LONDON (Reuters) – Concerns over high US bond yields hit global equities on Thursday as investors waited to see if Federal Reserve Chairman Jerome Powell would address concerns about a rapid rise in US bond prices. long-term debt.
The spectrum of higher U.S. bond yields also undermined safe-haven and low-yield safe-haven assets such as the yen, Swiss franc and gold.
The US Treasury at 10 years of reference fell to 1.453%. They previously hit their highest levels since a one-year high of 1.614% was set last week in bets on a strong economic recovery aided by government stimulus and progress in vaccination programs.
“Stocks and returns continue to drive and frustrate each other,” said James Athey, chief investment officer of Aberdeen Standard Investments.
“The Fed’s speech continues to express very little concern and certainly does not suggest any imminent action to curb rising yields. Today’s Powell speech is highly anticipated, but I fear more out of hope than out of rational expectation. ”.
The euro STOXX 600 fell 0.5% and the London FTSE 0.6% lower.
The MSCI global equity index, which tracks the shares of 49 countries, lost 0.5% on the third consecutive day of losses.
MSCI’s former Asian-Pacific Japanese shares lost 1.8%, while Japan’s Nikkei fell 2.1%, to a low since February 5th.
Futures E-mini S&P fell 0.2%. Nasdaq futures, the leader of the post-pandemic rally, fell 0.1% to a two-month low.
Technology stocks are vulnerable because their high valuation has been backed by expectations of a prolonged period of low interest rates.
But the market is focused on Powell, who will be speaking at a Wall Street Journal conference at 12:05 pm EST (1705 GMT), in what will be his last outing before the Fed’s policy decision convene from March 16 to 17.
Many Fed officials have downplayed the increase in Treasury yields in recent days, although Fed Governor Lael Brainard acknowledged on Tuesday that concern about the possibility that a rapid rise in yields could dampen the economic activity.
In addition, anxiety is consolidating in the face of a pending regulatory change in a standard called supplementary leverage ratio (SLR), which could make banks have more expensive bonds.
“The market is likely to be unstable until this regulatory issue is resolved,” said Masahiko Loo, portfolio manager at AllianceBernstein. “No people want to grab a knife that falls when market volatility is so high.”
The market will also have to contend with a huge increase in debt sales after rounds of stimulus to deal with a recession caused by the pandemic.
The issue is not limited to the United States, as the 10-year yield on the British Gilts touched 0.796% on Wednesday, almost last week’s high of 0.836%, after the government revealed much higher loans.
On Thursday, Germany’s ten-year yield fell 2 basis points to -0.31% after rising 5 basis points on Wednesday as it moved alongside U.S. treasuries.
Currency investors continued to make dollars by betting that the US economy would surpass its peers in the developed world in the coming months. [FRX/] The dollar rose to a seven-month high of 107.33 yen.
“The US dollar / yen has been on a one-way trajectory since early 2021,” said Joseph Capurso, head of international economics at the Commonwealth Bank of Australia. “The brighter outlook for the world economy is positive for both the US dollar and the Australian dollar.”
Other safe haven currencies weakened, with the Swiss franc falling to a five-month low against the dollar and a 20-month low against the euro.
The other major currencies changed little, with a flat euro of $ 1.2054.
Gold fell to a nearly nine-month low of $ 1,702.8 an ounce on Wednesday and stood at $ 1,714.
Investors ’focus on a U.S. economic rebound was not shaken by data released overnight that showed the U.S. labor market was in trouble in February, when private payrolls rose less than expected.
Oil prices rose on Thursday for the second straight session, as the possibility that OPEC + producers might decide not to increase production at a key meeting later in the day supported a drop in U.S. fuel inventories. . [O/R]
US crude rose 0.6% to $ 61.65 per barrel. Brent crude futures added 0.7% to $ 64.54 a barrel,
Additional reports from Koh Gui Qing in New York; edition by Sam Holmes, Richard Pullin, Simon Cameron-Moore, Larry King