- Treasury yields rise, raising the dollar, with its weight on gold and oil
- The yen is at a nine-month low as traders look for intervention signals
- MSCI World Index at five-week low, STOXX down 0.35%
- Shares of payment company Adyen fell 20%
SINGAPORE/LONDON (Reuters) – The 10-year US Treasury yield on Thursday hit a 10-month high, supported by fears that US interest rates may remain high for longer, which, along with China’s economic woes, is contributing to global equities. experiencing its lowest level in five weeks.
Benchmark 10-year yields reached 4.312% Thursday, testing a break of last October’s 4.338% which would be a 16-year high.
“The reason behind the rally is the strong data on domestic demand in the US. The minutes of the meeting (from the July Fed meeting, which was released on Wednesday), they seem really old, they talk about a gradual slowdown in the US economy, but when you look at the Odier, chief economist at Lombard-Odier, said, “The data is not even slowing down.”
Those minutes showed policymakers were divided over the need for further interest rate increases, with some pointing to the risk to the economy of pushing the increases too far.
US retail sales data came in strong earlier this week, and traders are also watching the Atlanta Federal Reserve’s GDP forecast model now, which showed that the US economy is likely to grow at a 5.8% annual rate in the third quarter.
Expectations for US peak rates have not changed significantly, but instead changes in yields have been driven by changes in price expectations over the medium term.
“What’s interesting is usually when you have volatility around rates the market tries to price in a higher rate on the fed funds, what happens here is the market makes rate cuts, or at least delays them until later,” Char said.
“The effect of higher yields is the norm: a well-supported dollar and stocks under pressure,” he added.
The MSCI World Index (.MIWD00000PUS) fell 0.18% on Wednesday, its lowest since July 6th.
The STOXX 600 Index (.STOXX) in Europe fell 0.3%, with the Dutch benchmark index (.AEX) leading, down 1.12% after a 22% decline in payments company Adyen (ADYEN.AS) whose first-half profit came without estimates.
Global stock selling may pause in the US, with Nasdaq and S&P500 stock futures up about 0.2%. NQcv1>
China’s economy was the other topic on investors’ minds, as a slew of economic data and turmoil in the real estate sector revealed a faltering post-pandemic recovery.
The latest development was beleaguered asset manager Zhongzhi Enterprise Group saying it would undertake a debt restructuring, another sign of turmoil in China’s $3 trillion shadow banking sector.
MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) fell to its lowest level since late November in early trade Thursday. The index fell about 8% for the month of August, and is heading for its worst monthly performance since September 2022.
Stock indices in Hong Kong (.HSI) and the Chinese mainland (.HSI) were flat.
“I still think there will be more action coming from policymakers,” Herald van der Linde, senior equities analyst for Asia at HSBC, told the Reuters Global Markets Forum. “It just takes a while.”
Van der Linde said the willingness to invest in China is very low. “And that appetite has to do with confidence, and that’s not going to change very quickly. It would be nice if we get some consumer stimulus.”
In currency markets, the dollar index, which measures the greenback against six competitors, rose to a two-month high of 103.59, supported by higher US yields.
The Japanese yen touched a nine-month low of 146.57 per dollar earlier in the session, as traders remained vigilant about possible interventionist chatter from Japanese officials.
Finance Minister Shunichi Suzuki said on Tuesday that authorities are not targeting absolute currency levels for intervention.
In commodities, oil prices stabilized after three sessions of decline. US crude rose 0.21% to $79.55 a barrel, and Brent crude was $83.82, up 0.44% on the day.
The increase in interest rates affected non-yielding gold, which touched a five-month low on Thursday. The metal was last at $1.89 an ounce, after dropping to $1,888.30.
Additional reporting by Ankur Banerjee in Singapore and Alun John in London, as well as Anusha Sircar in Bengaluru; Editing by Muralikumar Anantharaman, Sonali Paul and Angus McSwan
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