US stocks retreat as sovereign bond drop deepens

(iStock)
(iStock)

Dubai - US Treasuries joined a selloff in European government bonds sparked by weak demand for French debt, heightening a nervous mood that threatened to spill into equities markets. The dollar weakened after a private report showed the pace of US hiring moderated.

The yield on 10-year Treasury notes climbed five basis points to 2.37%, capping a surge of 23 basis points in nine sessions. The S&P 500 Index halted a three-day advance, with technology shares leading losses.

The yield on benchmark German bunds hit the highest since January 2016. The Stoxx Europe 600 Index dropped the most in a week. Oil clawed back some of its biggest loss in four weeks, while gold and silver retreated.

The selloff in bonds comes as central banks from Asia to Europe and the US have taken a more hawkish stance as they seek to remove nearly a decade of accommodation.

The rise in yields has started to weigh on equity markets just as data show growth in the American economy may be moderating. European Central Bank officials considered when they met last month removing a pledge to increase bond-buying, while ADP Research Institute data showed companies adding fewer workers to US payrolls in June than than the prior month.

On Wednesday, minutes from the Federal Reserve showed a lack of consensus about when to shrink the central bank’s $4.5trn balance sheet, and how to approach policy strategy in a time of low inflation.

Here’s what’s coming up:

The G-20 summit in Hamburg starts on Friday. US President Donald Trump is expected to hold his first meeting with Russia’s Vladimir Putin as well as meet his Chinese counterpart Xi Jinping.

And on Friday will also see the US Labour Department report official jobs figures. American employers probably added around 175 000 workers in June and wage growth probably strengthened, consistent with a solid labour market, economists project.

These are the main moves in markets:

Stocks

The S&P 500 Index declined 0.4% to 2,423.08 as of 15:33. The Nasdaq 100 index lost 0.7%, undoing a rally on Wednesday. The Stoxx Europe 600 Index fell 0.9%. Emerging-market shares slipped 0.1%. 

Currencies

The Bloomberg Dollar Spot Index weakened 0.2%. The euro advanced 0.4% to $1.1395 and the British pound strengthened 0.1% to $1.2949.

Bonds

The yield on 10-year Treasuries rose four basis points to 2.37%, after falling three basis points on Wednesday. German and French 10-year yields climbed seven basis points and those on gilts added six.

Commodities

West Texas Intermediate crude futures rose 1.8% to $45.94 a barrel. The contract dropped 4.1% on Wednesday, the most in four weeks, as Russia was said to oppose any proposal to deepen OPEC-led production cuts. Gold lost 0.2% to $1 224.36 an ounce, snapping two days of gains.

Asia

Japan’s Topix dropped 0.1% while the yen was steady after swinging between gains and losses. The South Korean won slumped 0.6% to the lowest level since March. India’s Sensex advanced 0.5%, poised for a record close.

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