The dollar soared to another record after the White House talked down the prospect of weakening the currency, while the continuing global bond rout pushed 10-year Treasury yields to the highest since 2008.
(Bloomberg) — The dollar soared to another record after the White House talked down the prospect of weakening the currency, while the continuing global bond rout pushed 10-year Treasury yields to the highest since 2008.
Major equity levels crumbled after a slew of hawkish Federal Reserve speakers stoked fears about rising interest rates and the economic outlook. European stocks dropped for a fifth day as investors abandon the region at levels last seen during the euro area debt crisis, according to Citigroup Inc. strategists. US futures and Asian shares also fell.
Health care was the only sector in the green, supported by Roche Holding AG, which rose after Eisai Co. and partner Biogen Inc. said their drug significantly slowed Alzheimer’s disease. Miners underperformed as the surging dollar and concerns about demand for raw materials sent a Bloomberg index of commodity prices to the lowest level since January. Apple Inc. fell in premarket trading after a report that it scrapped plans to increase iPhone production.
Meanwhile, natural gas prices in Europe surged after Russia said it may cut off supplies via Ukraine and the European Union said severe damage to two gas pipelines from Russia was deliberate. Putin moved to annex a large chunk of Ukrainian territory amid a string of military setbacks in its seven-month-old invasion.
UK 30-year yields jumped to the the highest since 1998 ahead of a green bond sale that has already pulled in more than £24 billion ($25.7 billion) of orders, while the pound fell amid mounting global criticism of the government’s fiscal plan.
The International Monetary Fund called the unfunded tax cuts excessive and in need of revision, while Moody’s Investors Service warned that it risks doing lasting damage to the nation’s debt affordability. Chancellor of the Exchequer Kwasi Kwarteng will ask financiers not to bet against the pound in a meeting today, Sky News reported without naming its sources.
The dollar’s rally brought losses to other currencies, including the euro and the onshore yuan.
The yen remained near the key 145 mark versus the dollar and within sight of levels that have drawn intervention from Japan. Speculation the sliding yen will compel Japan to intervene further, potentially funded by Treasuries sales, weighed on US debt.
“The fact we have such a strong increase in US yields is attracting flows into the US dollar,” said Nanette Hechler-Fayd’herbe, chief investment officer of international wealth management for Credit Suisse Group AG. “As long as monetary and fiscal policy worldwide are really not coming to strengthen their own currencies, we should be anticipating a very strong dollar.”
Adding to concerns, Deutsche Bank AG Chief Executive Officer Christian Sewing predicted a severe downturn in the lender’s home region and said the volatility whipsawing markets will continue for another year as central banks tighten rates to fight inflation.
European Central Bank President Christine Lagarde said borrowing costs will be raised at the next “several meetings,” with several Governing Council members favoring a 75 basis point hike in October.
In other news, Hurricane Ian became a dangerous Category 4 storm as it roars toward Florida, threatening to batter the Gulf Coast with devastating wind gusts and floods.
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Key events this week:
- Fed’s Mary Daly, Raphael Bostic, Charles Evans and ECB President Christine Lagarde speak at events, Wednesday
- Euro zone economic confidence, consumer confidence, Germany CPI, Thursday
- US initial jobless claims, GDP, Thursday
- Fed’s Loretta Mester, Mary Daly speak at events, Thursday
- China PMI, Friday
- Euro zone CPI, unemployment, Friday
- US consumer income , University of Michigan consumer sentiment, Friday
- Fed’s Lael Brainard and John Williams speak, Friday
Some of the main moves in markets:
Stocks
- Futures on the S&P 500 fell 1.1% as of 5:45 a.m. New York time
- Futures on the Nasdaq 100 fell 1.5%
- Futures on the Dow Jones Industrial Average fell 0.8%
- The Stoxx Europe 600 fell 1.6%
- The MSCI World index fell 0.1%
Currencies
- The Bloomberg Dollar Spot Index rose 0.4%
- The euro fell 0.4% to $0.9559
- The British pound fell 0.4% to $1.0686
- The Japanese yen was little changed at 144.71 per dollar
Cryptocurrencies
- Bitcoin fell 2.1% to $18,664.65
- Ether fell 3.8% to $1,275.01
Bonds
- The yield on 10-year Treasuries advanced five basis points to 3.99%
- Germany’s 10-year yield advanced nine basis points to 2.32%
- Britain’s 10-year yield advanced three basis points to 4.53%
Commodities
- West Texas Intermediate crude fell 0.1% to $78.41 a barrel
- Gold futures fell 0.6% to $1,625.80 an ounce
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