Stocks Decline And Yields Rise As Investors Weigh Rate Expectations

On Tuesday, global stock markets were trading lower for the most part, while US bond yields climbed to their highest levels seen since June.

This was after a services industry report for the US turned out to be stronger than expected, thereby boosting expectations of the Federal Reserve continuing to be aggressive in terms of monetary policy.

The US dollar also rose, but the Japanese yen dropped to a new low of 24 years.

The US market

Wall Street opened for its first trading session after a Labor Day holiday, which saw all three indexes end the day lower, with the Nasdaq Composite leading losses.

The Institute for Supply Management (ISM)’s survey indicated that August saw the services sector grow for the second month in a row because of a rise in employment and orders and a decline in price pressures and easing supply chains.

Moreover, the non-manufacturing PMI reading in the previous month reached 56.9, which surpassed economists’ expectations.

The US Fed is scheduled to meet on September 20th and there is a rate hike of 75 basis points expected in the said meeting.

This would bring the fed funds rate between 3.0% and 3.25%. The benchmark US government bond yields climbed to their highest levels seen since June 16th at 3.336%.

On August 2nd, they had declined to 2.516%, which was a low of four months.

Stock indexes

There was a 0.55% decline in the Dow Jones Industrial Average, which saw it drop by 173.14 points to reach 31,145.3.

Meanwhile, a 0.41% drop in the S&P 500 saw it lose 16.07 points to hit 3,908, while the Nasdaq Composite shed 0.74% to fall by 85.96 points and close at 11,544.91.

There was a 0.24% growth in the continent-wide STOXX 600 index in Europe, while a 0.47% decline was recorded in the MSCI’s index of global stocks.

Currencies and oil

There was a 0.6% gain in the US dollar index, which measures the currency’s performance against a basket of its peers.

But, the euro was declining once more, as it failed to go back above parity against the greenback. It had last dropped by 0.27% to trade at $0.9899.

There was a 1.53% drop in the Japanese yen against the US dollar, which took it to 142.80. The last month saw the British pound become one of the weakest major currencies in the world.

But, the sterling recorded a rise on Tuesday after the appointment of the new Prime Minister of Britain, Liz Truss. This is because the new premier is expected to deliver a big energy relief package.

The currency recorded gains of 0.03% on the day and reached $1.1516. In the energy sector, there was a drop in oil prices because of rising concerns about interest rate hikes.

Brent crude suffered losses of 3% for the day, which brought it down by $2.91 to trade at $92.83 per barrel. US West Texas Intermediate also dropped from Monday to end the day at $86.88 per barrel.

Leave a Reply

Your email address will not be published. Required fields are marked *