Soaring US yields drive global markets, pushing stocks lower
- Dollar eases from Treasury-led spike
Oil on track for highest close in four years
Yesterday’s accelerated selloff in Treasurys extended this morning, pushing yields on the US note to a 7-year high after fresh data confirmed sustained economic growth in the US, shortly after Fed Chairman signaled that the central bank will stick with its rate tightening agenda. The higher yields weighed on global stocks today, including futures on the , and , which all hovering in negative territory.
STOXX 600 Daily Chart
The pan-European opened lower and soon extended the decline to past 0.5 percent, with personal and household goods stocks as well as food and beverage shares the biggest decliners. Conversely, banks outperformed, spurred by the very same hawkish comments from Powell. Technically, the benchmark is set to complete a small H&S top, at the crest of a falling channel.
USD/CNY 60-Min Chart
Earlier, during the Asian session, regional currencies slipped lower against a strengthening . With China’s mainland indices closed for a week-long holiday, a slide in the , considered a leading indicator of Asian equities, was enough to reveal a bearish tilt across the region. Technically, the renminbi fell below an uptrend line.
Hong Kong’s took the brunt of the regional selloff, losing 1.73 percent. Australia’s outperformed, closing 0.49 percent in the green.
Global Financial Affairs
Yesterday, upbeat and figures, coming after Powell’ hawkish statements, boosted the outlook for faster rate hikes and thereby sparked considerable volatility, as institutional investors and other large players rushed to restructure investment portfolios accordingly.
The Treasury selloff that ensued, propelling yields to their highest level since 2011, boosted the greenback but spurred a selloff for defensive equity sectors, as bond proxies typically tend to fall out of favor when actual bond yields rise.
The eked out a 0.07 percent gain after its intraday high came within 0.04 percent of its record high. (-1.2 percent) underperformed, followed closely by (1.15 percent) and (-1.07 percent). Shares in the sector (+0.94 percent) outperformed, followed by those in the space (+0.81 percent), as climbed past $76 a barrel, trading near its highest level in nearly four years.
The ticked 0.2 percent higher, hitting both a record close and an all-time high, helped by Caterpillar (NYSE:)’s 2.2 percent leap to its highest level since June 12.
The edged 0.32 percent higher, boosted by Apple’s (NASDAQ:) 1.22 percent gain to a new all-time high.
US SmallCap 2000 Daily Chart
The outperformed, gaining 0.89 percent. Technically, however, the small cap equity benchmark faces the resistance of the bottom of the rising channel that it violated.
Yesterday’s ADP private payroll report, which revealed 230,000 new jobs against the 185,000 expected, marked the highest reading since February. Traders hold this release as an indication of official figures, coming out on Friday, which carry a deeper significance.
The climbed to 61.6 from 58.8. While a reading above 50 demonstrates expansion, this number nears a record high. Moreover, the measure of business activity increased to 65.2 from 60.7, the highest level since January 2004, while the employment component jumped to 62.4 from 56.7, also hitting a record.
The dollar surged on Wednesday as domestic and foreign investors rotated their capital into US assets, though it has retreated slightly today. It still remains above its uptrend line since May 14, which it crossed yesterday, but it has fallen below the uptrend line on September 12 for the second time since August 28: it must now overcome the August 15, 97.00 level to retain the uptrend.
WTI Daily Chart
Meanwhile, oil rebounded after sliding on reports that Saudi Arabia and Russia agreed to increase production. At $76.38, as of the time of writing, the commodity is set to close at its highest level since mid-November 2014. Right now it appears that , fear and speculation based on that fear. And neither is based in reality.
American for August are due on Thursday; data on the will come out on Friday.
The September US is also due on Friday.
The Reserve Bank of India’s is due on Friday.
All prices correct at time of writing
Futures on the dropped 0.4 percent to the lowest level in more than a week on the most substantial dip in more than two weeks.
The gave up 0.1 percent.
The UK’s fell 0.3 percent.
Germany’s slipped 0.4 percent.
The lost 1.1 percent, the lowest level in three weeks on the most massive tumble in more than four weeks.
The tumbled 1.9 percent, the lowest level in more than three weeks on the biggest tumble in more than six months.
The gained less than 0.05 percent to $1.1479, the first advance in more than a week.
The rose less than 0.05 percent to $1.2945.
The climbed 0.1 percent to 114.36 per dollar.
The yield on 10-year Treasuries gained two basis points to 3.20 percent, the highest level in more than seven years.
Germany’s yield edged six basis points higher to 0.53 percent, the highest level in more than a week on the biggest surge in almost four months.
Britain’s yield gained five basis points to 1.623 percent, the highest level in more than a week on the most substantial climb in more than a week.