NEW YORK, Oct 13 — US Treasury yields rose and the dollar strengthened while global stock markets fell yesterday after data showed US consumer prices increased more than expected in September.
That helped to underpin some views in the market that US interest rates may need to remain high for longer.
The week’s sharp escalation of Middle East tensions ensured the mood remained cautious across markets.
The Labour Department’s report yesterday showed the annual increase in consumer prices last month, excluding the volatile food and energy components, was the smallest in two years, but the surprise surge in rental costs caught investors’ attention.
An auction of US 30-year bonds showing poor demand also sent Treasury yields higher. In afternoon trading, US benchmark 10-year yields were last up 10.2 bps at 4.699 per cent, after hitting two-week lows of 4.53 per cent earlier in the session.
The rise in yields weighed on Wall Street stocks.
Yields are “going to be the primary driver on where markets go,” for now, said Alan Lancz, president of Alan B. Lancz & Associates Inc, an investment advisory firm based in Toledo, Ohio.
But, “it’s going to be a challenging market environment,” he said. “I know a lot of people think the fourth quarter is going to be a rally ... but it’s gonna be difficult with all the uncertainty going on now as things unfold” in the Middle East and with earnings.
Third-quarter earnings season gets under way for the S&P 500 yesterday with results from some of the big US banks and other companies.
The Dow Jones Industrial Average fell 173.73 points, or 0.51 per cent, to 33,631.14; the S&P 500 lost 27.34 points, or 0.62 per cent, to 4,349.61; and the Nasdaq Composite dropped 85.46 points, or 0.63 per cent, to 13,574.22.
The pan-European STOXX 600 index rose 0.10 per cent and MSCI’s gauge of stocks across the globe shed 0.49 per cent.
Recent gains in stocks have followed comments from Federal Reserve officials suggesting that US interest rates — which tend to drive global borrowing costs — may have finally peaked.
“Overall, there is probably not enough in the (CPI) report alone to suggest to the FOMC that it needs to be tightening policy again in November, but it will see it as justifying its message that policy needs to remain ‘tighter for longer,’ with the prospect of another rate rise still being kept on the table,” said Stuart Cole, chief macro economist, at Equiti Capital.
US oil prices ended lower after a large build in US crude stockpiles. Brent futures rose 18 cents to settle at US$86.00 (RM405.53) per barrel. US West Texas Intermediate crude fell 58 cents to US$82.91. Prices had risen more than US$1 a barrel earlier in the session.
In the foreign exchange market, the dollar index, a measure of the US currency against six others, jumped 0.85 per cent to 106.550 in its biggest single-day gain since March 15. The dollar rose more than 1 per cent against sterling, and the Australian and New Zealand dollars.
Spot gold dropped 0.3 per cent to US$1,868.52 an ounce. — Reuters