U.S. Treasuries sell-off has ripple effect across globe, stocks sink

Marco Green
October 7, 2018

Asian shares wobbled today after benchmark US Treasury yields surged to a fresh seven-year high and strong economic data fanned concerns about inflation and the risk of faster-than-expected interest rate rises.

Investors are expected to scour the USA government's September payroll report scheduled for release on Friday and look closely for signs of wage growth, especially in light of anecdotal indications of rising wages.

Investors sold off US government bonds Friday after fresh data showed the labor market continued to tighten in September, more reason for the Fed stick to its plans to keep gradually raising interest rates.

The pan-European FTSEurofirst 300 index .FTEU3 lost 1.02 percent and MSCI's gauge of stocks across the globe .MIWD00000PUS shed 1.00 percent.

Emerging market stocks lost 0.98 percent, closing at a 17-month low. "I think the market moves in the bonds this week side-swiped a lot of individuals".

The U.S. Treasury selloff on Wednesday was the biggest story in the financial markets.

The technology sector .SPLRCT sank 1.2 percent, dropping for the second day in a row. German lenders Commerzbank and Deutsche Bank were up 1.9 and 1.5 per cent, respectively, as German 10-year bond yields hit a 4-1/2 month high.

The 30-year Treasury bond reached a four-year high of 3.424 percent, up 7 basis points from late Thursday.

The U.S. dollar index, a measure of the dollar against a basket of other major currencies, fell 0.11 percent to 95.66 as of 1720 GMT, after new employment data showed less-than-expected addition in September. The dollar index fell 0.1 percent The euro was up 0.02 percent to $1.1515.

The Japanese yen strengthened 0.16 percent versus the greenback at 113.73 per dollar, while Sterling was last trading at $1.3087, up 0.53 percent on the day.

Oil prices have reached four-year peaks as the market focused on upcoming US sanctions on Iran while shrugging off the year's largest weekly build in USA crude stockpiles.

Oil prices rose today, two days after hitting four-year highs, lifted by looming USA sanctions against Iran's crude exports that are set to start next month.

The November crude contract was down 81 cents at US$75.60 per barrel and the November natural gas contract was down 5.1 cents at US$3.18 per mmBTU.

Prices have eased slightly after Saudi Arabia and Russian Federation said they would raise output to at least partly make up for expected disruptions from Iran, OPEC's third-largest producer, due to the US sanctions that take effect on November 4.

Prime Minister Giuseppe Conte on Wednesday confirmed a deficit target of 2.4 percent of gross domestic product (GDP) in 2019 and said this would fall to 2.1 percent in 2020 and 1.8 percent in 2021.

The combination of rising oil prices, borrowing costs and a climbing USA dollar have also been rocking emerging markets, which tend to be vulnerable to all three.

Other reports by Click Lancashire

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