Global stocks sucked under by bond market breakout
London: World stocks were in their biggest two-day dive in six months on Tuesday and commodities were also jammed in reverse, as rising U.S. borrowing costs cooled financial markets’ euphoric start to the year.
The move above 2.7 percent by U.S. Treasury yields US10YT=RR - the benchmark for world lending rates - helped the dollar off the canvas though that was part of the issue.
Oil slid back below $70, metals buckled and Asian stocks saw their biggest fall since early December after Wall Street had suffered its largest drop in five months after worries about Apple’s iPhone sales.
Despite an easing of yields in Europe its stocks duly followed. The pan-regional STOXX 600 dropped 0.5 percent as traders took aim at cyclical sectors like mining and financials after their strong run this month.
“The big picture view is that the rising U.S. yields have finally come to the dollar’s rescue,” said Societe Generale strategist Alvin Tan. “It didn’t respond for weeks but as yields have broken above 2.7 percent, it finally has.”
The rise in Treasury yields leaves them at the highest since mid-2014 though the move had been paused in Europe as lower-than-forecast early German inflation numbers had nudged its borrowing costs lower.
Moreover, the bond market braced for potentially hawkish language from the Federal Reserve, which will begin its two-day policy meeting on Tuesday.
Focus was also on U.S. President Donald Trump’s State of the Union address scheduled later in the global day, with attention on his views on an infrastructure overhaul and trade.
The dollar's rebound meant the euro fell for a second day. It eased 0.3 percent to $1.2373 EUR= having hit three-year high of $1.2538 last week. Data was still upbeat though with France's economy rounding off its strongest year since 2011.
Britain's pound also came under renewed pressure, falling back to $1.40 again GBP=D4, as Brexit tensions continued to hound the UK government and its leader Theresa May.
Britain’s housing market continued to lose momentum data showed too, with mortgage approvals at their weakest in nearly three years following the Bank of England’s first interest rate hike in a decade.
Growth in consumer lending, something the BoE has said it is watching closely, picked up speed for the first time in four months.
Russian stocks edged higher as they shrugged off the risk of possible new sanctions from a newly published U.S. list of oligarchs close to the Kremlin.
The list, drawn up as part of a sanctions package signed into law in August last year, does not mean those included will be subject to sanctions.
It does includes a wide circle of wealthy Russians though that run some of the country’s biggest companies, including the heads of Russia’s two biggest banks Sberbank (SBER.MM) and VTB (VTBR.MM), metals magnates and the boss of state gas monopoly Gazprom (GAZP.MM).
VTB Capital analysts said the list was “simply a mechanical listing” of prominent Russian politicians and business leaders which would not automatically lead to any immediate sanctions.
“Therefore, we do not expect any market reaction,” they said in a note.
Most Asian currencies had fallen overnight as the rise in bond yields lifted the dollar.
MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 1.1 percent too, but after a string of all-time highs, it was still on track for a 6.5 percent monthly gain.
Australian stocks shed 0.9 percent, South Korea's KOSPI .KS11 lost 1 percent, Hong Kong's Hang Seng .HSI 0.9 percent and Shanghai .SSEC 0.8 percent. Japan's Nikkei .N225 was the stand-out as it dropped 1.4 percent.
The bearish sentiment in Asia followed a softer lead from Wall Street, which has led a global equities rally over the past year thanks to strong world growth fuelling higher corporate earnings and stock valuations.
On Monday, U.S. stocks pulled back from record highs, with the Dow .DJI and the S&P 500 .SPX indexes marking their biggest one-day percentage declines in about five months, weighed down by a slide in Apple (AAPL.O) shares on reports of poor iPhone X demand.
Among commodities, oil prices extended losses after being pressured by the dollar’s bounce and rising U.S. crude output. [O/R]
U.S. crude futures CLc1 were down 0.9 percent at $64.97 per barrel. Underpinned by the dollar’s recent slide, prices had risen to $66.66 per barrel on Thursday, the highest since December 2014.
Brent crude LCOc1 fell 0.5 percent to $69.10 per barrel.
Spot gold XAU= slipped to $1,334.10 an ounce, the lowest since Jan. 23, also weighed by the stronger U.S. currency, while a 2.2 percent drop by nickel CMNI3 led a broad-based sell-off in industrial metals.
“Markets remain fragile to the downside,” said Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore.
The government today set up a Group of Ministers (GoM) under Home Minister Rajnath Singh and a panel headed by the Home Secretary to deal with the growing number of lynching incidents.
Senior Congress leader Digvijay Singh today criticised Maharashtra Chief Minister Devendra Fadanvis for cancelling his visit to Pandharpur on the occasion of 'Ashadhi Ekadashi' in view of a proposed protest by Maratha groups demanding reservation.
Goldman Sachs-backed ReNew Power has received markets regulator Sebi's approval to float an initial public offering.
The Supreme Court today extended till August 8 the stay on a Gujarat trial court's proceedings on the criminal defamation complaint filed by Jay Shah, son of BJP president Amit Shah, against news portal 'The Wire' and its scribes for allegedly writing a defamatory article.
Home Minister Rajnath Singh today said the central government is open to further review of the GST rates of different items as it has just reduced taxes of 88 consumer-centric products such as refrigerators, washing machines and sanitary napkins.
The station, which was named after Lord Elphinstone, the Governor of Bombay Presidency from 1853 to 1860, has now been renamed in honour of a local deity.
Lavasa -an ultimate getaway, a city that would offer the charms of European locales, with five star comforts in a scenic part of Maharashtra has now become an abandoned town.
A second chargesheet by the ED has confirmed the trail of illegal cash Mallya transferred to his accounts across global tax havens.
Delayed payment by GMR-led DIAL, the Delhi airport operator, to the CISF guards could eventually lead to passengers paying more to fly out of the Indian Capital.
The West Bengal Police has claimed to have busted a Rs 100 crore plus job racket in the Indian Railways following a crucial arrest in the Indian Capital.