Stocks, Bonds Struggle As Rate Uncertainty Lingers: Markets Wrap

Global markets steadied on Thursday, with US equity futures and bonds trading slightly weaker as investors looked ahead to data on the labor market.

Contracts on the S&P 500 dipped 0.3% and the yield on 10-year Treasuries edged up to 4.74%. The dollar was steadied, while West Texas Intermediate crude held around $84 a barrel.

Investor sentiment remains fragile after wild moves across markets this week driven by US bond yields, the reference rate for the global cost of capital, soaring to multi-year highs. Weekly US jobless claims data is due later today, and the monthly payrolls report will be released on Friday, which could cement bets on a November rate hike. Currently, swaps price a one-in-four chance of a Fed move next month.

“Friday’s payrolls data, and next week’s inflation number will decide whether the 10-year Treasury yield goes up to 5% or down to 4.5%,” Societe Generale strategist Kenneth Broux said. A higher-than-forecast jobs number could trigger “another wave of dollar-buying and bond-selling,” he added.

Even with markets showing sign of calm, strategists reports have highlighted the deep concern about the long-term economic toll of higher-for-longer interest rates. Barclays Plc analysts wrote in a note that global bonds are doomed to keep falling unless a sustained slump in equities revives the appeal of fixed-income assets.

“There is no magic level of yields that, when reached, will automatically draw in enough buyers to spark a sustained bond rally,” analysts led by Ajay Rajadhyaksha said. “In the short term, we can think of one scenario where bonds rally materially. If risk assets fall sharply in the coming weeks.”

Among individual movers in Europe, Alstom SA shares plunged 35% after the French train maker slashed its financial guidance due to delays on UK contracts and a rise in inventories.

Key events this week:

• China has week-long holiday
• 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:

Stocks

• The Stoxx Europe 600 rose 0.2% as of 9:54 a.m. London time
• S&P 500 futures fell 0.3%
• Nasdaq 100 futures fell 0.3%
• Futures on the Dow Jones Industrial Average fell 0.2%
• The MSCI Asia Pacific Index rose 1%
• The MSCI Emerging Markets Index rose 0.4%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.0505
• The Japanese yen was little changed at 149.02 per dollar
• The offshore yuan was little changed at 7.3233 per dollar
• The British pound fell 0.1% to $1.2117

Cryptocurrencies

• Bitcoin was little changed at $27,658.67
• Ether fell 0.2% to $1,638.65

Bonds

• The yield on 10-year Treasuries advanced one basis point to 4.75%
• Germany’s 10-year yield advanced three basis points to 2.95%
• Britain’s 10-year yield advanced five basis points to 4.62%

Commodities

• Brent crude fell 0.7% to $85.20 a barrel
• Spot gold was little changed

Source