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US yields hit decade highs; European shares and Nasdaq rise

Published 2023-08-20, 08:39 p/m
© Reuters. FILE PHOTO: A passerby walks past an electric monitor displaying various countries' stock price index outside a bank in Tokyo, Japan, March 22, 2023. REUTERS/Issei Kato
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By Chris Prentice and Yoruk Bahceli

NEW YORK (Reuters) -U.S. Treasury yields rose to decade highs, European equities recovered from a six-week low and the Nasdaq jumped more than 1% on Monday as investors awaited a Federal Reserve meeting on Friday at Jackson Hole, Wyoming.

Wall Street trading was mixed, with the Dow Jones Industrial and the S&P 500 giving back early gains while the tech-heavy Nasdaq Composite rose on earnings optimism.

Benchmark oil futures finished lower after rallying more than $1 a barrel, as hopes for Chinese demand faded.

The Dow Jones Industrial Average fell 36.97 points, or 0.11%, to 34,463.69, the S&P gained 30.06 points, or 0.69%, to 4,399.77 and the Nasdaq gained 206.81 points, or 1.56%, to 13,497.59.

Nvidia led gains among semiconductor stocks as HSBC raised its target prices on the stock.

Earnings on Wednesday will be another major test of valuations.

"Wall Street is having a hard time deciding what to do with stocks," said Edward Moya, senior market analyst with OANDA. "Everyone is expecting an impact from the surge in yields, but it seems like tech companies have held up. Nvidia is going to be key."

The pan-European STOXX 600 ended higher, after rising as much as 0.9% intraday, recovering from Friday's six-week low. Energy and mining sectors gained, tracking higher crude oil and metals prices.

Germany's DAX rose 0.2% even as official data showed a higher-than-expected fall in German producer prices in July.

Adyen slumped 8.6% as two brokerages downgraded the Dutch digital payments firm's stock after the company missed half-year expectations on Aug. 17.

Longer-dated U.S. Treasury yields were up, with the 30-year yield hitting 4.474%, its highest since April 2011. Bond yields move inversely with prices. [US/]

The 10-year Treasury hit 4.354%, the highest since November 2007 - before the collapse of Lehman Brothers almost a year later fully ushered in the Great Financial Crisis.

"People are starting to get worried about the (bond) selloff and are looking ahead to (Federal Reserve Chair Jerome) Powell and what he says later this week about peak rates," said Principal Global Investors' chief global strategist, Seema Shah.

The key event for the week is the Fed's Jackson Hole conference, where markets assume Powell will note the jump in yields and the recent run of strong economic data. The Atlanta Fed's GDP Now tracker is running at a heady 5.8% for this quarter.

A majority of polled analysts think the Fed is done hiking, while traders are betting on a 40% chance of a final Fed hike by November.

CHINA'S CENTRAL BANK SURPRISES

Disappointment earlier weighed on Asian shares.

China's central bank trimmed its one-year lending rate by 10 basis points and left its five-year rate unmoved. That was a surprise to analysts who had expected cuts of 15 bps to both as recovery in the world's second-largest economy has lost steam due to a worsening property slump, weak spending and tumbling credit growth.

"The small injection of stimulus by China's central bank in the ailing economy has proved largely underwhelming given the scale of the challenges erupting across sectors, but it has given investors hope there could be more to come," said Susannah Streeter, head of money and markets at Hargreaves Lansdown (LON:HRGV).

Analysts said concern around downward pressure on the yuan, which has lost nearly 6% against the dollar this year, is likely limiting the size and scope of rate cuts.

The European single currency was up 0.2% on the day at $1.0892, while the dollar index, which tracks the greenback against a basket of currencies of other major trading partners, was down at 103.35 by 4:19 p.m. ET (2019 GMT).

© Reuters. FILE PHOTO: Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., August 15, 2023.  REUTERS/Brendan McDermid/File Photo

In commodities, Brent crude futures settled down 34 cents at $84.46, a loss of 0.4%. U.S. West Texas Intermediate crude finished at $80.72 a barrel for a loss of 53 cents or 0.65%. [O/R]

Spot gold prices rose 0.32% to $1,894.19 an ounce. [GOL/]

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