Equities

US equity markets saw profit taking after recent strength, unsettled by the impact of rising bond yields on future earnings valuations. Consumer discretionary stocks such as Tesla and Apple saw notable weakness. European markets followed suit, with the UK particularly hit by the strength of sterling. In Asia, Japan tumbled despite the weaker yen, while China’s highly valued tech sector fell in tandem with the US Nasdaq. Emerging markets were broadly weaker.

Bonds

US Treasury bonds were hit by profit taking in response to fears of rising inflation, knocking confidence in government bonds across the globe. The yield on the US 10 year Treasury topped 1.5%, a level not seen since February 2020. Credit markets were weaker across the quality spectrum, while emerging market debt spreads widened as the sector underperformed the global bond index.

Currencies

Sterling briefly touched a three year high against the dollar, which otherwise strengthened across the board due to safe-haven buying. The euro made ground against sterling and the yen, which was weaker across the board.

Commodities

The oil price maintained its recent rising trend, as hopes of a recovery in demand gathered strength. Gold was weaker in response to the rising dollar and rising bond yields, as gold has no yield. Copper traded above $9,000 for the first time since 2011.

Responsible investing

The UN’s High Level Panel on International Financial Accountability, Transparency and Integrity for Achieving the 2030 Agenda (FACTI) recommended a clampdown on illicit financial flows, such as money laundering, as well as on legal tax avoidance schemes, including the shifting of corporate profits to areas with lower tax rates.