Markets in Q3: Gains, pains and oil reigns
By Marc Jones
LONDON (Reuters) — The equation for financial markets over the last few months has been simple and painful: A near 30% surge in oil prices + a steep rise in borrowing costs = a clattering for global stocks and bonds.
Sub plots have included Saudi Arabia and Russia cutting crude supplies and two African coups, but the main theme has been the Federal Reserve & Co continuing to crank up interest rates.
That higher-for-longer mindset has seen U.S. Treasuries and German Bunds, traditionally the main ballast in portfolios, lose between 5.5% and 6.5%, most which has come this month.
Equity bulls have also been biffed. World stocks are still up a respectable 8% for the year but have given back 7% — or $6 trillion — since August as even the tech giants have gone into reverse.
Gold has lost its shine too meaning that only oil and gas, cash and the dollar have proved reliably profitable.
«It's not a good time to have an oil shock,» Fidelity's Global Head of Macro and Strategic Asset Allocation, Salman Ahmed, said explaining his funds had becoming more cautious.
«If you are going above $100 a barrel and staying there you are starting to create that inflation narrative again».
Those big Q3 bond market losses have came as the 10-year Treasury yield — the benchmark for world borrowing costs — has surged roughly 75 basis points to just above 4.5%.
That is the largest quarterly jump in a year and one which hoists it back to its long-term average for the first time since 2007, according to Deutsche Bank. What's long-term? From 1790 to today…
Germany's Bund yield is now at nearly 3%, its highest in 12 years. Japan's meanwhile have nearly doubled, albeit to just 0.75%.
«The bond market has been in control this quarter,»
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