London (AFP) – Wall Street stocks pushed higher on Wednesday, taking advantage of a brief lull in rising oil prices and bond yields. Stocks have dropped and government bond yields have hit fresh multi-decade highs in recent days as elevated oil prices increase the prospect of sustained higher levels of inflation and central banks hiking interest rates in reaction.
But the yield on the 10-year US government bond dipped ahead of the open in New York and oil prices turned briefly lower, helping Wall Street’s main indices bounce back in morning trading. “There wasn’t a specific news catalyst to account for the reversals,” said Briefing.com analyst Patrick O’Hare. “It was simply a trend interrupted by some seller/buyer exhaustion, rooted in a sense that perhaps for now the respective trends need some relaxation,” he added.
Wall Street held onto its gains even after bond yields and oil prices resumed their march higher. But Europe’s main stock markets closed lower. Bond yields and oil prices have risen since a weekend US strike on an Iranian island in the Strait of Hormuz, sparking a series of tit-for-tat attacks in which Tehran has targeted American interests in Mideast countries. “The renewed US-Iran attacks and their impact on oil prices have made investors more concerned,” said Rajeev De Mello at Gama Asset Management.
With the strait — through which about a fifth of world oil and liquefied natural gas normally pass — effectively closed and energy costs unlikely to come down markedly anytime soon, fears are growing that high inflation will settle in. European gas prices on Wednesday reached the highest level since the start of 2023. That has upped investor expectations that the US Federal Reserve will raise interest rates later this month, putting upward pressure on bond yields.
Investors are gearing up for the release of key data on US jobs and inflation over the next week that could determine whether the Federal Reserve lifts rates at its next policy meeting due this month. Data from payroll firm ADP showed private-sector jobs growth in August was 38,000, down from the month before and well below the 47,000 predicted by economists polled by Dow Jones Newswires and The Wall Street Journal. The figures are closely monitored ahead of official employment numbers due Friday, although the reports can diverge.
Governments worldwide are seeing their debt repayments jump as yields on their bonds reach, in some cases, the highest levels since the end of the last century. The yield on 30-year UK government bonds is at the highest level since 1998, while for 10-year debt it was last higher during the global financial crisis of 2007-08. Japan’s 10-year bond yield is at a 30-year high, 30-year US Treasuries are just short of their 2007 mark, and the US 10-year yield is also at financial-crisis levels.
Stock markets across Asia showed the biggest falls Wednesday, with their key technology firms — which rely on low borrowing rates to fuel their investments — sending Tokyo down 2.9 percent and Seoul four percent lower. The Japanese yen rose sharply, gaining more than one percent against the dollar. “It looks suspiciously like an intervention, especially if we consider recent history and that no other obvious catalyst is in place,” ActivTrades analyst Ricardo Evangelista told AFP. The US intervened in markets to boost the yen in July, the first time it had carried out a joint intervention with Japan since 2011, but the yen quickly lost those gains as the difference in interest rates between the countries encouraged investments in US assets.
– Key figures at around 1530 GMT –
New York – Dow: UP 0.6 percent at 53,068.07 points
New York – S&P 500: UP 0.6 percent at 7,679.02
New York – Nasdaq Composite: UP 0.5 percent at 26,239.37
London – FTSE 100: DOWN 0.3 percent at 10,756.45 (close)
Paris – CAC 40: DOWN 0.3 percent at 8,280.63 (close)
Frankfurt – DAX: DOWN 0.5 percent at 25,839.33 (close)
Tokyo – Nikkei 225: DOWN 2.9 percent at 64,325.64 (close)
Hong Kong – Hang Seng Index: DOWN 0.1 percent at 25,311.21 (close)
Shanghai – Composite: DOWN 1.0 percent at 3,941.39 (close)
Brent North Sea Crude: UP 0.9 percent at $95.52 per barrel
West Texas Intermediate: UP 0.7 percent at $90.82 per barrel
Euro/dollar: UP at $1.1596 from $1.1589 on Tuesday
Pound/dollar: DOWN at $1.3506 from $1.3511
Dollar/yen: DOWN at 158.64 yen from 160.24 yen
Euro/pound: UP at 85.86 pence from 85.77 pence
© 2024 AFP
