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Home / Business / Stocks Stumble as US Yields Are Near 3 Percent

Stocks Stumble as US Yields Are Near 3 Percent



LONDON (Reuters) – The world's stock markets slid on Monday before a blizzard of profits by the world's largest companies and as cautious investors watched US bond yields Peak, which have sparked market cramps in the past.

FILE PHOTO: London Stock Exchange Group offices will be seen on December 29, 2017 in London, UK. REUTERS / Toby Melville / File Photo

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0Y US Treasury yield US10YT = RR has fallen its highest since January 2014 at 2.99 percent, which is the gap or spread on German bonds at its widest since 29 Years and the dollar .DXY higher in this process.

Traders also received a global round of economic surveys, which should show in the next few days whether the economic weakness in the first quarter was only a temporary phase related to the winter weather and New Year holidays in Asia.

Readings from Japan, France and Germany were all relatively reassuring. Japan's PMI data strengthened as production and domestic demand picked up, France received help from its service sector, while Germany was above forecast despite weaker orders.

"This is good reading, it's still encouraging," said Chris Williamson, chief economist at IHS Markit, on eurozone combined figures, which indicated quarterly GDP growth of 0.6 percent.

There was also a lot to digest on the geopolitical front.

North Korea said on Saturday it would immediately suspend nuclear and missile testing, scrapping its nuclear test site, and instead pursue peace and economic growth.

The talk of a US Treasury Secretary's trip to China has also fueled the hope that the recent trade tensions between the two largest economies in the world could thaw.

Oil prices dipped backwards but were not far from their highs since the end of 2014. The market had to shake on Friday when Trump tweeted criticism of OPEC's role in raising global prices, but quickly stabilized.

Brent crude LCOc1 was $ 73.83 a barrel at 20 cents, while US Crude oil CLc1 was $ 68.16. However, aluminum prices rose again to increase by 25 percent after the US imposed sanctions on Russian producer Rusal.

"The base (oil market) mood is bullish," Ole Ole Hansen, senior manager of Saxo Bank. "And OPEC may try to" overstrain "the market.

In the equity markets, the MSCI world index .MIWD00000PUS slipped 0.25 percent to Asia, with M1APJ0000PUS losing 0.5 percent overnight and Europe slipping to 0, 2 percent bank, UBS, disappointed and the overall increase in yields pressure.

E-mini futures for the S & P 500 ESc1 also indicated a lower start for Wall Street.

More than 180 companies in the S & P 500 are expected to report results this week, including Amazon, Alphabet, Facebook, Microsoft, Boeing and Chevron.

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Of particular concern to US analysts are the views of executives about their involvement in China Given the recent concerns over a trade war, US Treasury Secretary Steven Mnuchin said on Saturday he could travel to Beijing, a move that eased tensions between the two oversized economies

"A trip is being considered," Mnuchin said at a press conference during the International Monetary Fund and World Bank Spring Meetings in Washington.

"I met with the Chinese here and the discussions were really about the actions of the governor at the PBOC (People's Bank of China) and certain measures that they have announced regarding the opening of some of their markets, which We very much encourage and appreciate. "

Back on commodity markets The rise in oil prices has fueled both market expectations for future inflation and long-term bond yields.

10Y Treasury yields US10YT = RR are highest since early 2014, again threatening the hugely important 3% bulwark.

The last time yields approached this number in 2013, it shook the appetite for risk and sent the stocks slipping. It also came just before the oil price fell by 75 percent.

"A further $ 5 / barrel increase in oil will be enough to curb US 10-year yields by 3 percent, and the oil price is now at the threshold of higher prices higher foreign exchange rates and greater volatility in the asset market, "said Deutsche Bank's macro strategist Alan Ruskin.

Traditionally, the dollar had a slight negative correlation with oil, mainly because the dominant cause of dollar weakness is rising oil prices, he added.

"If oil helps push the 10-year return into new territory for this cycle, it will be at least slightly USD-positive if the correlation changes."

In fact, traders pointed to rising yield spreads for the broad rally of the dollar.

The gap to German bonds has reached the largest gap in almost three decades. In the short term, shorter-term US 2-year yields test 2.5 percent US2YT = RR, which is the highest since 2008.

The dollar was last at 108.215 JPY = after seeing a larger resistance in the 107.90 / 108.00 Zone broke through, which has been in existence since mid-February.

The dollar index rose to 90.69 DXY and further from the low last week at 89,229.

The Euro was lighter at 1.2323 EUR =, after repeatedly plummeting over $ 1.2400 in recent weeks.

Investors are waiting for the European Central Bank's political meeting on Thursday with the discussion that policymakers feel it is too early to announce a timetable for reducing bond purchases.

ECB chief Mario Draghi said on Friday he was confident that the inflation outlook had risen, but uncertainties "justify patience, perseverance and caution".

Additional coverage by Wayne Cole in Sydney and Jonathan Cable in London; Arrangement by Gareth Jones


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