Stocks Slide With Bonds After US Yield Spike: Markets Wrap – Yahoo Finance

May 29, 2024

(Bloomberg) — Stocks fell and bond prices slid, following an overnight sell-off in U.S. Treasuries after a weak bond auction and hawkish comments from the Federal Reserve chairman.

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Europe’s Stoxx 600 index fell 0.6%, and futures pointed to a similar decline on Wall Street. UK 10-year government bond yields rose 5 basis points, while German bund yields of the same maturity fell from a six-month high after regional inflation fell short of monthly national average expectations.

Markets are feeling the ripples of tough trading in the U.S., with weak demand for Treasury sales, resilient consumer confidence data and central bank comments backing up the outlook for interest rates to remain elevated. There’s an auction for seven-year Treasury notes late Wednesday, and a key U.S. inflation release is in focus at the end of the week.

“The risk of higher bond yields for a long period has weighed on equity valuations, so some short-term pressure seems understandable,” said Leonardo Perandini, equity strategist at Julius Baer Bank. “That said, we think markets could continue to rise with easing inflation expectations and rate cuts on the horizon.”

The 10-year Treasury yield edged up to 4.56% after rising 9 basis points on Tuesday. The Stoxx 600 is expected to gain 2.2% in May, while the S&P 500 was up 5.4% as of Tuesday’s close.

The Fed’s preferred inflation gauge, the personal consumption expenditures index, is due for release on Friday. Economists expect the PCE deflator to rise at an annualized rate of 2.7% in April, the same as in March.

“One potential pitfall is that a big, unexpected downside in inflation could lead to the perception that the U.S. economy is not as strong as previously expected — ‘bad news is bad news,'” said Jeffrey Yu, senior strategist at Bank of New York Mellon.

Fed Chairman Jerome Powell and his colleagues have stressed that they need more evidence that inflation is sustainably moving toward the 2% target before lowering the benchmark interest rate.

Fed Chairman Kashkari says interest rate hike not completely ruled out

Brent crude rose 0.8% to $84.93 a barrel, while West Texas Intermediate rose above $80 a barrel, as fresh attacks in the Red Sea escalated geopolitical tensions in the Middle East ahead of an OPEC+ meeting at the weekend.

Company Highlights:

Anglo American said it would not give BHP Group more time to commit to a takeover bid, suggesting a $49 billion takeover bid by the world’s biggest mining company was likely to die for now.
ConocoPhillips is in talks to buy smaller rival Marathon Oil Co., further adding to a string of big oil industry acquisitions, according to the Financial Times.
Royal Mail’s parent company has agreed to a 3.6 billion pound ($4.6 billion) takeover by Czech billionaire Daniel Kretinsky, setting the stage for a political fight over the future ownership of Britain’s postal service.
Lenovo Group plans to sell $2 billion worth of zero-coupon convertible bonds to Saudi Arabia’s sovereign wealth fund as part of a broader strategic agreement with the tech-hungry kingdom.

Major events this week:

German Consumer Price Index, Wednesday
Fed Beige Book, Wednesday
Fed President John Williams to speak Wednesday
Eurozone economic confidence, unemployment rate, consumer confidence on Thursday
US initial jobless claims, GDP, wholesale inventories Thursday
Fed’s John Williams and Laurie Logan to speak Thursday
Japan unemployment rate, Tokyo consumer price index, industrial production, retail sales, Friday
China manufacturing and non-manufacturing PMI, Friday
Eurozone Consumer Price Index, Friday
U.S. Consumer Income, Expenditures and PCE Deflator Friday
Federal Reserve President Raphael Bostic to speak on Friday