Stocks stumble on rise in yields

There’s a pretty broad based sell-off seen in stock indices this morning with markets in Europe and US futures both declining as investors grow increasingly concerned about the recent rise in yields. Solid employment data and a 21-year high in a widely viewed service sector survey from across the Atlantic on Wednesday afternoon saw US bond yields rise to multi-year highs and this makes stocks relatively less attractive. The FTSE 100 has fallen by almost 1% to trade at its lowest level in a fortnight and back below the 7450 mark. The pound is edging higher and one of the few currencies appreciating against the US dollar on the day, with the resurgent buck gaining ground from the rise in US yields.

Fed in danger of getting behind the curve

Today’s move lower in stocks has come as the US 10 year yield rose to its highest level since July 2011 and the strong outperformance of equities across the Atlantic in recent months leaves US markets looking vulnerable to a correction. European benchmarks have been trending lower in recent months as a notable and growing divergence has formed and with the Dow Jones Industrial Average reaching a record peak just yesterday, there is plenty of room to the downside should investors get skittish. Yields in Europe are on the rise too, but not due to strong economic data, rather investors are shunning Italian bonds due to concerns surrounding the fiscal responsibility of the populist government and with ECB purchases set to halt in the coming months prices could well continue to decline after reaching a 4-year high this week. Higher yields, particularly on assets that are considered risk free (US government bonds) make stocks seem relatively less attractive and the near decade long bull market which has been built on extremely low yields by historical standards, is now facing a serious existential threat.

UK car sales slump by a fifth

A sharp drop in car sales last month has come at a bad time for manufacturers, with one of the biggest in the UK also warning of the effects of a no-deal Brexit. The 338,834 vehicles registered in September marks a decline of 20.5% on the same period last year, with new stricter emissions standards being the most prominent of several factors taking the blame for the slump. Since 1 September all cars sold in the EU now have to undergo a new test on emissions and carmakers are seemingly struggling to cope. In news that isn’t directly related, Nissan, who employs 7,000 people at its Sunderland plant, has urged UK and EU negotiators to work towards mutually beneficial trade post-Brexit. More than half of the vehicles produced in the Sunderland plant are exported to the EU and any disruptions in this free trade would obviously threaten the current levels of output.