Global bonds got a respite Wednesday after a weak reading of private payrolls spurred bets that the US central bank can refrain from tightening policy.
(Bloomberg) — Global bonds got a respite Wednesday after a weak reading of private payrolls spurred bets that the US central bank can refrain from tightening policy.
The S&P 500 Index bounced after the gauge plumbed a four-month low Tuesday. Ten-year Treasury yields slipped below 4.8%, after jumping 30 basis points this week as markets dialed back expectations for a rate hike this year. Traders are pricing a less than one-in-five chance of an increase in November, down from one-in-three previously.
US companies added the fewest number of jobs since the start of 2021 in September, suggesting labor demand in several industries is slowing. Private payrolls rose 89,000 last month after climbing 180,000 in August, according to the survey from the ADP Research Institute in collaboration with Stanford Digital Economy Lab.
“Stock investors have been hoping the labor market will loosen up and give the Fed enough breathing room to dial down its hawkishness,” said Mike Loewengart, head of model portfolio construction at the Morgan Stanley Global Investment Office. “ADP isn’t necessarily a reliable predictor of the government’s monthly jobs data, but if Friday’s report also shows the labor market is cooling, stock investors may worry a little less about indefinitely higher interest rates.”
Even before the latest data, some investors were emerging to take advantage of the stock swoon. The S&P 500 is officially in oversold territory based on its relative strength index of below 30. Francisco Simón, European head of strategy at Santander AM, is among those eyeing cheapened assets.
“The current weakness of equities would be an opportunity to enter those sectors and companies with high sensitivity to rates,” he said. “We hope they will do a catch-up again once rates stabilize. Current yields are already at very high levels for the expected inflation and growth in the medium and long term.”
The latest leg of the selloff has been fueled by Tuesday’s better-than-expected US job data, as well as a slew of hawkish comments from Federal Reserve officials. As conviction grew that US interest rates could rise further from current 22-year highs, 30-year yields touched 5% for the first time since 2007.
“It’s fair to say there’s going to be a volatile environment until we have more clarity” on the direction of rates, Virginie Maisonneuve, global chief investment officer for equites at Allianz Global Investors, said in an interview with Bloomberg Television. “If you have a long-term time horizon find those stocks that have very strong structural backing for growth and have quality balance sheets.”
A gauge of the dollar versus a basket of Group-of-10 peers weakened for the first day this week, following its highest close since late November.
Key events this week:
- China has week-long holiday
- US ISM services index, Wednesday
- France industrial production, Thursday
- BOE Deputy Governor Ben Broadbent, Riksbank First Deputy Governor Anna Breman participate at panel discussion, Thursday
- US trade, initial jobless claims, Thursday
- San Francisco Fed President Mary Daly speaks at the Economic Club of New York, Thursday
- Germany factory orders, Friday
- US unemployment rate, nonfarm payrolls, Friday
Some of the main moves in markets:
- The S&P 500 rose 0.2% as of 9:30 a.m. New York time
- The Nasdaq 100 rose 0.3%
- The Dow Jones Industrial Average rose 0.1%
- The Stoxx Europe 600 rose 0.4%
- The MSCI World index was little changed
- The Bloomberg Dollar Spot Index fell 0.2%
- The euro rose 0.5% to $1.0516
- The British pound rose 0.7% to $1.2164
- The Japanese yen was little changed at 148.92 per dollar
- Bitcoin rose 0.5% to $27,532.6
- Ether fell 0.9% to $1,641.65
- The yield on 10-year Treasuries declined four basis points to 4.76%
- Germany’s 10-year yield was little changed at 2.96%
- Britain’s 10-year yield advanced three basis points to 4.63%
- West Texas Intermediate crude fell 2.3% to $87.14 a barrel
- Gold futures were little changed
This story was produced with the assistance of Bloomberg Automation.with the assistance of Bloomberg Automation.
–With assistance from Macarena Muñoz, Sujata Rao, Michael Msika and Tatiana Darie.
(US Bonds Rout on Pause After Signs Job Gains Cooled: Markets Wrap)
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