(Bloomberg) — Government bonds rallied from the UK to the eurozone to the US Thursday as economic and market anxieties tested the equity market’s bullish resolve. US futures rose.
Treasury yields were lower in the wake of an outsized rate increase by the Bank of England in the face of mounting recession risks. Contracts on both the S&P 500 and the Nasdaq 100 pushed higher, following the tech-heavy Nasdaq’s advance of 19% from its June low.
The bond market, especially the inverted Treasury yield curve, is flashing warnings on the economy amid a global wave of monetary tightening. US initial jobless claims rose slightly and are holding near the highest level since November, data showed Thursday.
“There’s an intense tug-of-war happening in the economy and markets,” said Dan Suzuki, deputy chief investment officer at Richard Bernstein Advisors. “On one side, you have a narrative that reasonable growth is going to support continued inflation pressure and keep the Fed hiking. The other narrative is that slowing growth is going to ease inflation and allow the Fed to stop hiking.”
Benchmark gilt yields tumbled after UK policy makers warned of a long recession and said its rate path was not pre-set.
US-China tension remains among the uncertainties clouding the outlook. Taiwan braced for the Chinese military to start firing in exercises being held around the island in response to US House Speaker Nancy Pelosi’s visit.
Gains in the Stoxx Europe 600 Index were led by retailers, leisure and technology firms, alongside an advance in shares of Chinese tech companies.
Oil steadied after erasing an earlier loss as investors weighed weaker US gasoline demand and rising inventories against a token supply increase from OPEC+. Gold advanced and Bitcoin oscillated near $23,000.
Among individual stock moves, Glencore Plc shares fell as much as 2% as its capital return plans overshadowed solid first-half results.
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What to watch this week:
- Cleveland Fed President Loretta Mester due to speak, Thursday
- US employment report for July, Friday
Some of the main moves in markets:
Stocks
- Futures on the S&P 500 rose 0.1% as of 8:48 a.m. New York time
- Futures on the Nasdaq 100 rose 0.2%
- Futures on the Dow Jones Industrial Average were little changed
- The Stoxx Europe 600 rose 0.4%
- The MSCI World index rose 0.3%
Currencies
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro rose 0.2% to $1.0187
- The British pound fell 0.4% to $1.2103
- The Japanese yen rose 0.2% to 133.53 per dollar
Bonds
- The yield on 10-year Treasuries declined three basis points to 2.67%
- Germany’s 10-year yield declined seven basis points to 0.80%
- Britain’s 10-year yield declined nine basis points to 1.83%
Commodities
- West Texas Intermediate crude rose 0.4% to $91.02 a barrel
- Gold futures rose 1.3% to $1,799.20 an ounce
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