Investors concerned about taper tantrum?
European stocks ended slightly lower on Tuesday and the US is on course for similar losses as investors continue to take a cautious approach at the start of the week.
I wouldn’t go as far to say they’ve been shaken by any particular event but there does appear to be a little less enthusiasm this week. Rising US yields may be weighing a little, the prospect of a taper tantrum perhaps unsettling investors. That may be a little overblown at this point, with the prospect of monetary tightening some time away still.
Policy makers are more optimistic about the outlook though and that will only be fueled further by a big stimulus package from the new Biden administration. The US economy has been resilient and is in a strong position to lead the recovery.
The economic situation in the UK is more severe and the recovery may be more challenging but based on Andrew Bailey’s comments today, negative interest rates are still not the favoured policy response for now.
There’s been a lot of talk about the preparedness for negative rates, viewed by some as a sign that the central bank is going to become the latest adopt it but it seems that’s not on the horizon afterall. The pound rallied on the comments, climbing back above 1.36 against the dollar in the process.
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