In the European and American stock exchanges, this Wednesday was a day of recovery after a start marked by concerns. At 8:37 am, the pan-European Stoxx 600 index was at one-month lows, pressured by falls in the bond markets and tensions in the Middle East. However, the European afternoon brought relief, with the Stoxx 600 closing down just 0.2%. In the United States, the S&P 500, the Nasdaq and the Dow Jones closed the session gaining 0.46%, 0.45% and 0.56% respectively.
The interest rates on sovereign debts of several countries reached multi-year highs, with the Japanese at 1996 levels, the British at 2008 and the American at early 2005 levels. Economist Filipe Garcia, from consultancy IMF, explained that the impact on equities may occur through company valuations, since higher rates change the discount multiples of future cash flows, but warned that the main risk would be a global confidence crisis, although he considers a US debt default unlikely.
In the American markets, valuations based on technological investments in artificial intelligence have been a source of relief. Lauren Cassidy, from Founders 100 ETF, told Reuters that AI adoption is still in an early phase and that record financial results, driven by AI, have corroborated the bull market. Also in Europe, solid results during the last earnings season were a relief for investors.
Mathieu Racheter, from Swiss private bank Julius Baer, foresaw that higher yields may fuel a rotation in the stock market rather than compromise the trend. The recommendation is not to abandon the winners in the technology and AI sector, but to add other sources of income, with a preference for value stocks, particularly the financial sector and banks.
