Saturday, October 23

Global stocks drop as energy crunch pushes bond yields to four-month highs


Stocks have run into trouble in September and October.

  • Global stocks fell on Wednesday as soaring energy prices pushed bond yields to four-month highs.
  • Rising bond yields make stocks look less attractive and are particularly bad for tech shares.
  • Natural gas prices have hit new records daily in Europe, while US oil is trading at around seven-year highs.
  • See more stories on Insider’s business page.

Global stocks and US futures slid on Wednesday, as bond yields rose sharply on the back of a worldwide energy squeeze that’s making investors worry about inflation.

S&P 500 futures were down 0.89% after the index rose 1.05% the previous day. Dow Jones futures were 0.68% lower and futures for the tech-heavy Nasdaq 100 were off by 1.12%.

In Asia overnight, Seoul’s KOSPI fell 1.82%, while Tokyo’s Nikkei 225 dropped 1.05% and Hong Kong’s Hang Seng fell 0.72%.

Europe’s continent-wide Stoxx 600 fell 1.54% in early trading and London’s FTSE 100 dropped 1.28%.

Stock markets boomed for the first seven months of the year, but have run into a rough patch in recent weeks.

A number of issues are concerning investors: the threat of strong inflation lasting longer than expected; the likelihood that central banks will soon start cutting back on support; and supply-chain issues threatening economic rebounds.

The International Monetary Fund said late on Tuesday the world economy is still “hobbled” by the coronavirus pandemic and global GDP growth is now likely to come in lower than its previous forecast of 6%.

Global energy prices have soared in recent weeks, with suppliers struggling to keep up with a sharp rebound in demand after coronavirus restrictions were loosened in advanced economies.

Natural gas prices have been hitting new highs daily and are up more than 500% over the last year in Europe, while US oil prices are trading around seven-year highs.

Pressure in energy markets has been a key factor pushing up bond yields, which rose to their highest level since June on Wednesday. Bond market investors demand a higher yield when they think inflation will be stronger.

Read more: RBC says these 30 stocks are investors’ best bets to profit in the 4th quarter as stocks go through their worst slump in a year and a half

The yield on the key 10-year US Treasury note climbed 2 basis points to 1.554% on Wednesday, while the 30-year Treasury note yield rose 3 points to 2.126%. The dollar index rose 0.34% to 94.30, around its highest level in a year.

Investors were also on edge about the ADP jobs report on private-sector employment due on Wednesday, which will give a sense of the health of the US labor market before official figures are released on Friday. A strong number could lead to the Federal Reserve starting to cut back on stimulus as early as November.

There are a whole host of worries “swirling around equity markets this week and not going away any time soon,” Neil Wilson, chief market analyst at trading platform Markets.com.

“Chiefly this morning, we might say that rising Treasury yields and soaring energy prices are conspiring to knock risk appetite.”

Higher bond yields and rising inflation make stocks look less attractive. They weigh particularly on the shares of fast-growing tech companies who currently do not offer much in the way of profit, or dividends.

The energy crunch helped push Brent crude, the global benchmark oil price, up for a fourth day on Wednesday. It rose 1.59% to $82.56 a barrel, a three-year high. WTI crude slipped 0.13% to $78.83 a barrel.

In crypto markets, bitcoin slipped slightly after breaking through the $50,000 barrier on Tuesday for the first time in a month. It was down 1.5% to $50,697.



markets.businessinsider.com

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