New York (AFP) – Wall Street stocks closed higher Wednesday, holding onto early gains after a temporary dip in oil prices and bond yields reversed following US President Donald Trump’s renewed threats against Iran. 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.
However, 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. “The market is enjoying a broader rebound…as relative stability in crude oil and Treasury yields has eased some of the pressure that drove the week’s early losses,” said Briefing.com in a note. Jose Torres of Interactive Brokers stated that messaging from US leaders on the interest rate outlook and bond yields was “boosting investor sentiment, which has faced significant headwinds in recent sessions.”
Wall Street held onto its gains even after bond yields and oil prices resumed their march higher. US-listed stocks of Uber rose more than 1.5 percent on Wednesday after the ride-hailing giant said it was laying off about 10 percent of its workforce. In contrast, 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.
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. Investors expect that the US Federal Reserve will raise interest rates later this month to fight inflation, putting upward pressure on bond yields.
Key data on US jobs and inflation over the next week could determine the Fed’s decision. 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 Fed on Wednesday flagged that while the country’s general economic outlook was positive, heightened uncertainty due to high energy prices and the Iran war was weighing on sentiment.
Moreover, Canada’s central bank left its benchmark interest rate unchanged at 2.25 percent for the seventh straight time but warned of possible consequences from the trade war with the United States. 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 Japan’s 10-year bond yield is also at a 30-year high. Yields on 30-year and 10-year US Treasuries are near levels last seen in the 2007-08 financial crisis.
Stock markets across Asia showed the biggest falls Wednesday, with their key technology firms—which rely on low borrowing rates to fuel investments—sending Tokyo down 2.9 percent and Seoul down four percent. The Japanese yen rose sharply, gaining more than one percent against the dollar at one point in the day. “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, marking 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 2000 GMT:**
– New York – Dow: UP 0.6 percent at 53,061.95 points (close)
– New York – S&P 500: UP 0.5 percent at 7,666.60 (close)
– New York – Nasdaq Composite: UP 0.5 percent at 26,217.83 (close)
– 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 1.0 percent at $95.63 per barrel
– West Texas Intermediate: UP 0.6 percent at $91.01 per barrel
– Euro/dollar: DOWN at $1.1584 from $1.1589 on Tuesday
– Pound/dollar: DOWN at $1.3484 from $1.3511
– Dollar/yen: DOWN at 158.89 yen from 160.24 yen
– Euro/pound: UP at 85.91 pence from 85.77 pence
© 2024 AFP
