Stocks ended their win streak with a slight decline this week and sit relatively flat for 2016 overall. Bond yields rose this week as several statements from Fed officials leaned towards hawkish action as soon as the next meeting of the central bank.
The final revision to Q4 GDP growth came in slightly above expectations, led by the strength of the American consumer. Better than expected growth and unemployment figures over the past month have some members of the Federal Reserve eyeing an additional rate hike sooner rather than later, contrary to market expectations.
The Governor of China’s central bank issued a sharp warning regarding corporate debt levels in the country, stating lending as a fraction of GDP was too high. China has been encouraging debt for equity swaps to help capitalize the banking sector and stimulate the slowing economy.
St. Louis Fed President James Bullard surprised markets and analysts on Thursday stating the economy could be ready for an additional rate hike in April. Combined with a Blackrock report advocating that investors cut back on bond allocations, bond yields to rise this week.
Russia is struggling to find banks to participate in the sale of $3 billion worth of bonds. Banks have been warned by the U.S. government not to participate out of fear that funds will be passed on to firms or individuals who are the target of U.S. sanctions. Russia is recruiting Chinese and European banks to complete the deal.
Hungary became the first emerging market to employ negative interest rates this week. Hungary’s economy has struggled with low growth and demand since the financial crisis.
In energy, shale producers in the U.S. are citing difficulties in increasing production after crude’s recent rise. Heavy layoffs in the sector have made operating drilling sites more difficult.