Headlines:
- Stocks feel the pinch as 10-year Treasury yields hit 5.33%, highest since 2002
- US dollar hits three-month high as Treasury yields surge, EUR/USD cracks key support
- Oil shoots higher as the market starts to lose patience with the prolonged US-Iran stalemate
- Trump tells TIME the U.S. could resume or intensify attacks against Iran after the midterm elections
- US sees China invasion of Taiwan unlikely before 2028, but trade and market risks remain
- Switzerland September CPI +1.0% vs +1.0% y/y expected
- Eurozone manufacturing hits 52-month high as input and output prices accelerate
- UK September final manufacturing PMI 51.9 vs 52.0 preliminary
- Ethereum struggles to break out of the range as macro headwinds cap the upside. What to watch?
- US layoffs ease in September, but weak hiring keeps NFP in focus
Markets:
- 10-year Treasury yields down 1 bps to 5.28%
- AUD leads, JPY lags on the day
- WTI crude up 1.5% to $91.80
- Gold up 0.6% to $4,182
- European indices lower; S&P 500 futures +0.4%
- Bitcoin up 0.3% to $83,921
It was a volatile session to kick start October trading in Europe, with bonds continuing to keep broader markets on edge.
10-year Treasury yields fell slightly in Asia to 5.28% before rebounding in the earlier part of the session to 5.33%, their highest level since 2002.
That saw European indices deepen losses while S&P 500 futures completely pared its earlier advance for a brief moment as well. But as yields fell back to 5.28% now, we’re seeing the sharp losses in Europe pull back a little while S&P 500 futures push back up on the day.
It’s still all about the bond market at this stage.
With yields pushing higher earlier in the session, the dollar also caught a strong bid with EUR/USD falling to its lowest in three months. The pair broke below the 1.1300 support region, touching 1.1265 before recovering back towards the figure level as yields came off the boil.
The broader market mood is not helped by a rebound in oil prices as well, with WTI crude up 1.5% to $91.80 on the day. Meanwhile, Brent crude is threatening a fresh advance back above the $100 mark.
So once again, it is that uncomfortable combination of higher oil prices and elevated bond yields that is biting at risk sentiment.
In Europe, major indices had a rough time in the early stages in falling by over 1% across the board. The DAX has since pared most of that decline but the CAC 40 has only halved it as we pass midday in London.
Besides that, gold is holding on to its bounce from earlier today around $4,182. However, the precious metal is still struggling for firmer conviction to break back above $4,200.
For now, the bond market is still the tail that is wagging the dog. And that will continue to be the case heading into the US jobs report tomorrow, which will offer another major test for yields and broader markets.
This article was written by Justin Low at investinglive.com.