(Bloomberg) — Stocks fell and Treasuries resumed a retreat as investors grew increasingly worried about the long-term effects of historically high borrowing costs.
Most Read from Bloomberg
The US 30-year yield rose to the highest level since 2007, and 10-year rates rose for a second day. The selloff rippled across equity and commodity markets, with Europe’s Stoxx 600 trading close to a six-month low and S&P 500 index futures down more than 0.5%. West Texas Intermediate crude futures slid to trade below $89 a barrel and the dollar index reached a 10-month high.
In US premarket trading, HP Inc. gained after Bank of America analysts raised their rating on the PC maker to buy.
Wall Street strategists are warning about the impact that elevated interest rates on equities, with Goldman Sachs Group Inc., Morgan Stanley and JPMorgan Chase & Co. saying there’s a risk of further stock-market declines. Currently, traders are pricing roughly a one-in-three chance of a rate hike in November.
“We had not anticipated such an increase in rates,” said Vincent Juvyns, global market strategist at JPMorgan Asset Management. “This is something which will at least slow down, or even reverse the progress of equity markets.”
Read More: Treasury Selloff Fuels Speculation That Bond Vigilantes Are Back
This week’s Treasury selloff came after US lawmakers managed to avert a government shutdown, prompting traders to increase bets that the Fed could raise rates in November. Comments from two Fed policymakers reinforced that view, with Cleveland Fed president Loretta Mester saying on Monday that one more rate hike was likely needed and Governor Michelle Bowman urging multiple increases.
In Tuesday’s session, bond proxies such as utilities were hard hit in Europe. Retail stocks were dragged down on a warning from online retailer Boohoo Group Plc, which fell as much as 12%.
“The market is probably evenly split on whether central banks will need to continue raising rates or not so the bond marker is testing investors,” said Brian O’Reilly, head of market strategy at Mediolanum International Funds. “With 10-year yields around 4.6%, the asset allocation decision for equities is getting quite difficult.”
This week’s slew of data could determine whether Treasury yields continue to rise. Figures on US job openings are due later in the day, while Friday will bring the crucial monthly payrolls print.
Key events this week:
-
China has week-long holiday
-
Atlanta Fed President Raphael Bostic speaks on economic outlook and inflation, Tuesday
-
US August JOLTS report, Tuesday
-
New Zealand rate decision, Wednesday
-
Eurozone services and composite PMIs, Wednesday
-
ECB President Christine Lagarde gives welcome address at conference, Wednesday
-
US ISM services index, Wednesday
-
France industrial production, Thursday
-
BOE Deputy Governor Ben Broadbent, Riksbank First Deputy Governor Anna Breman participate at panel discussion, Thursday
-
US trade, initial jobless claims, Thursday
-
San Francisco Fed President Mary Daly speaks at the Economic Club of New York, Thursday
-
Germany factory orders, Friday
-
US unemployment rate, nonfarm payrolls, Friday
Some of the main moves in markets:
Stocks
-
The Stoxx Europe 600 fell 0.8% as of 1:22 p.m. London time
-
S&P 500 futures fell 0.5%
-
Nasdaq 100 futures fell 0.6%
-
Futures on the Dow Jones Industrial Average fell 0.4%
-
The MSCI Asia Pacific Index fell 1.5%
-
The MSCI Emerging Markets Index fell 1.1%
Currencies
-
The Bloomberg Dollar Spot Index rose 0.2%
-
The euro was little changed at $1.0476
-
The Japanese yen was little changed at 149.92 per dollar
-
The offshore yuan was little changed at 7.3265 per dollar
-
The British pound was little changed at $1.2075
Cryptocurrencies
-
Bitcoin fell 1.4% to $27,458.31
-
Ether fell 0.8% to $1,652.88
Bonds
-
The yield on 10-year Treasuries advanced five basis points to 4.73%
-
Germany’s 10-year yield advanced two basis points to 2.95%
-
Britain’s 10-year yield was little changed at 4.57%
Commodities
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Jason Scott and Tassia Sipahutar.
Most Read from Bloomberg Businessweek
©2023 Bloomberg L.P.
