Global Stocks Slump as Treasury Yield Hits 5%: Markets Wrap

(Bloomberg) — Stocks staged a broad retreat after the 10-year Treasury yield topped 5%, fueling concern that soaring borrowing costs will erode economic growth.

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The yield on the 10 year jumped nine basis points to 5.01%, the highest since 2007. Europe’s Stoxx 600 index sank 0.8%, reaching the lowest intraday level since March. S&P 500 equity futures fell 0.6%. Copper, viewed as a benchmark for the global economy, tumbled to the lowest in nearly 11 months.

The speed and severity of the bond selloff are capturing Wall Street’s attention, just as earnings season gets underway. With US data continuing to show a strong economy and Federal Reserve speakers reinforcing the need to keep interest rates high until inflation abates, many investors are turning more bearish on risk assets.

Weaker earnings also hurt sentiment on Monday. Volkswagen AG retreated almost 3% after earnings missed expectations and Royal Philips NV lost 4% after reporting a drop in order intake. The UK’s Vistry Group Plc tumbled after announcing hundreds of job cuts.

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Corporate Highlights

• Chevron Corp. agreed to buy Hess Corp. in a deal worth $53 billion, the latest major consolidation in the US oil industry. In an all-stock transaction, Chevron will pay $171 per share for Hess.

• Adevinta ASA shares fell the most since March 2020 after people with knowledge of the matter said a consortium led by Permira and Blackstone Inc. is reconsidering its pursuit of the European online classifieds company, threatening one of the year’s biggest potential buyouts.

• Volkswagen AG shares declined after outlining weaker-than-expected third-quarter earnings and hedging losses. Europe’s biggest carmaker now sees operating return on sales for the year as low as 7%, from at least 7.5%, it said late Friday.

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Traders are closely watching developments in the Middle East after Hamas released two US hostages and aid started to trickle through Egypt’s border with Gaza over the weekend. The respite may prove fleeting, with Israel stepping up air raids on Gaza in preparation for the “next phase” of its conflict with Hamas, while also warning that Hezbollah risks dragging Lebanon into a wider regional war.

“It is a very volatile situation,” said Stuart Cole, head macro economist at brokerage Equiti Capital. “While we may be seeing some dialing back of the hedging trades seen ahead of the weekend, this does not mean we are seeing any pro-risk sentiment emerging.”

In Argentina, investors were bracing for a selloff after Economy Minister Sergio Massa did better than forecast in Sunday’s presidential vote, dashing hopes for an outright win by a more market-friendly candidate. The nation’s dollar bond maturing July 2046 declined for a fourth day.

Inflation readings in Australia and Japan later this week as well as economic activity data in the US and Europe will offer more clues on the outlook for global interest rates. Fed Chairman Jerome Powell is due to give remarks and the European Central Bank will deliver a policy decision later in the week.

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Key events this week:

• Taiwan jobless rate, industrial production, Monday

• Eurozone consumer confidence, Monday

• EU foreign ministers meet in Luxembourg, Monday

• Reserve Bank of Australia Governor Michele Bullock speaks in Sydney, Tuesday

• Eurozone S&P Global Services PMI, S&P Global Manufacturing PMI, Tuesday

• UK S&P Global / CIPS Manufacturing PMI, jobless claims, unemployment, Tuesday

• US S&P Global Manufacturing PMI, Tuesday

• UN Security Council is expected to open debate on the Middle East, Tuesday

• Microsoft, Alphabet earnings, Tuesday

• Australia 3Q CPI, Wednesday

• Germany IFO business climate, Wednesday

• IBM, Meta earnings, Wednesday

• South Korea GDP, Thursday

• European Central Bank rate decision, Thursday

• EU leaders summit in Brussels, Thursday-Friday

• US wholesale inventories, GDP, US durable goods, initial jobless claims, Thursday

• Intel, Amazon earnings, Thursday

• Japan Tokyo CPI, Friday

• China industrial profits, Friday

• US personal spending and income, University of Michigan consumer sentiment, Friday

• Exxon Mobil earnings, Friday

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 fell 0.8% as of 10:36 a.m. London time

• S&P 500 futures fell 0.6%

• Nasdaq 100 futures fell 0.8%

• Futures on the Dow Jones Industrial Average fell 0.4%

• The MSCI Asia Pacific Index fell 0.8%

• The MSCI Emerging Markets Index fell 0.9%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro rose 0.1% to $1.0606

• The Japanese yen was little changed at 149.94 per dollar

• The offshore yuan was little changed at 7.3240 per dollar

• The British pound was little changed at $1.2162

Cryptocurrencies

• Bitcoin rose 2.1% to $30,495.25

• Ether rose 1.7% to $1,669.04

Bonds

• The yield on 10-year Treasuries advanced 10 basis points to 5.01%

• Germany’s 10-year yield advanced seven basis points to 2.96%

• Britain’s 10-year yield advanced eight basis points to 4.73%

Commodities

This story was produced with the assistance of Bloomberg Automation.

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