Equities turn red, Treasuries dip with economic data in focus

By Sinéad Carew

NEW YORK (Reuters) – MSCI’s global equities index fell more than 1% on Wednesday after nine straight days of gains while Treasury yields fell as U.S. economic data beat expectations and UK inflation slowed at a rate that took markets by surprise.

Oil prices settled slightly higher after hitting their highest level in nearly three weeks, as traders dealt with worries about disruptions in the Red Sea after Yemen’s Iran-aligned Houthi militants stepped up attacks on commercial ships.

The dollar rose against other major currencies, while sterling fell sharply after UK inflation plunged in November to its lowest rate in more than two years at 3.9%. That was far lower than the 4.4% economists polled by Reuters had expected, making it less of an outlier globally.

U.S. existing home sales rose unexpectedly in November. And, amid optimism about the labor market, the Conference Board said its consumer confidence index increased to 110.7 this month comparing well to economist expectations for 104.0 and November’s downwardly revised 101.0.

Investors at first reacted positively to the data but the S&P 500 lost steam in afternoon trading, ending the session down 1.5% after coming within 0.4% of its record high reached in January 2022.

“There’s been a significant amount of complacency. And once you weren’t making meaningful inroads to higher highs through lunch today a little bit of selling got us to negative on the day,” said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.

“As soon as things went negative, you saw some programs come in and an absence of buyers created an air pocket to the downside,” said James.

Earlier, Sameer Samana, Senior Global Market Strategist at Wells Fargo Investment Institute in Charlotte had said the data was suggesting that the economy was “headed toward a softish landing,” causting the dip in bond yields and investor buying of equities in economically sensitive sectors such as energy.

MSCI’s gauge of stocks across the globe shed 0.91% after rising earlier in the day. Wednesday’s decline snapped a nine-session winning streak for the index.

On Wall Street, the Dow Jones Industrial Average fell 475.92 points, or 1.27%, to 37,082, the S&P 500 lost 70.02 points, or 1.47%, to 4,698.35 and the Nasdaq Composite dropped 225.28 points, or 1.5%, to 14,777.94.

In U.S. Treasuries U.S. 10-year Treasury yields fell to an almost five-month month low as government bond yields fell globally after the British inflation data.

Benchmark 10-year notes were down 6.7 basis points to 3.855%, from 3.922% late on Tuesday. The 30-year bond was last down 4.7 basis points to yield 3.9889%, from 4.036%. The 2-year note was last was down 9.5 basis points to yield 4.3418%, from 4.437%.

In currencies, the dollar strengthened against sterling after the UK inflation data fueled speculation of rate cuts by the Bank of England. Sterling was last trading at $1.2637, down 0.73% on the day.

The dollar index rose 0.284%, with the euro down 0.36% to $1.0941. The Japanese yen strengthened 0.19% versus the greenback at 143.56 per dollar,

In commodities, global oil benchmark Brent hovered above $80 a barrel amid jitters over global trade disruption and geopolitical tensions in the Middle East following attacks on ships in the Red Sea by Yemen’s Iran-aligned Houthi forces.

U.S. crude settled up 0.38% at $74.22 per barrel and Brent settled at $79.70, up 0.59% on the day.

In precious metals, spot gold dropped 0.4% to $2,031.61 an ounce. U.S. gold futures fell 0.27% to $2,034.50 an ounce.

(Additional reporting by Karen Brettell in New York, Yoruk Bahceli in Amsterdam, Stella Qui in Sydney; Editing by Alexander Smith, Kirsten Donovan, Nick Zieminski and David Gregorio)