GLOBAL MARKETS – Wall Street is falling as government bond rates rise and oil prices fall

GLOBAL MARKETS - Wall Street is falling as government bond rates rise and oil prices fall

On Tuesday, Wall Street equities sank in a tumultuous session, and oil prices plummeted, as risk appetite waned as investors sought safe havens like Treasuries amid concerns about inflation and slowing economic growth. As the market evaluated the inflation picture a day before the release of US consumer price index (CPI) data, US Treasuries rallied, with the yield on the benchmark 10-year note falling from more than a three-year high to below 3%. Markets have been turbulent as a result of rising inflation and concerns that monetary tightening intended to slow price increases would also slow economic development. Last week central banks in the United States, Britain and Australia raised interest rates and investors girded for more tightening as policymakers fought soaring inflation. While all three U.S. indexes were rebounding from Monday’s sell-off, enthusiasm for equities quickly faded.

At 1130 EDT (1530 GMT), the Dow Jones Industrial Average fell 97.45 points, or 0.3%, to 32,148.25, the S&P 500 lost 10.91 points, or 0.27%, to 3,980.33 and the Nasdaq Composite dropped 16.49 points, or 0.14%, to 11,606.76. The pan-European STOXX 600 index rose 0.80% and MSCI’s gauge of stocks across the globe shed 0.33%, after earlier rising as much as 1.44%. The U.S. dollar was choppy on Tuesday as it held near a two-decade high ahead of a key reading on inflation that could provide insight on the Fed policy path. The dollar index rose 0.164%, with the euro down 0.19% to $1.0535. The Japanese yen weakened 0.03% versus the greenback at 130.29 per dollar, while Sterling was last trading at $1.2301, down 0.24% on the day.

“There’s a tonne of cross currents right now. Liquidity is drying up and volatility is the name of the game,” said Matthew Miskin, co-chief investment strategist at John Hancock Investment Management in Boston. “The tech and growth side of the (equities) market is such a big weight. Treasury yields going up as fast as they did spooked risk assets. If they could take a breather here it could let the market … find some footing.” Miskin was reassured by Federal Reserve official comments on Tuesday that suggested efforts to engineer a soft landing. In particular he pointed to Cleveland Federal Reserve Bank President Loretta Mester’s comment that while unemployment may increase and growth slow, the Fed’s policy tightening should not push the economy into a “sustained downturn.” “They’ve been so hawkish so any slight move off that the market wants to sniff that out,” said Miskin. “Sentiment wise a lot of people are looking for capitulation. The dots aren’t completely connecting yet for that.”

Earlier data showed China’s export growth slowed to its weakest in almost two years, as the central bank pledged to step up support for the slowing economy. Oil prices fell in volatile trade as the market balanced impending European Union sanctions on Russian oil with demand concerns related to coronavirus lockdowns in China, a strong dollar and growing recession risks. U.S. crude recently fell 1.85% to $101.18 per barrel and Brent was at $103.92, down 1.91% on the day. Benchmark 10-year notes last rose 33/32 in price to yield 2.9497%, from 3.079% late on Monday. Spot gold dropped 0.4% to $1,847.41 an ounce. U.S. gold futures % to $1,857.10 an ounce. Elsewhere, Bitcoin was up 4% after earlier falling to its lowest level since July 2021. Tuesday’s gain allowed it to recover some losses when it tumbled 11.8% on Monday plunge, which had been its biggest daily fall since May 2021. (Additional reporting by Herbert Lash and Chuck Mikolajczak in New York, Elizabeth Howcroft in London; Editing by Bradley Perrett, Raissa Kasolowsky and Alexander Smith)

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