Stocks fall as bond yields retreat from four-month highs
Stocks around the globe were lower yesterday and European bond yields fell from four-month highs as worries continued over the health of the global economy.
US stocks remained near their late Friday levels as the global risk-off mood clashed with a well-received earnings update from Bank of America, the country’s second-largest bank by assets.
A dip in energy and healthcare stocks offset the boost to financials from Bank of America’s strong results.
“I think we’re headed for a bumpy session with earnings leading the way,” said Peter Cardillo, chief market economist at First Standard Financial in New York.
“It’s also a jittery market ahead of the elections and of course the prospects of a rate hike [by the US Federal Reserve] in December.”
The Dow Jones industrial average rose 2.64 points, or 0.01 per cent, to 18,141.02, the S&P 500 gained 0.42 points, or 0.02 per cent, to 2,133.4 and the Nasdaq Composite added 1.82 points, or 0.03 per cent, to 5,215.98.
A gauge of equity markets around the globe fell 0.2 per cent. A measure of European shares was down 0.4 per cent.
Oil fell more than one per cent as a rising US rig count left investors worrying about the prolonged glut. The energy sector led all S&P components lower, down 0.75 per cent in early trading.
US and European government bonds reversed earlier selling and rose in price after benchmark 10-year Treasury note yields hit their highest since June 2 and German and British bonds touched their highest since late June.
Buying in Treasuries was spurred by bargain-hunting investors who scooped up government debt when prices fell on Friday following comments from Federal Reserve Chair Janet Yellen that the central bank may tolerate inflation above its two-per cent goal, analysts said.
The rise in prices also followed a sub-par reading from the New York Fed’s gauge on regional business activity in October.
The 10-year US Treasury note rose 5/32 in price to yield 1.775 per cent, falling from a high of 1.814 per cent.
British 10-year government bond yields were last at 1.131 per cent, falling from 1.223 per cent in European trading, the highest since June 20.
German 10-year bunds were last yielding 0.064 per cent, falling from 0.104 per cent, their highest since June 24.
Safe-haven gold also edged up as buyers began to resurface after a six per cent fall over the last few weeks.
“Markets are reacting to the possibility that the Fed might join the Bank of Japan in conducting policy to steepen the yield curve,” Ric Spooner, chief market analyst at CMC Markets in Sydney, wrote in a note.
Oil prices, up for four straight weeks, have helped drive the pickup in inflation globally.
Brent crude futures was down a little over 1 per cent at $51.40, with US crude futures at $49.75 per barrel.