Global stocks tumbled Tuesday after a closely watched US bond benchmark hit a 16-year high, exacerbating worries about elevated interest rates as the dollar briefly topped 150 yen.
All three major US indices closed in the red, falling by more than one percent, after the yield on the 10-year US Treasury note climbed to levels last seen in 2007.
Analysts have attributed the surge in yields — an important proxy for interest rates — to hefty issuance of US Treasury notes and commentary from Federal Reserve officials signaling the central bank could keep interest rates higher for longer.
Market watchers have also pointed to possible selling of US treasuries by governments seeking to strengthen their currencies against the dollar.
The yield figure climbed further on Tuesday following a US report that showed a surprising number of job openings.
“The US labor market remains in rude health, keeping upward pressure on both the US dollar and on yields,” said Michael Hewson, chief market analyst at CMC Markets UK.
“If we continue to see yields move higher, with speculation that the US 10-year yield could push up to and beyond 5 percent, the pressure on US stock market valuations could become more intense,” he said.
The labor report, known as JOLTS, showed a surprise increase in the number of job openings to 9.6 million, a sign of continued tightness in the market.
Those many job openings “aren’t telling quite the story the (Federal Reserve) wants to hear,” said a note from Oxford Economics.
The report comes ahead of Friday’s highly anticipated September US employment report.
The slump on Wall Street followed significant drops on Asian and European bourses.
The dollar briefly topped 150 yen for the first time in a year before quickly pulling back.
The temporary surge raised speculation of Bank of Japan intervention to strengthen its currency — if it hasn’t already done so — as it did when the yen weakened in October last year.
Traders noted that the dollar quickly fell back after breaching the psychological threshold.
Since September, stock indices on both sides of the Atlantic have erased much of the gains seen since the beginning of the year — in Paris, the CAC 40 fell below 7,000 points at one point for the first time since March.
“Sentiment remains cagey with investors showing no desire to hold onto any gains,” said Fawad Razaqzada, a market analyst at StoneX.
Asian indices also ended mostly lower with Hong Kong leading the decline, falling nearly 2.7 percent as the market reopened after a holiday weekend.
Russia’s currency meanwhile continued to weaken on signs the country’s economy is facing slower growth and higher inflation as the fighting in Ukraine drags on.
The ruble crossed the psychological threshold of 100 to the dollar on the Moscow financial exchange — having already done so in August before recovering — raising the prospect of weaker spending power for Russians forced to pay more for imported goods.
– Key figures around 2030 GMT –
New York – Dow: DOWN 1.3 percent at 33,002.38 (close)
New York – S&P 500: DOWN 1.4 percent at 4,229.45 (close)
New York – Nasdaq: DOWN 1.9 percent at 13,059.47 (close)
London – FTSE 100: DOWN 0.5 percent at 7,470.16 (close)
Frankfurt – DAX: DOWN 1.1 percent at 15,085.21 (close)
Paris – CAC 40: DOWN 1.0 percent at 6,997.05 (close)
EURO STOXX 50: DOWN 1.0 percent at 4,095.59 (close)
Tokyo – Nikkei 225: DOWN 1.6 percent at 31,237.94 (close)
Hong Kong – Hang Seng Index: DOWN 2.7 percent at 17,331.22 (close)
Shanghai – Composite: Closed for a holiday
Euro/dollar: DOWN at $1.0472 from $1.0477
Pound/dollar: DOWN at $1.2081 from $1.2087
Euro/pound: DOWN at 86.66 pence from 86.68 pence
Dollar/yen: DOWN at 148.85 yen from 149.86 yen Monday
Brent North Sea crude: UP 0.2 percent at $90.92 per barrel
West Texas Intermediate: UP 0.5 percent at $89.23 per barrel (AFP)