The 31 May 2015 Qatar National Bank global market update reports the following key information:
- Bond yields fell in advanced economies but rose in most emerging markets (EMs) as investors moved into safe assets. The flight to safety seems to have been triggered by concerns over the Fed tightening stemming from two events on May 22: (a) A stronger-than-expected rebound in US consumer prices, and (b) Comments by the Fed Chair, Janet Yellen, that monetary tightening is expected to begin this year. Most commentators expect yields to rise in EMs as the date of the first US interest rate hike approaches.
- USD appreciated against most G20 currencies due to higher risk aversion. Most commentators expect USD to strengthen going forward on expectations of a Fed rate hike in the second half of this year.
- Most global equity indices fell as investors shunned risky assets in favour of safer government bonds. Most commentators expect G20 equity markets to correct once US short-term interest rates start to rise.
- Commodity prices mostly fell with other risky assets; oil was unchanged over the week. Most commentators expect oil prices to stabilise but other commodity prices to continue to weaken on deflationary risks and once US short-term interest rates start rising.
- The main events shaping global markets this week are likely to be the US employment report and OPEC meeting. The main events shaping global markets this week are likely to be the US employment report and OPEC meeting.