SINGAPORE/LONDON, Aug 17 (Reuters) – U.S. 10-year Treasury yields hit a 10-month high on Thursday as fears that U.S. interest rates will remain high for longer, coupled with China’s economic woes, weighed on global stock markets. Deteriorating to a five-week low.
The benchmark 10-year yield hit 4.312%, a test of 4.338% in October, the highest since 2007.
“The uptick is due to strong data on US domestic demand. The minutes (from the Fed’s July meeting released on Wednesday), which feel really dated, they talk about a gradual slowdown in the US economy, but when you look at the data we’re not even in a recession,” said Sammy Saar, chief economist at Lombard Odier. said.
The minutes showed policymakers split on the need for more interest rate hikes.
U.S. retail sales data came out strong earlier this week, and traders are also looking at the Atlanta Federal Reserve’s GDPNow forecast model, which showed the U.S. economy could grow at an annual rate of 5.8% in the third quarter.
However, expectations for US peak rates did not change significantly. Instead, changes in yields are driven by changes in medium-term rate expectations.
“What’s interesting is that when you have volatility around rates, the market tries to price in higher fund-of-funds rates. What’s happening here is the market is pricing in price cuts or at least delaying them,” Saar said.
“The impact of higher yields is stable: a well-supported dollar and stocks under pressure,” he added.
MSCI’s world index ( .MIWD00000PUS ) fell 0.1% on Thursday, falling to its lowest level since the start of the session on July 6.
Europe’s broader STOXX 600 ( .STOXX ) fell 0.2%, led by the Dutch benchmark ( .AEX ), which fell 1.2% as payments company Adyen ( ADYEN.AS ) missed its first-half earnings estimates due to a 27% drop.
The global stock sell-off may have paused in the U.S., however, with Nasdaq and S&P500 stock futures up as much as 0.2%. NQcv1>
China woes
China’s economy was the other topic on investors’ minds as persistent economic data and jitters in the property sector stalled the post-pandemic recovery.
The latest development is a further sign of turmoil in China’s $3 trillion shadow banking sector, which has rattled asset manager Zhongzhi Enterprise Group, which has said it will conduct a debt restructuring.
MSCI’s broadest index of Asia-Pacific shares outside Japan ( .MIAPJ0000PUS ) fell to its lowest level since late November in early trade Thursday. The index fell 8% for August and is set for its worst monthly performance since September 2022.
Hong Kong ( .HSI ) and offshore Chinese share benchmarks ( .CSI300 ) held off somewhat near multi-month lows as investors remained hopeful of potential government stimulus to boost the economy.
“I still think there will be more action from policymakers,” Harald van der Linde, HSBC’s chief Asia equity strategist, told the Reuters Global Markets Forum. “It will take some time.”
Van der Linde says the willingness to invest in China is very low. “That appetite has to do with confidence, and it’s not going to change very quickly. It’s good to have some incentives for consumers.”
In currency markets, the dollar index, which measures the U.S. currency against six rivals, edged a touch lower, underpinned by higher U.S. yields hitting a two-month high of 103.59.
Japanese Yen In the session, the Japanese yen hit a nine-month high of 146.57 per dollar as traders remain wary of intervention talks by Japanese officials.
Finance Minister Shunichi Suzuki said on Tuesday that authorities were not targeting absolute currency levels for intervention.
Among commodities, oil prices were steady after three sessions of decline. U.S. crude was up 0.9% at $80.12 a barrel, while Brent was at $84.23, up 0.9% on the day.
A rise in gold prices hit a five-month low on Thursday. The metal was last at $1,896 an ounce, down from $1,888.30.
Reporting by Ankur Banerjee in Singapore and Alun John in London, additional reporting by Anisha Sircar in Bengaluru; Editing by Sonali Paul, Angus MacSwan and Chisu Nomiyama
Our Standards: Thomson Reuters Trust Principles.
