Markets in focus: Why have stock markets ignored rising interest rates for so long?
Stock markets are facing increasing competition from bonds and their rising yields. However, the stock exchanges are benefiting from a different effect.
Markets are watching closely as bond yields rise, defying expectations that they would capture investors' attention sooner. German and French sovereign bond yields have reached levels not seen in over a decade, with US ten-year bonds yielding 5.3%, German bonds at 3.6%, and French bonds at 4.9%. As yields climb, equities face increasing competition.
However, stock markets have largely remained unfazed, only recently showing signs of pressure. The DAX index is down 6% from its record high, while US markets such as the S&P 500 are off by just 2%. This divergence in market reactions raises questions about the underlying drivers of the rising yields. Factors contributing to the upward trend include strong U.S. economic data, mounting national debts, stubbornly high inflation, and expectations of further interest rate hikes by central banks. In Germany, inflation rose to 3.3% in September, up from 2.9% in August.
Written by urgent.news from Handelsblatt's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
