LONDON (Reuters) – Concerns about high U.S. bond yields hit global stocks on Thursday as investors waited to see if Federal Reserve Chairman Jerome Powell would address concerns about a rapid rise in costs of long-term loans.
The specter of higher US bond yields also undermined safe-haven, low-yielding assets like the yen, Swiss franc and gold.
Benchmark 10-year US Treasuries fell to 1.453%. They previously hit their highest levels since a year-long high of 1,614% set last week on betting on a strong economic recovery aided by government stimulus and progress on vaccination programs.
“Stocks and returns continue to drive and frustrate each other,” said James Athey, chief investment officer at Aberdeen Standard Investments.
“The Fed speech continues to express very little concern and certainly does not suggest any imminent action to slow rising yields. Powell’s speech today is highly anticipated, but I fear more for hope than rational expectation. “
The Euro STOXX 600 was down 0.5% and the London FTSE a further 0.6%.
The MSCI World Stock Index, which tracks the stocks of 49 countries, lost 0.5%, its third consecutive day of losses.
Shares of the MSCI, excluding Japan, Asia-Pacific, lost 1.8%, while Japan’s Nikkei fell 2.1% to its lowest level since February 5.
E-mini S&P futures fell 0.2%. Futures on Nasdaq, the leader of the post-pandemic rally, fell 0.1%, previously hitting a two-month low.
Tech stocks are vulnerable because their high valuation has been supported by expectations of a prolonged period of low interest rates.
But the market is focused on Powell, who is due to speak at a Wall Street Journal conference at 12:05 p.m. EST (1705 GMT), in what will be his last presentation before the Fed’s policymaking committee meet March 16-17.
Many Fed officials have downplayed rising Treasury yields in recent days, though Fed Governor Lael Brainard acknowledged Tuesday that concerns about the possibility of a rapid rise in yields can slow down economic activity.
Additionally, anxiety is mounting over a pending regulatory change in a rule called the supplemental leverage ratio, or SLR, which could make it more costly for banks to hold bonds.
“The market is likely to be unstable until this regulatory issue is resolved,” said Masahiko Loo, portfolio manager at AllianceBernstein. “There are no people who want to catch a falling knife when market volatility is so high.”
The market will also have to deal with a huge spike in debt sales after rounds of stimulus to cope with a recession brought on by the pandemic.
The problem is not limited to the United States, with the yield on the British 10-year Gilts on Wednesday touching 0.796%, close to last week’s 11-month high of 0.836%, after the government revealed much indebtedness. higher.
On Thursday, Germany’s 10-year yield fell 2 basis points to -0.31% after rising 5 basis points on Wednesday, still moving in tandem with US Treasuries.
Currency investors continued to earn dollars while betting that the US economy will outperform its peers in the developed world in the coming months. [FRX/] The dollar rose to a roughly seven-month high of 107.33 yen.
“The US dollar / yen has had a one-way trajectory since early 2021,” said Joseph Capurso, head of international economics at the Commonwealth Bank of Australia. “The prospects for the improvement of the world economy are positive for both the US dollar / yen and the Australian dollar / yen.”
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.
Other major currencies were little changed, with the euro flat at $ 1.2054.
Gold fell to a nearly nine-month low of $ 1,702.8 per ounce on Wednesday and last settled at $ 1,714.
Investors’ focus on a US economic rebound was unaffected by data released overnight that showed the US job market struggling in February, when private payrolls rose less than expected.
Oil prices rose for a second session in a row on Thursday, as the possibility that OPEC + producers decided not to increase production at a key meeting later in the day underpinned a drop in US fuel inventories. [O/R]
US crude rose 0.6% to $ 61.65 a barrel. Brent crude futures rose 0.7% to $ 64.54 a barrel,
Additional information on Koh Gui Qing in New York; edited by Sam Holmes, Richard Pullin, Simon Cameron-Moore, Larry King