WEEKEND WEB: Bomb threats fail to bring down market

Scott Woods
Scott Woods
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SCOTT WOODS takes a look at the world of finance.

Even fresh threats from North Korea over the deployment of a hydrogen bomb in the Pacific did little to dent global stock markets which ended last week in positive territory.

The main story dominating headlines – the end of monetary stimulus in the US – was largely shrugged off by emerging market and European investors, the latter buoyed by positive economic news.

Talk of a possible US interest rate rise sent the US dollar marginally higher against 
major currencies before falling back.

Meanwhile, global bond prices fell and yields rose (bond prices move inversely to yields) as investors digested the implications of a reduction in monetary stimulus.

Against a background of strong economic growth and low inflation, US Federal Reserve (Fed) chair, Janet Yellen, effectively signalled the end of post-crisis monetary stimulus last week.

While Yellen suggested her decision to reverse the printing presses would be gradual and as about as exciting as watching paint dry, the main moves were felt in currency and US bond markets.

In anticipation of further US interest rate rises, possibly December, the dollar gained marginally against a basket of major currencies. Bond prices fell and yields rose as investors adjusted bond prices to keep them competitive with potentially higher rates.

There was good news for Europe as economic activity in the region continues to pick up.

Purchasing managers index (PMI) data, a key economic indicator released last week, showed that Germany’s factory sector enjoyed its fastest pace of growth inSeptember in more than six years.

Aside from a strong manufacturing showing, there was also positive news for business activity and employment.

The value of investments and the income they produce can fall as well as rise. You may get back less than you invested.