Oil prices pushed closer to $100 a barrel, stoking expectations interest rates will stay higher for longer and keeping pressure on global markets.
(Bloomberg) — Oil prices pushed closer to $100 a barrel, stoking expectations interest rates will stay higher for longer and keeping pressure on global markets.
The US benchmark oil price hit $95 a barrel for the first time in more than a year and Brent traded above $97 after a drop in stockpiles at a major storage hub underscored a widening global deficit.
The potential feed-through to inflation kept the 10-year Treasury yield around 4.6%, the highest since 2007. The dollar was little changed after its longest run of gains in a year. In Europe, the Stoxx 600 opened flat and US futures posted small moves.
“The key uncertainty that now complicates matters is of course crude oil prices,” Koon How Heng, head of market strategy for United Overseas Bank, said on Bloomberg Television. “The market now needs to adjust to higher funding costs, higher duration risk.”
Hawkish commentary from central banks has dashed hopes for a pivot toward lower rates any time soon, making September the worst month for global stocks in a year and the weakest for global bonds since February.
At the same time, Neel Kashkari, Minneapolis Federal Reserve President, said a potential US government shutdown and the effects of the autoworker strike may slow the economy, requiring less aggressive moves from the central bank.
“If these downside scenarios hit the US economy, we might then have to do less with our monetary policy to bring inflation back down to 2%,” Kashkari said in an interview on CNN.
Fed Chair Jerome Powell and a handful of other central bank officials are set to speak later Thursday. Data due include US gross domestic product and initial jobless claims ahead of the personal consumption expenditures price on Friday, the Fed’s preferred inflation gauge.
Global stocks also face the risk of further selling linked to a large options position held by a JPMorgan Chase & Co. equity fund. Tens of thousands of protective put contracts held by the fund will expire Friday at a strike price not far below the current level of the S&P 500, creating the potential for market dislocations.
In China, mainland shares edged lower ahead of an extended break for onshore markets, which will close Friday before reopening Oct. 9. Chinese developers extended losses after falling to levels not seen since 2011 on Wednesday. Trading in China Evergrande Group was suspended in Hong Kong and bondholders of Country Garden Holdings Co Ltd said they had yet to be paid a coupon due Wednesday.
Key events this week:
- 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:
- The Stoxx Europe 600 rose 0.1% as of 8:01 a.m. London time
- S&P 500 futures were little changed
- Nasdaq 100 futures were little changed
- Futures on the Dow Jones Industrial Average were little changed
- The MSCI Asia Pacific Index fell 0.8%
- The MSCI Emerging Markets Index fell 0.4%
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0496
- The Japanese yen rose 0.2% to 149.33 per dollar
- The offshore yuan rose 0.2% to 7.3094 per dollar
- The British pound was little changed at $1.2130
- Bitcoin rose 0.8% to $26,438.07
- Ether rose 1.4% to $1,616.13
- The yield on 10-year Treasuries was little changed at 4.61%
- Germany’s 10-year yield advanced one basis point to 2.86%
- Britain’s 10-year yield advanced three basis points to 4.38%
- Brent crude rose 0.7% to $97.25 a barrel
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
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