On global stock markets, share prices under pressure due to rising bond yields

Last week, share prices mostly fell on most global stock exchanges, with the U.S. S&P and Nasdaq indices declining for the second consecutive week, as higher-than-expected inflation in the U.S. raised yields on government bonds, reducing the attractiveness of investing in stocks.

The New York Dow Jones strengthened by 0.6 percent last week, to 35,281 points, but the S&P 500 weakened by 0.3 percent, to 4,464 points. At the same time, the Nasdaq index dropped by 1.9 percent, to 13,644 points, marking its first decline in two consecutive weeks this year.

Along with the Nasdaq, the S&P 500 index recorded a loss for the second week in a row, primarily under pressure from the latest inflation data in the U.S. measured by producer prices, which rose by 0.8 percent year-on-year in July, higher than the expected 0.7 percent, and accelerated compared to June, when it was 0.2 percent.

Although market participants still expect that the Fed will not raise interest rates further by the end of the year, forecasts that there will be no rate hikes at the next central bank meeting in September have dropped from 90 percent, prior to the release of the producer price index, to 88.5 percent.

– We have seen clear indications in recent days that market participants have decided to step aside and observe, which tells us that the market has priced in everything into stock prices, and is neither unpleasantly nor pleasantly surprised – explains the movements on Wall Street Jason Betz from Ameriprise Financial.

However, yields on 10-year U.S. government bonds, which move in line with short-term expectations around interest rates, jumped to 4.88 percent. This has pressured prices, especially of technology stocks, as higher interest rates can slow down the economy and erode these companies’ ability to achieve planned growth in business results, which has also fueled a strong jump in their valuations. Higher interest rates also make bonds a more attractive investment than stocks for those investors who are not inclined to take on significant risk.

Due to the decline in technology stock prices, the semiconductor stock index fell by 5 percent last week, marking its worst weekly performance since early April.

Shares of large and technology companies have boosted the value of the Nasdaq and S&P since the beginning of the year, but after five months of soaring, August has been marked by a much more cautious approach from investors,

– Time will tell if we made the right decision, however, with such a strong surge in technology stock prices that has been achieved, it is hard not to take profit-taking sales – says Betz.

And on most European exchanges, share prices also fell last week. The London FTSE index slipped by 0.53 percent, to 7,524 points, and the Frankfurt DAX by 0.74 percent, to 15,832 points, while the Paris CAC strengthened by 0.34 percent, to 7,340 points.