Equities on Wall Street traded lower in the premarket session on Tuesday, as investors were discouraged by the Federal Reserve’s Chair Jerome Powell announcing the possibility of the Fed increasing interest rates to decrease the rate of inflation and the US Senate failing to approve a measure to suspend the debt ceiling. Notably, Federal Reserve Bank of New York leadership warned that tapering the United States central bank’s bond-buying “may soon be warranted,” The Dow Jones Industrial Average decreased 0.39% at 4:24 am ET, the Nasdaq 100 lost 1.34% at the same time. The S&P 500 traded 0.73% lower a minute later. The euro lost 0.14% against the dollar to trade for $1.16792 at 4:26 am ET.]
Shares drop for third day, yields soar as markets brace for rate hikes
LONDON (Reuters) – Global shares fell for a third successive day, while bond yields on both sides of the Atlantic soared on anxiety over when central banks might raise interest rates. MSCI’s All Country World Index, which tracks shares across 49 countries, was down 0.3% on the day after the start of trading in Europe. The 10-year U.S. Treasury yield hit 1.5444%, its highest level since Jun. 17, pulling up euro zone bond yields in its wake. Two-year Treasury yields surged to 18-month highs. A market measure of euro zone inflation expectations jumped to 1.81%, its highest level in two weeks. Surging yields pressured high-growth technology shares at the start of trading in Europe while fresh signs of a slowdown in China’s economy also weighed on investor sentiment, pushing the pan-European STOXX 600 index down over 1%. [.EU] Britain’s FTSE 100 index fell 0.5%, while Germany’s DAX fell 0.8%. France’s CAC 40 fell 1.1% and Italy’s FTSE MIB index slipped 0.6%. “The global equity market is having difficulties rising in a wall of worries as the energy crunch and re-pricing of the U.S. (and EU over the month) is potentially changing the timing and speed of future rate increases or at least tapering,” said Sebastien Galy, senior macro strategist at Nordea Asset Management. Rising yields also boosted the dollar, with the index that measures the greenback’s strength rising to a five-week high. The Japanese yen fell against the dollar and the euro as rising yields made the currencies more attractive to Japanese buyers. During Asian trade, Brent crude oil hit $80 a barrel for the first time in three years, driven by regional economies beginning to reopen from the COVID-19 pandemic and supply concerns. Gold prices fell to a 1-1/2-month low on Tuesday, with spot gold hitting its lowest level since Aug. 11 at $1,735.40 per ounce. London nickel and tin prices extended losses into a second session on Tuesday, as widening power cuts in top metals consumer China cause worries over downstream demand.