The U.S. 10-year yield hit its highest since October, dragging stocks down

  • Treasury yields rise, dollar lifts, gold, oil weigh
  • Yen lowest in nine months as traders eye intervention notes
  • The MSCI world index hit a five-week low, while the STOXX fell 0.35%
  • Shares of payments company Adion plunged 20%

SINGAPORE/LONDON, Aug 17 (Reuters) – U.S. 10-year Treasury yields hit a 10-month high on Thursday as fears that U.S. interest rates will remain high for longer, coupled with China’s economic woes, weighed on global stock markets. Deteriorating to a five-week low.

The benchmark 10-year yield hit 4.312% on Thursday, a gap from October’s 4.338% that would be the highest in 16 years.

“The uptick is due to strong US domestic demand data. The minutes (from the Fed’s July meeting released on Wednesday), which feel really dated, they talk about a gradual slowdown in the US economy, but when you look at the data we’re not even in a recession,” said Sammy Saar, chief economist at Lombard Odier. said.

The minutes showed policymakers split on the need for more interest rate hikes.

U.S. retail sales data came out strong earlier this week, and traders are also looking at the Atlanta Federal Reserve’s GDPNow forecast model, which showed the U.S. economy could grow at an annualized rate of 5.8% in the third quarter.

Expectations for US peak rates did not change significantly, however, as changes in yields were driven by changes in medium-term rate expectations.

“What’s interesting is that when you have volatility in rates, the market is trying to price in a higher Fed funds rate, and what’s happening here is that the market is pricing in cuts or at least delaying them,” Saar said.

“The impact of higher yields is stable: a well-supported dollar and stocks under pressure,” he added.

MSCI’s world index (.MIWD00000PUS) fell 0.18% on Wednesday, its lowest level since July 6.

Europe’s broader STOXX 600 ( .STOXX ) fell 0.3%, with the Dutch benchmark ( .AEX ) standing out, with payments company Adyen ( ADYEN.AS ) down 1.12% after a 22% decline, missing its first-half earnings estimates.

The global stock sell-off may have paused in the U.S., however, with Nasdaq and S&P500 stock futures up as much as 0.2%. NQcv1>

China woes

China’s economy was the other topic on investors’ minds as persistent economic data and jitters in the property sector stalled the post-pandemic recovery.

The latest development is a further sign of turmoil in China’s $3 trillion shadow banking sector, which has rattled asset manager Zhongzhi Enterprise Group, which has said it will conduct a debt restructuring.

MSCI’s broadest index of Asia-Pacific shares outside Japan ( .MIAPJ0000PUS ) fell in early trade Thursday to its lowest level since late November. The index fell 8% for August and is set for its worst monthly performance since September 2022.

Hong Kong ( .HSI ) and offshore China share benchmarks ( .CSI300 ) held off somewhat near multi-month lows as investors remained hopeful of government stimulus.

“I still think there will be more action from policymakers,” Harald van der Linde, HSBC’s chief Asia equity strategist, told the Reuters Global Markets Forum. “It will take some time.”

Van der Linde says the willingness to invest in China is very low. “That appetite has to do with confidence, and it’s not going to change very quickly. It’s good to have some incentives for consumers.”

In currency markets, the dollar index, which measures the U.S. currency against six rivals, hit a two-month high of 103.59 on higher U.S. yields.

Japanese yen In the session, the Japanese yen hit a nine-month low of 146.57 per dollar as traders remain alert to interventionist talks by Japanese officials.

Finance Minister Shunichi Suzuki said on Tuesday authorities were not targeting absolute currency levels for intervention.

Among commodities, oil prices were steady after three sessions of decline. U.S. crude was up 0.21% at $79.55 a barrel, while Brent was up 0.44% at $83.82.

A rally in non-yielding gold hit a five-month low on Thursday. The metal last traded at $1,89 an ounce, down to $1,888.30.

Reporting by Ankur Banerjee in Singapore and Alun John in London, additional reporting by Anosha Sircar in Bengaluru; Editing by Muralikumar Anantharaman, Sonali Paul and Angus MacSwan

Our Standards: Thomson Reuters Trust Principles.

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