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Rising U.S. inflation this week caused a major shake-up in the U.S. bond market.

Week in review: U.S. bonds, shaken and stirred

This week: Rising U.S. inflation and growing European economies.

Higher U.S. inflation sparked a sell-off in bonds this week. Investors’ fear of an overheating U.S. economy increased this week as the U.S. government reported that consumer prices rose more quickly in January than analysts had expected. The tumble in 10-year Treasuries sent yields to above 2.9%, marking a four-year high.

Wall Street proved more resilient, with the S&P 500 Index experiencing a five-day streak of gains to close up 4.3% on Thursday. Other global equity markets also did well, as the effects of stronger-than-expected inflation data were confined to the bond market. The FTSE 100 Index gained 2.0%, with its European equivalent, the FTSE World Europe ex UK Index rising 2.2%.

European growth at a 10-year high

The UK’s impending departure from the European Union (EU) doesn’t appear to be acting as a drag on Continental Europe’s economic performance. Its statistics office, Eurostat, reported this week that the EU expanded by 2.5% in 2017, its strongest performance since 2007. Much of this expansion has been driven by four economies: Spain, Germany, Italy and France. Some Eastern European countries such as Slovakia and Latvia have also gained traction and exhibited strong growth. Meanwhile, a considerable portion of the Eurozone’s strength can be attributed to the European Central Bank’s stimulus policy, which has kept a lid on the cost of borrowing.

Unilever threatens to pull the plug on tech platforms

Unilever has threatened to pull advertisements from platforms such as Google and Facebook if they fail to tackle online extremism and illegal content which “create division in society and promote anger and hate.” The consumer goods giant said it believes shoppers’ trust in social media is at a new low. Its Chief Marketing Officer, Keith Weed, said: “We cannot have an environment where our consumers don’t trust what they see online” and spoke of widespread “fake news, racism, sexism, terrorists spreading messages of hate, toxic content directed at children.”

As part of its overall policy, Unilever has pledged to only invest in responsible platforms which make a positive contribution to society.

Laura Ashley fails to blossom

Laura Ashley issued a profit warning this week after reporting disappointing trading figures over the festive period. Sales fell 0.5% for the 26 weeks to December 31, while pre-tax profit nearly halved to £4.3 million (US$ 6 million). Upon the news, shares fell by 26% but subsequently staged a partial recovery, and were down 8% by close of business on Thursday. The multinational fabric fabricator, noted for its floral patterns, warned that “continued market challenges” and a weakening pound meant profits would be lower than expected. However, Chairman Khoo Kay Peng remained upbeat, expressing hopes that budding plans for a new digital platform in the second half of 2018 would help it to bloom once again.

And finally…

Is there Life on Mars? We might never know, because it seems that the rise in cryptocurrencies’ popularity is now hampering the search for extraterrestrials. A group of scientists on the lookout for new life forms has been left feeling alienated by investors in the digital assets. The seekers of new civilizations are struggling to get hold of computer chips known as GPUs (graphic processing units), which they use to scan radio waves from deep space in hopes of catching an otherworldly message.

Given their speed and efficiency at performing millions of repetitive computations, GPUs are crucial to the 21st century equivalent of the California gold rush: they are used heavily by tech-savvy investors in the “mining” of cryptocurrencies such as Bitcoin and Ethereum.

The high demand for the GPUs from those undertaking such Earthly pursuits means there are fewer available for the scientists’ use. Their bid to boldly go ahead with expanding operations at two of their observatories – Green Bank in West Virginia and Parkes in Australia, has been stymied by the low supply.

Sorry, E.T. If you can’t phone home, blame it on the cryptocurrency craze.

Important Information

Foreign securities are more volatile, harder to price and less liquid than U.S. securities. They are subject to different accounting and regulatory standards, and political and economic risks. These risks are enhanced in emerging markets countries.

Companies mentioned are for illustrative purposes only and are not intended to be a recommendation to buy or sell any security.

Indexes are unmanaged and are included for illustrative purposes only. You cannot invest directly in an index.

Image Credit: Editorial image credit: Stockimo / picfair.com

ID: US-160218-57703-1