London (AFP) – European and US stock markets gave up ground Thursday as investors grappled with the risk of higher-for-longer interest rates, and the potential hit to economic growth that could result.
Analysts say signs of a robust American economy, such as strong labour market data this week, are in fact bad news for equities as it gives the Federal Reserve more reason to keep monetary policy tight through the end of the year and beyond.
The prospect has weighed heavily on US Treasury yields, which hit their highest levels since 2007 this week as investors fear that high borrowing costs for businesses and consumers will eventually drag on the economy.
The latest weekly jobless claims in the United States released Thursday, at 207,000, also suggested a tight market that could feed wage inflation.
All eyes will now be on Friday’s US employment figures for clues on the health of the world’s biggest economy and the Fed’s next moves.
“The markets sell-off which saw government bond prices fall and yields rise has taken centre stage this week, and investors continue to watch the 10-year Treasury yield like a hawk,” said AJ Bell investment director Russ Mould.
“Having dipped slightly on Wednesday, the yield has since crept back up to 4.75 percent as investors readjust portfolios to align with the prospect of interest rates staying higher for longer,” he said.
Oil prices tumbled further following their September surge after a US report on gasoline inventories came in much higher than analysts expected, an indication of weakening demand in the world’s largest economy.
“Gasoline inventory builds have spilled over into crude markets amid concerns about a potential 2024 recession driven by rising interest rates,” said Stephen Innes, a partner at SPI Asset Management.
Europe’s main indices had spent most of the session in positive territory on the back of Wall Street’s rebound on Wednesday, before being dragged down in line with opening US losses.
Asian indices also closed higher, with Tokyo jumping 1.8 percent by the close.Markets in mainland China were shut for a weeklong holiday.
– Key figures around 1545 GMT –
New York – Dow: DOWN 0.5 percent at 32,960.00
London – FTSE 100: UP 0.5 percent at 7,451.54
Frankfurt – DAX: DOWN 0.2 percent at 15,070.22
Paris – CAC 40: FLAT at 6,998.25
EURO STOXX 50: FLAT at 4,099.81
Tokyo – Nikkei 225: UP 1.8 percent at 31,075.36 (close)
Hong Kong – Hang Seng Index: UP 0.1 percent at 17,213.87 (close)
Shanghai – Composite: Closed for a holiday
Euro/dollar: UP at $1.0530 from $1.0504 on Wednesday
Pound/dollar: UP at $1.2171 from $1.2135
Euro/pound: DOWN at 86.52 pence from 86.55 pence
Dollar/yen: DOWN at 148.49 yen from 149.12 yen
Brent North Sea crude: DOWN 1.7 percent at $84.37 per barrel
West Texas Intermediate: DOWN 1.8 percent at $82.71 per barrel
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