Oil jumps on supply bets as Treasury yield tops 3 percent

Bloomberg

Oil rallied after President Donald Trump’s decision to walk away from a nuclear deal with Iran, while the dollar slipped and 10-year Treasury yields topped 3 percent ahead of a key bond auction.
US stock indexes edged higher. Energy shares advanced after West Texas oil reversed Tuesday’s slump to trade above $71 per barrel as the market came to terms with a US message that buyers of Iranian crude have six months to curb their purchases.
Walmart Inc. weighed on the major gauges after its deal to buy a controlling stake in India’s biggest online seller, Flipkart, was met with investor skepticism. A gauge of emerging-market currencies erased its 2018 gains before the dollar gave up an earlier advance to trade slightly lower.
Even as North Korea released three US citizens it had held for as long as two years in a goodwill gesture, the threat of increased geopolitical tension in the Middle East is buffeting global sentiment just as concern spreads over the implications of higher Treasury yields and recent dollar strength. Wednesday brings with it a $25 billion auction of 10-year US notes, with investors waiting to see if the new bonds will carry a 3 percent coupon for the first time in almost seven years.
“This tug-of-war remains in the market, regardless of the positive headlines on North Korea, regardless of the positive headlines on earnings,” said Quincy Krosby, the chief market strategist at Prudential Financial Inc.
“This is a market that has to sort that out, and that 10-year yield flirting with 3 percent again is a reflection of that tug-of-war.”
Elsewhere, stocks in Europe climbed as the MSCI Asia Pacific Index fell. Indonesia’s rupiah weakened to a two-year low on worries about capital outflows from emerging markets. Turkey’s lira gained after President Recep Tayyip Erdogan called a meeting to discuss issues including the exchange rate, fueling speculation that authorities may take measures to stem a arket rout.
The Bank of England decides on policy on Thursday. US inflation data for April is due the same day.
The S&P 500 Index added 0.3 percent in New York. The Stoxx Europe 600 Index rose 0.6 percent. The U.K.’s FTSE 100 Index rose 1.2 percent to the highest since January. The MSCI Emerging Market Index was little changed. The MSCI Asia Pacific Index sank 0.3 percent.
The Bloomberg Dollar Spot Index dipped 0.1 percent. The euro was little changed at $1.1861. The British pound increased 0.2 percent to $1.3578. The Japanese yen fell 0.5 percent to 109.71 per dollar, the weakest in a week.
The yield on 10-year Treasuries rose two basis points to 2.99 percent.
Germany’s 10-year yield was little changed at 0.56 percent. Britain’s 10-year yield increased two basis points to 1.46 percent. West Texas Intermediate crude increased 2.9 percent to $71.06 a barrel, the highest in more than three years on the largest climb in three weeks. Gold was little changed at $1,314.10 an ounce.