Finance · Top StoryA mood of nervous caution hung over U.S. markets on Tuesday, as flaring hostilities in the Middle East pushed oil to a six-week high and Brent crude futures close to $100 a barrel, while the Japanese yen extended its strong gains to hit a seven-month high against the dollar.
In Jamie McGeever’s column, the focus shifts to the U.S. bond market narrative, countering claims that it is cracking. While yields are rising due to sticky inflation and strong nominal growth, the increase in borrowing costs is deemed reasonable. The article explores the implications of the 10-year Treasury yield nearing 5%, a level not seen in nearly two decades, and examines the broader economic context.
Key developments include: - A blistering rally in the Japanese yen ahead of an expected interest rate hike from the Bank of Japan next week, disrupting the carry trade as investors reassess currency strategies. - Yemen’s Tehran-backed Houthis attacked four cities in Saudi Arabia, wounding over 70 people and setting oil installations ablaze, marking a major escalation in the Middle East conflict. - Brent crude prices remain below $100 despite escalating tensions in the U.S.-Iran conflict, disrupting Gulf exports through the Strait of Hormuz and the Red Sea.
The article also discusses market reactions: - Stocks in Japan, Europe, and the UK dipped slightly, with Wall Street showing losses across major indices (Nasdaq -0.3%, S&P 500 -0.6%, Dow -1.2%). - The U.S. bond selloff, triggered by the Iran conflict, pushed the 10-year Treasury yield near 5%. - Energy and software sectors saw mixed performance, with energy rising +1% and Intel surging +9%, while healthcare and Amgen declined -2.5% and -10%, respectively. - The dollar/yen exchange rate dipped below 153.00, while the euro/yen hit its lowest since November 2022. The Chilean peso rose +1%.
The article concludes with economic talking points: - Long-dated Treasuries have underperformed over the past decade, but the risk-reward balance for bonds is improving, with yields near 5% seen as a buying opportunity. - The Japanese yen’s surge, though headline-grabbing, is not the only notable Asian currency performance; the South Korean won has also strengthened significantly. - Canada’s retaliatory tariffs on U.S. goods, including steel, aluminum, and automobiles, have intensified trade tensions, with potential escalation looming. - The U.S. Treasury’s $39 billion auction of 10-year notes drew strong demand, reflecting investor confidence.
The piece also hints at potential market-moving events for the following day, including Japan’s non-manufacturing tankan index, China’s PPI and CPI inflation data, Taiwan’s trade figures, and U.S. Treasury sales of 10-year notes.
Source: Euronext Markets: Real-time Stock Market Data | live
