Global rout eases as Treasury yields stabilize: Markets wrap

(Bloomberg) — The global financial corridor eased on Wednesday as Treasury yields fell and the dollar weakened from a 10-month high.

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U.S. index futures were higher, pointing to a recovery in the S&P 500, which fell to a four-month low on Tuesday. The 10-year Treasury yield, a measure of the global cost of capital, fell below 4.8% after rising 30 basis points this week.

The latest round of selling was fueled by better-than-expected US jobs data on Tuesday and dovish comments from Federal Reserve officials. The 30-year yield touched 5% for the first time since 2007 as confidence grew that US interest rates could rise further from current 22-year peaks. Markets are pricing in a third of the November hike and will likely see more than that. 50% chance of moving in December.

U.S. private payrolls data due later from ADP Research Institute could cause more volatility during Tuesday’s JOLTS survey.

“It’s fair to say there will be a volatile environment until we get more clarity” on the direction of rates, Virginie Maisonneuve, global chief investment officer for equities at Alliance Global Investors, said in an interview with Bloomberg Television. “If you have a longer time horizon, look for stocks with very strong structural support for growth and quality balance sheets.”

Meanwhile, there are signs that buyers are already taking advantage of the stock’s swoon. The S&P 500 is officially in oversold territory based on its Relative Strength Index below 30. Francisco Simone, head of European strategy at Santander AM, is one of the people keeping an eye on cheap assets.

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“The current weakness in equities will be an opportunity to enter those sectors and companies that are more sensitive to rates,” he said. “We expect them to catch-up again once rates stabilize. Current yields are already too high for expected inflation and medium to long-term growth.”

In private stock moves on Wednesday, airline SAS AB fell as much as 96% after announcing plans to take the bankrupt Scandinavian flag carrier private. Tesco Plc rallied after Britain’s biggest grocer raised its profit forecast.

After its highest close since late November, the dollar and a basket of its Group-of-Ten peers weakened for the first day of the week.

Highlights of this week:

  • China has a week off

  • Eurozone services and composite PMIs, Wednesday

  • ECB President Christine Lagarde delivers a welcome speech at Wednesday’s conference

  • US ISM Services Schedule, Wednesday

  • France Industrial Production, Thursday

  • BOE Deputy Governor Ben Broadbent and Riksbank First Deputy Governor Anna Breimann participate in a panel discussion on Thursday

  • US Trade, Initial Jobless Claims, Thursday

  • San Francisco Fed President Mary Daly speaks Thursday at the Economic Club of New York

  • Germany factory orders, Friday

  • US unemployment rate, non-farm payrolls, Friday

Some key movements in the markets:

Shares

  • S&P 500 futures were up 0.2% at 7:15 a.m. New York time

  • Nasdaq 100 futures rose 0.1%

  • Futures for the Dow Jones industrial average rose 0.2%

  • The Stoxx Europe 600 rose 0.4%

  • The MSCI world index fell 0.1%

Coins

  • The Bloomberg Dollar Spot Index fell 0.2%

  • The euro rose 0.5% to $1.0516

  • The British pound was up 0.5% at $1.2140

  • The Japanese yen rose 0.1% to 148.85 per dollar

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Cryptocurrencies

  • Bitcoin rose 0.6% to $27,554.67

  • Ether fell 0.6% to $1,646.16

Bonds

  • The yield on 10-year Treasuries fell a basis point to 4.79%

  • Germany’s 10-year yield fell a basis point to 2.95%

  • Britain’s 10-year yield was little changed at 4.60%

materials

  • West Texas Intermediate crude was down 1.9% at $87.54 a barrel.

  • Gold futures were down 0.1% at $1,839.40 an ounce

This story was produced with the help of Bloomberg Automation.

–With assistance from Sujata Rao and Michael Mzika.

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