A turning point in the markets

This week – Tuesday in particular – could mark a significant a turning point in the markets, says John Stepek.

Summer is usually quiet for markets, but I wonder if we might look back and see this week Tuesday in particular as a turning point. It may well mark the day when the last of the big money printers the Bank of Japan began to turn off the taps. In late 2016, the Japanese central bank told markets that it would do whatever it needed to in order to keep the yield on ten-year Japanese government bonds (JGBs) at 0%. By and large, the yield has stayed at 0% ever since. But with US interest rates rising, and the end of quantitative easing in sight in the eurozone, investors had started to wonder if the Bank would change policy at its July meeting. Which is what it did.

The Bank now says it will let the ten-year yield rise to as much as 0.2% rather than 0.1% before it intervenes to drive it back down. Bank boss Haruhiko Kuroda tried to downplay the move by noting that rates will be very low in Japan for years. Yet the market took the hint. As we went to press, JGB prices had seen their biggest fall in two years (bond prices fall as yields rise). It's not much of a tightening to be sure but it is certainly not a loosening.

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John Stepek

John Stepek is a senior reporter at Bloomberg News and a former editor of MoneyWeek magazine. He graduated from Strathclyde University with a degree in psychology in 1996 and has always been fascinated by the gap between the way the market works in theory and the way it works in practice, and by how our deep-rooted instincts work against our best interests as investors.

He started out in journalism by writing articles about the specific business challenges facing family firms. In 2003, he took a job on the finance desk of Teletext, where he spent two years covering the markets and breaking financial news.

His work has been published in Families in Business, Shares magazine, Spear's Magazine, The Sunday Times, and The Spectator among others. He has also appeared as an expert commentator on BBC Radio 4's Today programme, BBC Radio Scotland, Newsnight, Daily Politics and Bloomberg. His first book, on contrarian investing, The Sceptical Investor, was released in March 2019. You can follow John on Twitter at @john_stepek.