Trading Day: Tech jitters smother inflation relief

ORLANDO, Florida, June 24 (Reuters) – U.S. bond yields tumbled on Wednesday as oil’s slide to a four-month low eased inflation fears, although the relief wasn’t felt as much in equity markets and persistent worries over tech valuations pushed the S&P 500 and Nasdaq lower.

In my column today, I look at why the ​dollar’s surge isn’t causing the consternation in global capitals one might have expected. The reason? The inflationary impact on the rest ‌of the world is being offset by tumbling oil and energy prices.

If you have more time to read, here are a few articles I recommend to help you make sense of what happened in markets today.

Today’s Key Market Moves

Today’s Talking Points

* Boom turns to … bust?

As the end of the month, quarter, and first half of the year looms into view, price swings across all assets are accelerating, with investors rebalancing, booking profits and squaring positions. Some are particularly noteworthy.

Gold has fallen below $4,000 and is down 12% in June, on for ​its worst month since 2008; silver is more than 50% below its January peak, down 25% this month; bitcoin is below $60,000, down nearly 20%. Stocks ​remain elevated though – next in line to correct, or forming a solid base for the next leg up?

* No inflation expectations

Inflation expectations across the developed world are falling ‌rapidly as ⁠conflict in the Middle East cools, supply routes re-open, and energy prices tumble. At least market-based expectations are falling – consumers and businesses may catch up later.

The U.S. 5-year breakeven inflation rate is 2.20%, the lowest this year, and the 10-year equivalent is below that at its lowest since April last year. One-year euro zone inflation swaps are back below the ECB’s 2% target, and the 2-year UK inflation swap rate is the lowest in six months.

* Curve ball

The ​U.S. yield curve has been flattening for ​months, a move that accelerated last ⁠week after the Fed’s statement and Chair Kevin Warsh’s press conference. On Wednesday, the benchmark 2s/10s curve closed at 25 basis points, its flattest since March last year.

Traditionally, curve flattening is a sign of slower growth ahead. But ​like other textbook signals and rules of thumb, it no longer seems to apply. Recession didn’t follow two years ​of curve inversion ⁠over 2022-2024. Should we be worried if inversion looms again?

What could move markets tomorrow?

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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, ​under the Trust Principles, opens new tab, is committed to integrity, independence, and freedom from bias.

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.