Economy

SA bonds weaken as market changes mind about US Fed outlook

SA bonds weaken as market changes mind about US Fed outlook

Further dollar gains will likely depend on data showing a further improvement in growth and inflation, which could fan speculation that the US central bank could raise interest rates this year three more times.

Wall Street stocks finished well off their lows of the session, with the Dow and S&P 500 indexes earlier falling below their 200-day moving averages - a key technical level - for the first time since early April.

MSCI's gauge of equity markets across the globe shed 0.96 percent.

US stocks logged their biggest advance in nearly four weeks after the country's jobless rate hit an 18-year low.

South African government bonds were weaker on Friday morning, after staging a moderate recovery earlier following the US Federal Reserve decision to keep rates on hold. USA officials asked China to bring forward reductions in its trade surplus, raising the hurdle for any overarching deal, while state-run news agency Xinhua said the two parties agreed on some issues but disagreed on others.

The Dow Jones Industrial Average fell 336.06 points, or 1.4 percent, to 23,588.92, the S&P 500 lost 35.19 points, or 1.34 percent, to 2,600.48 and the Nasdaq Composite dropped 94.37 points, or 1.33 percent, to 7,006.53.

Stocks in Europe followed Asian peers lower as investors began to switch their attention away from the Federal Reserve and back to earnings and the outlook for global trade.

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AIG shares dropped after the insurer reported a lower-than-expected quarterly profit, while Cardinal Health declined after the drug distributor cut its annual earnings forecast. Economists polled by Reuters had expected it to be unchanged from 1.3 percent in March.

The Bloomberg Dollar Spot Index fell 0.2 per cent.

The dollar initially weakened in response to the Fed, as the market took the view that Fed's forward-looking view was less hawkish than expected.

Benchmark U.S. 10-year notes last rose 10/32 in price to yield 2.929 percent, from 2.964 percent late Wednesday.

The yield on 10-year Treasuries edged higher as the greenback slid from its highest since January. "For me I think the Fed should continue to gradually remove accommodation", he added. The U.S. dollar fell in choppy trading.

The dollar index fell 0.07 percent, with the euro up 0.29 percent to $1.1985. The U.S. dollar was up to 1.0007 Swiss franc from 0.9973 Swiss franc, and it stayed flat at 1.2853 Canadian dollars.


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