European stocks gain as US yield surge pauses. After a drop in oil prices and worse U.S. labor market data late on Wednesday helped pull down U.S. Treasury rates from 16-year highs, European equities began higher on Thursday. After Wall Street’s advances, Asian equities recovered from their overnight lows of 11 months. Due to the holidays, China’s mainland markets are still closed.
Recent weeks have seen an increase in U.S. yields as investors reassess the likelihood that the U.S. Federal Reserve will maintain high rates for longer if inflation stays over goal and the economy continues to perform well. Overnight, the 10-year U.S. yields reached a 16-year high of 4.884%.
The bond sell-off stopped after a lower-than-anticipated U.S. private payroll data and a 5% decrease in oil prices.
On Thursday at 09:03 GMT, the U.S. 10-year yield was 4.7498%. The benchmark 10-year German yield increased two basis points to 2.961%, while other European government bond rates remained mixed. Since March, the German curve had been least inverted.
Most European stock indices moved slightly higher, with the STOXX 600 (.STOXX) up less than 0.1% daily.
The 47-country MSCI world equity index (.MIWD00000PUS), which measures stock prices, increased 0.2% in the most recent trading session, making up ground lost since late March.
Traders await information on American employment statistics to determine whether the bond sell-off will continue. Initial unemployment claims for the United States are due later on Thursday, while non-farm payrolls and the unemployment rate are due on Friday.
Everyone is asking: Can yields increase any higher, and when will they seriously harm the economy? Stated Aviva Investors portfolio manager Baylee Wakefield. “Investors may be less concerned about higher interest rates coming into the end of the year if we see more encouraging signs from non-farm payrolls on Friday.”
According to analysts, more data would be required to determine if the labor market was slowing. In a client note, ING FX analysts expressed concern that markets could give Wednesday’s private payroll data too much weight.
In a client letter, ING stated: “There is a risk that the dollar correction and the bond pause are overly dependent on expectations of a jobs data miss. The U.S. dollar index was at 106.83 when it came to currencies, down from a top of 107.34 earlier in the week. The euro remained constant at $1.05035.
The market change on Wednesday helped the Japanese yen, which traded at 149. Analysts had predicted earlier this week that the Japanese government may have interfered with boosting the yen; on Wednesday, the Bank of Japan’s money market statistics indicated that it was highly unlikely that Japan had done so.
Despite the U.S. dollar’s recent resurgence, economists continue to predict further weakening, according to a Reuters poll. While the prognosis for future demand remained uncertain, oil prices, which plunged on Wednesday, remained largely stable.
Comment Template