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Markets

Diverging path for U.S. and euro bond markets

Opening sequence

Opening sequence

Markets

Diverging path for U.S. and euro bond markets

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17:07
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COMING UP:Diverging path for U.S. and euro bond markets

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Transcript

00:00:00
>>
NOISE] A
diverging path for US and Eurozone markets. Wall Street breaking new ground, with the Dow closing above 19,000 for the first time on Tuesday, thanks to the Donald Trump effect. But just hours later, German bond yields plunging new depths. Shares in Europe dipping, with the Euro nearing one-year lows.
00:00:18
Reuters Markets Editor Mike Dolan says actions by the European Central Bank are keeping European markets flat.>> In particular since Mario Draghi was speaking on Monday evening, he's successfully given a signal that the ECB would continue to lean towards easier policy, even though the Federal Reserve is now seen as a dead cert to raise interest rates next month.
00:00:39
And that divergence of interest rates is seeing bond market yields go to their widest level in certainly on a two-year level, the widest in 11 years.>> Sources telling Reuters the ECB is now looking to lend out more of its huge debt pile to banks, stimulating lending to businesses.
00:00:58
Little sign of easier lending on the other side of the Atlantic though. Markets remain buoyed by US President-elect Trump's pledges to cut taxes, spend on infrastructure, and cut regulation.>> The trade that's been prevalent since Trump's election has been this reflation trade internationally, and that's seen a rise in equity markets, particularly industrial stocks, and in banking stocks, too, who are betting that he will ease back on regulation.
00:01:24
But commodity markets, and also bond deals, have been rising on the idea that we're gonna get some upsurge in activity, and some rise in inflation over the horizon. But that's all speculative because we don't know yet what Donald Trump will actually do.>> Market euphoria at Trump's win two weeks ago has put the Euro dollar exchange rate under pressure, with the dollar perching near a 14 year high.