World shares have experienced their worst quarterly performance in a year, as concerns over elevated interest rates continue to haunt the market. Although European shares rose, aided by gains in luxury stocks, and U.S. equity futures indicated a solid start for Wall Street, global stock markets have suffered heavy losses due to rising bond yields. Bond markets have also seen a torrid quarter, with euro zone government bond yields on track for their biggest quarterly rise in a year. Despite the stability in bond markets, yields are still considered too high and are expected to move lower in the future.
Amidst these market challenges, revisions to official data released on Friday revealed that Britain’s economic performance during the COVID-19 pandemic has been stronger than initially thought, surpassing the growth rates of Germany and France. Asian shares experienced moderate gains, but are still on track for their worst quarterly performance in a year, as are European shares and the MSCI’s world stock index. While the Democratic-led U.S. Senate continued with a bipartisan funding bill aiming to avert a partial government shutdown, the House began voting on partisan Republican spending bills that are unlikely to become law. These differing paths between the two chambers increase the risk of federal agencies running out of money, potentially furloughing hundreds of thousands of federal workers and halting a range of services.
As uncertainty continues to loom, the potential economic consequences of prolonged partial shutdowns are becoming a concern. If no agreement is reached in Washington, the dollar could face negative effects. The dollar index has already eased slightly, but remains near 10-month highs. In Japan, the yen has experienced a temporary respite, but the possibility of intervention from Japanese authorities remains on the market’s radar. In terms of other commodities, oil prices have rebounded after a brief pause, as traders weigh expected supply increases against forecasts of positive demand from China during its Golden Week holiday. Gold prices, on the other hand, are bracing for their largest monthly fall since February, sitting around six-month lows.