LONDON (Reuters) – Concerns about high US bond yields hit global equities on Thursday, as investors waited to see if Federal Reserve President Jerome Powell would address concerns about a rapid increase in borrowing costs. long term.
The specter of higher US bond yields has also hurt low-yielding assets and safe havens, such as the yen, the Swiss franc and gold.
The 10-year benchmark US Treasury bonds fell to 1.453%. They have already reached their highest levels since the 1.614% year-on-year increase established last week, with bets on a strong economic recovery aided by government stimulus and progress in vaccination programs.
“Stocks and earnings continue to drive and frustrate each other,” said James Athey, chief investment officer at 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. Powell’s speech today is highly anticipated, but I fear more for hope than for rational expectation. “
The Euro STOXX 600 fell 0.5% and the London FTSE fell 0.6%.
The MSCI world equity index, which tracks stocks in 49 countries, lost 0.5%, its third consecutive day of losses.
MSCI’s ex-Asia Pacific Japan shares fell 1.8%, while Japan’s Nikkei shares fell 2.1%, to their lowest level since February 5.
E-mini S&P futures fell 0.2%. Futures for Nasdaq, the leader of the post-pandemic rally, fell 0.1%, before reaching a two-month low.
Technology stocks are vulnerable because their high valuation was supported by expectations of a prolonged period of low interest rates.
But the market is focused on Powell, who is expected to speak at a Wall Street Journal conference at 12:05 pm EST (1705 GMT), in what will be his last presentation before the Fed’s policy-making committee meets March 16-17. .
Many Fed officials have downplayed the increase in Treasury yields in the past few days, although Fed Governor Lael Brainard admitted on Tuesday that concerns about the possibility of a rapid rise in yields could hurt economic activity.
In addition, anxiety is growing over a pending regulatory change to a rule called the supplementary leverage index, or SLR, that could make it more expensive for banks to hold bonds.
“The market is likely to be unstable until this regulatory problem 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 increase in debt sales after rounds of stimulus to deal with a recession triggered by the pandemic.
The issuance is not limited to the United States, with the UK’s 10-year yield on Gilts on Wednesday reaching 0.796%, close to last week’s high of 0.836% after the government revealed much larger loans.
On Thursday, Germany’s 10-year yield fell 2 basis points, to -0.31%, after rising 5 basis points on Wednesday, still moving in conjunction with US Treasury bonds.
Currency investors continued to snap at dollars by betting that the US economy will outperform its peers in the developed world in the coming months. [FRX/] The dollar rose to a seven-month high of 107.33 yen.
“The dollar / yen has been on a unilateral path since the beginning of 2021,” said Joseph Capurso, head of international economics at the Commonwealth Bank of Australia. “The positive outlook for the world economy is positive for both the US dollar / yen and the Australian dollar / yen.”
Other safe-haven currencies have been weakened, with the Swiss franc falling to a five-month low against the dollar and a 20-month low to the euro.
Other major currencies have changed little, with the euro stable at $ 1.2054.
Gold fell to an almost nine-month low of $ 1,702.8 per ounce on Wednesday and last time stood at $ 1,714.
Investors’ focus on a US economic recovery was not shaken by data released overnight, which showed the US labor market struggling in February, when private payrolls increased less than expected.
Oil prices rose for the second consecutive session on Thursday, as the possibility for OPEC + producers to decide against increasing production at an important meeting later in the day sustained a drop in US fuel stocks. [O/R]
US crude rose 0.6% to $ 61.65 a barrel. Brent oil futures increased 0.7% to $ 64.54 a barrel,
Additional reporting by Koh Gui Qing in New York; edition of Sam Holmes, Richard Pullin, Simon Cameron-Moore, Larry King