Stocks, bonds struggle following uncertainty interest rate hike

BLOOMBERG

European shares crept higher following three straight loss-making days, after softer US economic data sparked a late bounce on Wall Street and soothed fears of a Federal Reserve interest rate hike next month.
Gains were fragile however, with Europe’s Stoxx 600 index edging just 0.1% higher after closing at the lowest in more than six months, while futures for the US S&P 500 were back to trading in the red, a day after the underlying benchmark posted its biggest gain in almost three weeks.
The yield on benchmark 10-year Treasury bonds stood around 4.73%, slightly higher on the day, though it remains well off 16-year highs hit this week.
Earlier, Asian markets benefited from October 4’s firmer Wall Street close, with Japan’s Topix Index posting its best day since November 2022.
The relief came after data showing US companies added the fewest jobs last month since early-2021, while a separate report showed a modest pullback in the services sector. That persuaded traders to trim bets on a November Fed rate rise and they now see a one-in-quarter chance of a move, compared to one-in-three before the figures.
“We are really at an inflection point where interest rates in the US just can’t go up that much higher,” Adam Coons, a fund manager at Winthrop Capital Management, said on Bloomberg Television.
Still, markets are struggling to gain traction after a bruising cross-asset selloff that wiped trillions of dollars off global equities and bonds amid uncertainty over how much higher US interest rates could go from current 22-year highs. Friday’s monthly payrolls data could prove crucial in showing whether the labour market is cooling, though investors were expected to see weekly jobless numbers later on Thursday.
The dollar was flat against its Group-of-10 peers, while the yen strengthened as much as 0.6%, a day after a sharp drop in the currency stoked speculation that authorities had intervened to steady it.
However, Japan’s bond market stress continued, as a weak auction of long-dated debt pushed 20-year yields to the highest since 2013.
Commodity markets were calmer, with US crude oil futures gaining ground after slumping 5.6% for the steepest loss in more than a year. Gold was also supported by the dip in bond yields, though it stayed close to March lows.