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Stocks fall, bond yields jump as rate hikes loom

NEW YORK : Global shares fell for a third day in a row on Tuesday, with tech stocks plummeting, as anxiety over when central banks might raise interest rates led to rising bond yields on both sides of the Atlantic.

U.S. Treasuries extended their sell-off into a fourth day with the 10-year yield reaching a level last seen in mid-June. [L1N2QU21M]

The prospect of rising cash rates and the risk of inflation proving less transitory than expected took two-year yields to 18-month highs. European bond yields soared too.

U.S. Federal Reserve policymakers last week projected that they are ready to raise rates in 2022 and that the bank is likely to begin reducing its monthly bond purchases as soon as November.

MSCI's gauge of stocks across the globe shed 1.85per cent.

All three major U.S. stock indexes slid more than 1.5per cent, with interest rate sensitive tech and tech-adjacent stocks weighing heaviest as investors lost their risk appetite.

The Nasdaq Composite index of tech stocks and the S&P 500 index saw their worst daily falls since March and May respectively and were on track for their biggest monthly declines since September 2020.

Tech stocks usually fall when bond yields are rising because they have higher valuations and are most reliant on future growth, which can be curtailed by higher interest rates.

The Dow Jones Industrial Average fell 569.84 points, or 1.63per cent, to 34,299.53, the S&P 500 lost 90.5 points, or 2.04per cent, to 4,352.61 and the Nasdaq Composite dropped 423.29 points, or 2.83per cent, to 14,546.68.

The pan-European STOXX 600 index fell 2.2per cent, its biggest one-day decline in more than two months.

Traders were left wondering whether the declines were the start of a broader market pullback or just a blip.

"We're at the crossroads here," said Dennis Dick, a trader at Bright Trading LLC. "It's hard to say (if this pullback will continue) because every time we think here's a correction, the market just rides the dip."

Benchmark 10-year notes last fell 18/32 in price to yield 1.5444per cent, from 1.484per cent late on Monday.

"The selloff on bond markets is related to markets reading recent statements from the Fed and the Bank of England as being more hawkish with a view to the timing of rate hikes," said Sarah Hewin, senior economist at Standard Chartered Bank.

The dollar hit a 10-and-a-half month high, buoyed by surging Treasury yields.

The dollar index rose 0.31per cent, with the euro down 0.08per cent to US$1.1685.

Gold prices hit a seven-week low on Tuesday, as the dollar strengthened and U.S. Treasury yields surged.

U.S. gold futures settled 0.8per cent lower at US$1,737.5 per ounce. Spot gold dropped 1.0per cent to US$1,732.86 an ounce.

Brent oil dipped after topping US$80 per barrel for the first time in nearly three years, as a five-day rally ran out of steam.

Brent crude futures settled at US$79.09 per barrel, down 0.6per cent.

U.S. crude oil futures settled at US$75.29 per barrel, down 0.2per cent.

Earlier in Asia, shares were mixed as the fallout from Chinese property developer Evergrande's debt crisis and a widening power shortage in China weighed on sentiment.

Japan's Nikkei was down 0.2per cent after halving its initial losses. China's blue chip index CSI300 edged up 0.1per cent as Hong Kong's Hang Seng Index gained 1.34per cent, snapping a recent run of negative sessions.

Hong Kong and mainland China's major property indices rose to 8per cent after the People's Bank of China (OBOC) pledged to support homeowners.

Investors remain on edge over the future of Evergrande, which failed to meet a deadline to make an interest payment to offshore bond holders. Evergrande has 30 days to make the payment before it falls into default. Shenzhen authorities are investigating the company's wealth management unit.

(Additional reporting by Ritvik Carvalho and Sujata Rao in London and Scott Murdoch in Hong Kong; editing by Timothy Heritage, Will Dunham, Giles Elgood, Philippa Fletcher and Sonya Hepinstall)

Source: Reuters

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