Source : THE AGE NEWS
More swings in the bond market are rattling stock markets around the world.
On Wall Street, the moves were relatively modest after US bond yields cranked higher but then gave back the gains later in the day. The S&P 500 rose 0.3 per cent and was on track to break a three-day losing streak. The Dow Jones Industrial Average was virtually unchanged in mid-afternoon trade and the Nasdaq composite was 0.3 per cent higher.
The Australian sharemarket is set to climb, with futures at 5.01am AEST pointing to a rise of 40 points or 0.5 per cent, at the open. The ASX lost 2 per cent on Thursday. The Australian dollar was trading at US69.24¢.
The moves were more dramatic in Europe, where stock indexes tumbled 1.7 per cent in London, 1.6 per cent in Paris and 1 per cent in Frankfurt. They were hurt by sharp moves for bond yields on that side of the Atlantic. The yield on the 10-year French government bond, for example, shot to nearly 4.95 per cent and then veered toward 4.80 per cent and back up to 4.90 per cent.
That is a punishing swing for the bond market, where moves get measured in hundredths of a percentage point.
High yields slow the economy by making it more expensive for everyone to borrow money, while undercutting prices for stocks and other investments.
Yields are on the rise for a range of reasons, including worries about high inflation and oil prices, signals that the US economy remains solid and governments’ insistence to continue to spend much more money than they bring in.
Those worries don’t look to be going away anytime soon, and oil prices climbed again Thursday to keep the pressure up on inflation. The price for a barrel of Brent crude leaped 4.3 per cent to $US102.24 for its latest yo-yo move on uncertainty about when the war with Iran will allow the global oil industry to return to normal.
Further reports also signalled the US economy is powering through its many challenges. Fewer US workers applied for unemployment benefits last week, which could mean companies are laying off fewer workers.
A separate report on Thursday said growth for US manufacturing also continued in September. Potentially more concerning in that report from the Institute for Supply Management was that increases in prices accelerated, which could mean further pressure on inflation.
It all sent the yield on the 10-year US Treasury briefly toward 5.34 per cent and its highest level since 2002. But the 10-year yield relented later in the day and pulled back to 5.23 per cent from 5.29 per cent late Wednesday. That helped stocks on Wall Street recover their losses and turn higher.
Still, the 10-year yield remains much higher than it was last week, when it was below 5 per cent, and from before the war with Iran began, when it was below 4 per cent.
High yields can hurt real-estate owners in particular. Not only do they raise the cost of borrowing, they can also make investors looking for income leave real-estate stocks and their dividends for bonds.
BXP, which owns office buildings around the country, sank 1.6 per cent. Alexandria Real Estate Equities, which owns campuses for life sciences companies, fell 2.2 per cent.
Helping to counteract such losses were gains for stocks benefiting from the boom around artificial-intelligence technology.
Optimism rose after Micron Technology delivered a stronger profit report for the latest quarter than analysts expected. Micron also said growth is strengthening, and it gave forecasts for upcoming profit and revenue that topped analysts’ estimates because of the AI boom.
Micron’s stock rose 1.7 per cent to bring its stellar gain for the year so far to nearly 280 per cent. Elsewhere in AI, Nvidia added 1.6 per cent and was the single strongest force lifting the S&P 500, while Applied Materials rose 3.8 per cent.
Outside of tech, Accenture leaped 17 per cent after the consulting and services company reported stronger profit for the latest quarter than analysts expected. It saw growth around the world, from the Americas to Asia.
In stock markets abroad, Asian indexes did better than the rest of the world thanks to optimism around AI following Micron’s profit report. Japan’s Nikkei 225 jumped 3.3 per cent, and South Korea’s Kospi climbed 1.9 per cent.
AP
The Market Recap newsletter is a wrap of the day’s trading. Get it each weekday afternoon.
