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HomeEconomyTreasury yields jump before Fed meeting; stocks rebound

Treasury yields jump before Fed meeting; stocks rebound

  • Stocks try to recover in choppy trading in second half
  • Fed Leads Pack of Central Bank Meetings
  • Market tilts to 75 bp from Fed, PBOC eases
  • Strong dollar near multi-year high

NEW YORK (Reuters) – The U.S. Federal Reserve made investors nervous ahead of an expected big rate hike with a message that it meant companies were dealing with inflation. The benchmark 10-year Treasury bond yield hit a more than decade high on Monday, pushing the dollar higher. this week.

The 10-year yield surged to 3.518%, the highest since April 2011, before falling. Higher yields helped strengthen the dollar, and gold’s appeal declined as concerns about the economy in light of rising interest rates cooled risk-taking.

But Michael James, managing director of equity trading at Wedbush Securities, said the Fed’s tone wasn’t as troubling as the market expected when hedge funds hiked rates Wednesday. Wall Street stocks rose as they positioned it as an opportunity.

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“Positioning is done in case there is something that proves not to be hawkish from the Fed. It is a positioning for

“Right now, the majority of people are in the negative camp.”

of FedEx (FDX.N) King Lipp, chief investment strategist at Baker Avenue Asset Management, said last week’s warnings about slowing global demand weighed on stocks as investors reassessed valuations. said.

“The biggest concern right now, and the reason for the market volatility today, is the growing uncertainty about earnings, coupled with concerns about rate hikes,” Lipp said.

“We could be headed for a hard landing rather than a soft landing, and a hard landing is the Fed probably tightening too much when the economy is already slowing,” he said.

Wall Street and European equities trading were choppy for most of the weeklong session as central banks around the world ensured higher borrowing costs.

Wall Street tried to rebound in late trading with Dow Jones Industrial Average (.DJI) Up 0.44%, S&P 500 (.SPX) Add 0.44% and Nasdaq Composite (.IXIC) It is up 0.48%.

In Europe, the pan-European STOXX 600 index (.STOXX) MSCI’s National World Index down 0.09% (.MIWD00000PUS), the gauge of stocks around the world dropped 0.17%. Asian stocks also fell overnight. (.MIAPJ0000PUS)

Investors heard a hawkish message from Fed Chairman Jerome Powell at the Jackson Hole Bank symposium in August, but kept denying it until it became clear that inflation was stubbornly high, according to MUFG Securities America in New York. George Goncalves, head of US macro strategy, said. .

After the last three Fed meetings, there was a rebound of relief in bonds and stocks as markets interpreted Powell as dovish. But this uptick is unlikely as policymakers end their two-day meeting on Wednesday, he said.

“People are aware of the fact that the Fed means business,” he said. “The only way to stem this inflation is to get ahead of it, and they are still lagging behind. The hawks are approaching their peak, but not there yet.”

The market is pricing in a 75 basis point increase, with futures pointing to an 18% percentage point gain on Wednesday, according to the CME’s FedWatch tool.

Markets also show interest rates could reach 4.5% by March as the Federal Reserve is forced to push the economy into recession to keep inflation in check. read more

Two-year yields, a barometer of future inflation expectations, rose to an almost 15-year high of 3.970%. European government bond yields also rose.

David Chao, global market strategist at Invesco, said the performance of assets during this Fed tightening cycle was unlike any other.

“Usually when the economy is thriving and most assets are doing well, the Fed tightens,” Chao said. “But most assets took a hit this time, probably due to the spike in inflation and the sudden policy change.”

Business was thin in the UK as markets closed to mark Queen Elizabeth’s state funeral. read more

Tightening time

With most of the central banks meeting this week, from Switzerland to South Africa, expected to hike rates, markets are split on whether the Bank of England will rise by 50 or 75 basis points. read more

However, China’s central bank cut its repo rate by 10 basis points to support the sluggish economy.chinese blue chips (.CSI300) Still closed 0.1% lower.

Another exception is the Bank of Japan, which is also scheduled to meet this week and shows no signs of abandoning its ultra-loose yield curve policy despite the yen’s sharp depreciation. read more

The dollar gained 0.24% against the yen, retreating from a 24-year high of 144.99 two weeks ago amid increasingly severe intervention warnings from Japanese policymakers.

The Dollar Index gained 0.164% and the Euro fell 0.05% to $1.001.

Oil prices edged higher amid volatile trading as fears of tighter supplies outweighed fears that a stronger dollar and sharp rate hikes would slow global demand.

Brent rose 65 cents to $92.00 a barrel and US crude settled 62 cents higher to $85.73.

US gold futures settled 0.3% lower at $1,678.20 an ounce.

Bitcoin, also moving in line with investors’ risk appetite, reached a three-month low of $18,271 before dropping 0.72% to $19,279.00.

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Reporting by Wayne Cole, Sydney and Arun Jong, London.Editing by Katherine Evans and Nick Zieminski

Our criteria: Thomson Reuters Trust Principles.

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