The global selloff in bonds eased. The dollar steadied while stocks struggled for direction.
(Bloomberg) — The global selloff in bonds eased. The dollar steadied while stocks struggled for direction.
European shares erased an early gain to trade little changed. US equity futures added about 0.4% and a measure of global equities fell below its 200-day moving average, suggesting stocks may be entering oversold territory.
US Treasury yields slipped three basis points, backtracking from a 16-year high sparked by speculation the Federal Reserve will keep policy restrictive into next year, or longer. A gauge of the dollar was steady near its highest this year, while a measure of how much bond investors are compensated for holding long-term debt turned positive for the first time since June 2021.
Much rests on the bond market, which is guiding the direction for stocks and currencies, and ultimately the economy, according to Derek Halpenny, head of global markets research at MUFG Bank Ltd.
“If yields continue to move higher, at some point relatively soon we will see even larger equity market declines and a hit to the main engine of the US economy – the consumer,” Halpenny wrote in a note. “Falls in equity markets would impact expectations further and begin to impact consumers’ appetite to spend.”
US stocks are heading for their biggest monthly decline since December as investors worry the Fed would keep interest rates higher for longer at a time when economic growth is slowing.
The Federal Reserve Bank of New York’s gauge of the 10-year term premium became positive on Monday, suggesting traders are betting on elevated policy rates.
Treasury ‘Term Premium’ Gauge Positive for First Time Since 2021
Oil resumed its climb, moving back above $91 a barrel. US consumer confidence has taken a knock from higher costs at the pump and the spreading impact of aggressive rate hikes.
A gauge of consumer sentiment dropped to 103 from a revised 108.7 in August, missing the median estimate of 105.5 in a Bloomberg survey of economists.
Meanwhile, Senate Democratic and Republican leaders agreed Tuesday on a plan to keep the government open through mid-November and provide $6 billion in assistance to Ukraine. The plan to avert a shutdown on Oct. 1 still needs to overcome gridlock in the House.
Key events this week:
- US durable goods, Wednesday
- Eurozone economic confidence, consumer confidence, Thursday
- US initial jobless claims, GDP, Thursday
- Fed Chair Jerome Powell town hall meeting with educators while Richmond Fed President Tom Barkin, Chicago Fed President Austan Goolsbee make speeches, Thursday
- Eurozone CPI, Friday
- Japan unemployment, industrial production, retail sales, Tokyo CPI, Friday
- US consumer spending, wholesale inventories, University of Michigan consumer sentiment, Friday
- ECB President Christine Lagarde speaks, Friday
- New York Fed President John Williams speaks, Friday
Some of the main moves in markets:
- S&P 500 futures rose 0.4% as of 7:11 a.m. New York time
- Nasdaq 100 futures rose 0.4%
- Futures on the Dow Jones Industrial Average rose 0.3%
- The Stoxx Europe 600 was little changed
- The MSCI World index was little changed
- The Bloomberg Dollar Spot Index rose 0.1%
- The euro fell 0.2% to $1.0554
- The British pound fell 0.1% to $1.2145
- The Japanese yen was little changed at 149.20 per dollar
- Bitcoin rose 1.2% to $26,463.25
- Ether rose 1.9% to $1,617.34
- The yield on 10-year Treasuries declined three basis points to 4.51%
- Germany’s 10-year yield declined two basis points to 2.78%
- Britain’s 10-year yield declined three basis points to 4.30%
- West Texas Intermediate crude rose 1.4% to $91.67 a barrel
- Gold futures fell 0.4% to $1,911.40 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Sagarika Jaisinghani.
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