Monday, October 25

Shares staunch bleed after worst selloff since January


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NEW YORK/LONDON — Investors sought to staunch the bleed on Wednesday after world stocks suffered their worst rout since January and US and European borrowing costs raced to their highest in months.

Stock indices in Europe and the US rose after a heavy selloff in US tech stocks on Tuesday had consigned Wall Street to its steepest drop since mid-July.

The Dow Jones Industrial Average rose 135.16 points, or 0.39%, to 34,435.15, the S&P 500 gained 18.74 points, or 0.43%, to 4,371.37 and the Nasdaq Composite added 86.27 points, or 0.59%, to 14,632.96.

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The pan-European STOXX 600 index rose 0.61% and MSCI’s gauge of stocks across the globe gained 0.09%.

The global benchmarks for borrowing costs – the yields on US and German government bonds – also edged lower after their spikes had helped fuel the volatility.

Benchmark 10-year notes last rose 7/32 in price to yield 1.5132%, from 1.536% late on Tuesday.

Those Treasury yields have jumped roughly 20 basis points over the last week and are set for their biggest monthly jump since March.

“The question that will come in the next 10 days is will the US Treasury yield keep pushing above 1.5%,” said Societe Generale strategist Kenneth Broux.

German and British 10-year bond yields are set for the biggest month rise since February — gilt yields have soared almost 40 bps this month to 1%.

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Broux said the question for October and the rest of the year would be whether the inflation pressures that central banks train their focus on start to abate. “The 1.5% level (on US Treasuries) is really pivotal,” he said.

In the currency markets, the run up in yields, prompted by the signs that some Fed members want to start moving interest rates up next year, saw the dollar touch an 18-month high against the yen and set its highest level of the year versus other major peers.

The dollar index rose 0.364%, with the euro down 0.36% to $1.1639.

The dollar is also on course for its best year since 2015 just as doubts re-emerge about the global recovery from the COVID pandemic and Washington is bogged down in debt ceiling talks that could lead to a government shutdown. China is also grappling with a power crunch and property sector worries that have hit its economy.

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Overnight Asia-Pacific shares had managed to restrict falls to 1.2%. Not including Japan, the region was heading for a 9.4% decline for the third quarter, its worst quarterly performance since the first three months of 2020, when global markets were roiled by the initial spread of COVID-19.

China’s worsening power crunch pushed investors out of Chinese stocks vulnerable to factory shutdowns, including chemicals and steelmaking, even as the country’s economic planning agency sought to reassure residents and businesses.

Debt saddled property giant China Evergrande’s shares did leap 15% though, after it said it planned to sell a 9.99 billion yuan ($1.5 billion) stake in Shengjing Bank.

But investors are still waiting to see whether the developer makes some now overdue bond payments and rating firm S&P Global said another major property firm, Fantasia, was also at growing risk of default.

In the commodity markets, oil prices dropped, having broken through $80 a barrel for the first time in nearly three years the day before.

US crude recently fell 0.49% to $74.92 per barrel and Brent was at $78.55, down 0.68% on the day.

Safe haven gold edged higher in the metal markets.

Spot gold added 0.2% to $1,736.20 an ounce. US gold futures gained 0.04% to $1,736.60 an ounce.

(Additional reporting by Alun John in Hong Kong and Dhara Ranasinghe and Sujata Rao in London; Editing by Edmund Blair, Kirsten Donovan, William Maclean)

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In-depth reporting on the innovation economy from The Logic, brought to you in partnership with the Financial Post.

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