Stocks wilt as Fed shift sparks stampede into bonds
European shares wilted and there was a stampede into bonds on Thursday, after the US Federal Reserve’s abandonment of all plans to raise rates this year left traders wondering what might be lurking in the shadows. World markets’ reaction to a super-dovish Fed was not unlike the response to the European Central Bank’s equally easy stance earlier this month – the benefits of a reduced interest rate horizon came laced with doubts.
Banks suffered their usual worries about low borrowing rates to drag the pan-European STOXX 600 down 0.2 percent, though London’s FTSE edged up as its miners were lifted by higher copper and metals prices. The real action was in the bond markets. With investors rushing to price in the prospect of US rate cuts later this year, benchmark Treasury yields dived to their lowest since early 2018 and those on German Bunds – Europe’s benchmark to the lowest since October 2016.