Published: Sun, October 07, 2018
Economy | By

Higher U.S. Treasury Yields to provide further boost to the greenback

Higher U.S. Treasury Yields to provide further boost to the greenback

Non-farm payrolls increased less than expected in September, likely due to the effect of Hurricane Florence, though data for July and August was revised higher, a Labor Department report showed.

"That sense of the market's rising discomfort about inflation risks leads me to expect the wage inflation reading within the USA nonfarm payrolls on Friday will be critical to the current sell-off", wrote Brian Daingerfield, macro strategist at NatWest Markets.

As a result, a Fed hike in December is now put at an 8 in 10 chance, while investors lifted expectations for how high rates may eventually go. Retailers also declined and Amazon gave up 1 per cent to $1,889.65.

Emerging market stocks lost 1.01 per cent, putting them on track to close at a 17-month low.

The U.S. dollar weakened against the euro but lingered near recent 11-month highs as investors digested U.S. economic data and Powell's remarks.

The Dow .dji rose 0.2 percent, while the S&P 500 .spx gained 0.07 percent and the Nasdaq .ixic 0.32 percent.

At 9:59 a.m. EDT the Dow Jones Industrial Average was down 117.06 points, or 0.44%, at 26,711.33, the S&P 500 was down 11.40 points, or 0.39%, at 2,914.11 and the Nasdaq Composite was down 64.17 points, or 0.80%, at 7,960.92.

"Equities will have no choice because if they don't remain competitive with the risk-free rate of return people will stop buying them anyway and they will start going into bonds", said Walter Zimmerman, chief technical analyst at ICAP in Jersey City, New Jersey.

Tesla shares fell 5.6 percent after Chief Executive Officer Elon Musk stirred nerves about the settlement of his securities fraud lawsuit by mocking the U.S. Securities and Exchange Commission on Twitter.

Wholesale club operator Costco gave up 5.6 per cent to $218.82 after it said it discovered technology problems related to its financial reporting processes.

The technology sector .SPLRCT sank 1.27 percent, dropping for the second day in a row on a fall in Intel and Microsoft .

Fears about Italy's finances pushed Milan stocks down 1.3 per cent, while London's FTSE, Frankfurt's DAX and the CAC in Paris were off 0.95 to 1.4 per cent. Bond prices in all three countries fell again sending yields higher.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.3%, while Japan's Nikkei dropped 0.5% and the Australian benchmark was up just 0.1%.

USA crude CLcv1 oil futures rose 0.7 percent to $74.85 a barrel and Brent crude LCOc1 futures gained 0.5 percent to $85.00 a barrel. Heating oil dipped 0.3 per cent to $2.39 a gallon.

The Japanese yen strengthened 0.17 percent versus the greenback at 113.73 per dollar, while Sterling was last trading at $1.3114, up 0.74 percent on the day.

Gold rose 0.3 per cent to $1,205.60 an ounce. Copper fell 0.5 per cent to $2.76 a pound.

The dollar shot to its highest so far this year on the yen at 114.55 and was threatening a major peak from November 2017 at 114.735. The euro rose to $1.1525 from $1.1515.

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