Rising Treasury yields and weak earnings news sapped appetite for stocks as traders tracked an intensifying diplomatic push to contain the Israel-Hamas war.
(Bloomberg) — Rising Treasury yields and weak earnings news sapped appetite for stocks as traders tracked an intensifying diplomatic push to contain the Israel-Hamas war.
Yields on 10-year US government bonds gained for a fourth day, closer to reaching 5% for the first time since 2007. The relentless advance in yields reflects expectations that the Federal Reserve will keep interest rates at restrictive levels to cool inflation that’s still stubbornly above the central bank’s target.
Europe’s Stoxx 600 Index fell more than 1% and US equity futures edged lower after declines on Wall Street Wednesday. Tesla Inc. slid as much as 4.7% in US premarket trading after the electric-vehicle maker’s third-quarter results missed already low expectations. Drugmaker Roche Holding AG dropped the most in almost a year on its cautious outlook. Nestle SA shares declined as the KitKat maker reported the slowest sales growth in almost three years. On a brighter note, Netflix Inc. surged after the streaming-video company posted its best quarter for subscriber growth in years.
“Stocks may have been driven by various concerns, but bonds are no longer seen as a hedge for that pullback,” said Mark Nash, head of fixed income alternatives at Jupiter Asset Management. “In a high inflation world, both assets get hit.”
In the Middle East, United Nations Secretary-General Antonio Guterres is due in Egypt, a day after US President Joe Biden’s visit to Israel, while UK Prime Minister Rishi Sunak has started a two-day trip to the region. Investor attention turns later to US data for fresh readings on the economy. Chair Jerome Powell rounds off another busy diary of speeches by Fed officials.
Read more: The 5% Bond Market Means Pain Is Heading Everyone’s Way
In currencies, Israel’s shekel weakened for a ninth day, its worst streak since 2020. The dollar was steady, while the yen strengthened slightly as Japan’s exports rose more than expected in September. Traders are preparing for turbulent trading in the currency amid growing concerns that Japanese authorities will intervene.
Oil prices slipped as the US eased crude sanctions against Venezuela, potentially aiding global supply, while traders tracked developments in the Middle East, source of about a third of the world’s crude. Gold was steady on haven demand after delivering gains of almost 7% since the Oct. 7 attack by Hamas on Israel.
“US Treasuries have not been fulfilling their usual safe-haven role in recent days, with strong US data trumping worries about a deepening conflict in the Middle East,” said Mark Haefele, chief investment officer at UBS Global Wealth Management. “Instead, investors have been looking to gold and oil for a hedge against geopolitical risks.”
Key events this week:
- US initial jobless claims, existing home sales, leading index, Thursday
- Federal Reserve Chair Jerome Powell, Chicago Fed President Austan Goolsbee, Atlanta Fed President Raphael Bostic, Philadelphia Fed President Patrick Harker, Dallas Fed President Lorie Logan speak at different events, Thursday
- Japan CPI, Friday
- China loan prime rates, Friday
- Philadelphia Fed President Patrick Harker speaks, Friday
Some of the main moves in markets:
Stocks
- The Stoxx Europe 600 fell 1% as of 9:54 a.m. London time
- S&P 500 futures fell 0.3%
- Nasdaq 100 futures fell 0.2%
- Futures on the Dow Jones Industrial Average fell 0.3%
- The MSCI Asia Pacific Index fell 1.6%
- The MSCI Emerging Markets Index fell 1.2%
Currencies
- The Bloomberg Dollar Spot Index rose 0.1%
- The euro was little changed at $1.0538
- The Japanese yen was little changed at 149.84 per dollar
- The offshore yuan was little changed at 7.3340 per dollar
- The British pound fell 0.2% to $1.2110
Cryptocurrencies
- Bitcoin rose 0.3% to $28,355.45
- Ether fell 0.8% to $1,550.6
Bonds
- The yield on 10-year Treasuries advanced six basis points to 4.97%
- Germany’s 10-year yield advanced two basis points to 2.95%
- Britain’s 10-year yield advanced five basis points to 4.71%
Commodities
- Brent crude fell 1.8% to $89.82 a barrel
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Chiranjivi Chakraborty.
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