Financials Down as Traders Retreat From Rate Bets -- Financials Roundup

Features Dow Jones Newswires

Banks, lenders and other financial companies fell as traders retreated from bets on higher interest rates.

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Treasury yields were more or less flat ahead of Federal Reserve Chairwoman Janet Yellen's testimony to Congress on Wednesday. "The Fed as well as the ECB are determined to incrementally tighten monetary policy," said Lorenzo Di Mattia, manager of hedge fund Sibilla Global Fund, in a note to clients.

A sustained bout of rate increases could result in "two possible scenarios: the global economy is able to maintain positive growth despite higher interest rates and contracting global central banks' balance sheets." This scenario is likely if the U.S. and another major nation, perhaps Japan, succeeds in implementing fiscal stimulus, Mr. Di Mattia said. The alternative, Mr. Di Mattia said, is that "a global slowdown begins.

Risk assets suffer a severe correction - at least 10% for the broad indices." Mr. Di Mattia said, in either scenario, there would likely be a period of volatility as markets adjust to the new interest-rate regime.

(-By Rob Curran, rob.curran@dowjones.com)

(END) Dow Jones Newswires

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July 11, 2017 16:43 ET (20:43 GMT)