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US yields, dollar rise higher as oil tops $80 a barrel

Yields on benchmark US bonds rose yesterday to their highest level in about seven years, pushing the US dollar to a four-month peak against the yen, while oil prices eclipsed $80 a barrel for the first time since November 2014.

US and European shares gained modestly, with MSCI’s gauge of stocks across the globe edging up 0.18 per cent.

European bond yields generally were also rising along with US peers as investors eyed political risk in Italy.

The focus this week has centred on rising US Treasury yields, as investors point to data reflecting a strong US economy that could indicate firming inflation.

The benchmark 10-year US yield hovered above 3.1 per cent, continuing a surge higher earlier in the week.

On Wall Street, the Dow Jones Industrial Average rose 33.18 points, or 0.13 per cent, to 24,802.11, the S&P 500 gained 6.21 points, or 0.23 per cent, to 2,728.67 and the Nasdaq Composite added 17.62 points, or 0.24 per cent, to 7,415.92.

Energy shares rose 1.3 per cent, bolstered by higher oil prices.

Investors were also watching trade developments between the US and China, as the two countries launched a second round of talks to try to avert a damaging tariff war.

The yield premium investors demand for holding Italian bonds over top-rated German peers jumped to its highest since January as investors fretted about a confrontation between a new government and the ECB over debt forgiveness.

The pan-European FTSEurofirst 300 stock index rose 0.51 per cent.

U.S. 10-year yields climbed following a steep bond market selloff earlier in the week.

Benchmark 10-year notes last fell 5/32 in price to yield 3.1112 per cent, from 3.095 per cent late on Wednesday.

The dollar index, which measures the greenback against a basket of major currencies, rose 0.09 per cent.

 The Japanese yen weakened 0.37 per cent versus the US currency at 110.80 per dollar.

Oil prices hit $80 a barrel for the first time since November 2014 on concerns that Iranian exports could fall because of renewed US sanctions, reducing supply in an already tightening market.

Brent was last at $80.29, up 1.27 per cent on the day, after rising as high as $80.33.

U.S. crude rose 0.71 per cent to $72 per barrel.

“The geopolitical noise and escalation fears are here to stay,” said Norbert Rücker, head of macro and commodity research at Swiss bank Julius Baer. “Supply concerns are top of mind after the United States left the Iran nuclear deal.”

Spot gold dropped 0.1 per cent to $1,288.96 an ounce, touching a new low for the year during the session.

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