggled overnight as rising bond yields weighed on risk assets. The Fed’s beige book gave further insight into the US economy, which, while not surprising, wasn’t good news for stocks. The report said prices rose at a modest pace while consumers pushed back against additional price increases, which led to smaller margins as input prices rose. Retailers are offering incentives to shoppers as “price growth” is expected to continue at a modest path.

• We have been targeting the 5500 over the coming weeks/months by the S&P500, but the risk/reward has now diminished.
• We have moved to a neutral stance towards the S&P500 et al., although we still wouldn’t be surprised to see another foray into fresh all-time highs.

Equities were dragged lower overnight by another weak Treasury Auction, increasing concerns that funding the US deficit will drive up bond yields. These bond sales are combining with uncertainties around monetary policy as inflation shows little sign of moderation. The underlying concern is US and global yields are moving higher, which is bad news for a stock market trading on 22 times forward earnings (Bloomberg).

• We are targeting a retest of the 3.55 area by the 10s over the coming years.