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The Trader: Stocks lower, rates on the move

Stock markets decline with easyJet one of the fallers
October 12, 2021
  • FTSE 100 moves sideways at 7,100
  • Rates hitting new highs
  • EasyJet shares decline two per cent

Declining stocks... Stock markets declined on Tuesday morning following on the heels of a wobbly session on Wall Street, with losses of around 0.5 per cent for the broader European Stoxx 600. The FTSE 100 continues to chop in a sideways direction, trading just below 7,100 it is held firmly within the range of the last 6 months, whilst the DAX is back to the lower end of the recent range to test the 200-day moving average once more. Inflation worries persist, though our tradeable US natural gas and oil prices have edged back from the highs. Yesterday saw WTI rise above $82 for a fresh multi-year peak, before paring gains to take an $80 handle this morning. Coal prices in China meanwhile have risen to a new all-time high. Copper has rallied 7 per cent this month, though it’s still about 10 per cent below its May peak.

Mates rates... Rates are on the move again with the 10-year US Treasury note at 1.63 per cent, a four-month high. The 2-year note yield also notched an 18-month high. Earlier we saw UK gilt yields spike on markets believing the Bank of England could act early to tame inflation. The simple way of looking at this is higher energy costs = higher inflation expectations = early, faster central bank tightening. Later today we hear from the Fed’s Clarida and Bostic, whilst a 10-year bond auction in the US will be watched for demand. US CPI inflation numbers are due tomorrow.

On Wall Street... Sentiment looked fragile as early gains reversed the market, which closed at the session low. The S&P 500 fell 0.7 per cent, with similar losses for the Nasdaq and Dow Jones. Lots of churn, little real direction to this market right now until the macro picture on inflation and central bank reaction is better understood. Asian shares were broadly weaker as another deadline for Evergrande (3333) bond coupon payments has passed.  

Come fly with me... Budget airline easyJet (EZJ) shares declined more than 2 per cent despite sounding a confident tone over the reopening of the travel sector. The company reported Q4 headline losses decreased by more than half with positive operating cash generated. Management now expects a headline loss before tax of slightly more than £1.1bn. However, on a more upbeat note the company says it sees positive momentum carried into FY22 with H1 bookings double those of the same time last year. 

WTI: Finding support at the 23.6 per cent retracement of the move up off the Oct 7th swing low.

GBPUSD: Pulling back from yesterday’s 2-week high, where it retreated from our trend line, now sitting on the 23.6 per cent retracement of the March 2020 to May 2021 rally at 1.35950.

Neil Wilson is the Chief Market Analyst for Markets.com