US equities hinted at recovery from a two-day retreat, even as a selloff intensified across bond markets worldwide.
(Bloomberg) — US equities hinted at recovery from a two-day retreat, even as a selloff intensified across bond markets worldwide.
The S&P 500 rose 0.3% after the benchmark closed below a closely-watched technical level twice this week. While many investors had believed that the Federal Reserve was done raising interest rates, that’s no longer a sure thing after minutes from last meeting suggested officials are considering tighter policy.
Data showing the labor market remains healthy did little to change the narrative Thursday. Investors will be turning to the Jackson Hole conference in Wyoming next week for signs of the Fed’s direction.
The moves across bond markets have been sharp and swift this week. The 10-year Treasury yield rose as much as 6 basis points to 4.31% on Thursday, approaching the highest level since 2007. Japan’s 20-year bond yield surged after a debt auction drew tepid investor demand.
“The narrative of aggressive rate cuts and inflation falling flat doesn’t exist anymore,” Aneeka Gupta, director of macroeconomic research at WisdomTree, said in an interview with Bloomberg Television. “We’re likely to see bond yields trading higher for longer.”
Read More: Global Yields March to 15-Year Highs as Rate-Hike Worries Build
Treasuries have been a key driver of the global debt selloff as resilience of the world’s largest economy defies expectations that a run of Federal Reserve interest-rate hikes would spark a recession. In the UK, the surge in gilt yields comes after sticky inflation and strong wage data boosted investor bets that the Bank of England will need to raise interest rates further to 6% and keep them high for longer.
China Weighs
China also continued to weigh on sentiment. The picture emerging from property agents and private data providers suggest the slump in the real estate market may be worse than official reports show. These figures show existing-home prices falling at least 15% in prime neighborhoods of major metropolitan areas like Shanghai and Shenzhen.
China ramped up its efforts to stem losses in its currency on Thursday by offering the most forceful guidance since October through its daily reference rate for the managed currency. Authorities told state-owned banks to step up intervention in the currency market this week, in a push to prevent a surge in yuan volatility, according to people familiar with the matter.
The offshore yuan advanced while the dollar slumped.
“Equity markets are currently faced with two headwinds — first, real rates are surging again, as the US economy is showing numbers consistent with an economic recovery,” said Florian Ielpo, head of macro research at Lombard Odier Asset Management. “Second, China is starting to emit dire signals that must remind investors of the awful summer 2015, with a troubled housing market and shadow banking system.”
Elsewhere, Brent crude halted a three-day drop, trading up 1% at $84.25 per barrel. Gold edged up after closing below $1,900 an ounce for the first time since March.
Key events this week
- Eurozone CPI, Friday
Some of the main moves in markets:
Stocks
- The S&P 500 rose 0.3% as of 9:33 a.m. New York time
- The Nasdaq 100 rose 0.3%
- The Dow Jones Industrial Average rose 0.3%
- The Stoxx Europe 600 fell 0.6%
- The MSCI World index was little changed
Currencies
- The Bloomberg Dollar Spot Index fell 0.3%
- The euro rose 0.2% to $1.0906
- The British pound rose 0.3% to $1.2774
- The Japanese yen rose 0.4% to 145.74 per dollar
Cryptocurrencies
- Bitcoin fell 1.6% to $28,465.09
- Ether fell 1.1% to $1,788.6
Bonds
- The yield on 10-year Treasuries advanced three basis points to 4.28%
- Germany’s 10-year yield advanced four basis points to 2.69%
- Britain’s 10-year yield advanced seven basis points to 4.72%
Commodities
- West Texas Intermediate crude rose 1.3% to $80.38 a barrel
- Gold futures rose 0.2% to $1,931.40 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Richard Henderson, Alice Gledhill and Farah Elbahrawy.
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