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 steadied after briefly surpassing $95 a barrel for the first time in more than a year and Brent traded near $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 turned lower after its longest run of gains in a year. In Europe, the Stoxx 600 slipped 0.3% and S&P 500 futures were little changed.
“The combination of oil prices bursting and rising rates, that’s of course not good for stock markets,” said Arnaud Girod, head of economics and cross-asset strategy at Kepler Cheuvreux. “This needs to calm down. It’s a toxic cocktail.”
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 premarket trading, Peloton Interactive Inc. rose 13% after the maker of the trademark exercise bikes agreed to a deal with Lululemon Athletica Inc. to tap its online workouts and team up on apparel. Micron Technology Inc. tumbled 5% as its mixed outlook for the November quarter weighed on investor sentiment.
Key events this week:
- 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 fell 0.3% as of 10:44 a.m. London time
- S&P 500 futures were little changed
- Nasdaq 100 futures fell 0.2%
- Futures on the Dow Jones Industrial Average were little changed
- The MSCI Asia Pacific Index fell 0.8%
- The MSCI Emerging Markets Index fell 0.6%
- The Bloomberg Dollar Spot Index fell 0.2%
- The euro rose 0.3% to $1.0536
- The Japanese yen rose 0.3% to 149.24 per dollar
- The offshore yuan rose 0.2% to 7.3090 per dollar
- The British pound rose 0.6% to $1.2205
- Bitcoin rose 0.6% to $26,393.31
- Ether rose 1.6% to $1,618.95
- The yield on 10-year Treasuries advanced three basis points to 4.63%
- Germany’s 10-year yield advanced six basis points to 2.91%
- Britain’s 10-year yield advanced 11 basis points to 4.47%
- Brent crude fell 0.4% to $96.20 a barrel
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Richard Henderson.
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