European stocks started the day on a positive note as oil prices dropped, and there was softer U.S. labor data from the previous day. This news helped pull U.S. Treasury yields back down from their 16-year highs.
Asian stocks also saw a rebound from their 11-month lows, and this followed gains on Wall Street. However, it’s worth noting that China’s mainland markets remained closed for holidays.
The reason U.S. yields have been on the rise in recent weeks is that investors are reassessing the likelihood of the U.S. Federal Reserve maintaining higher interest rates for a longer period. This is in response to concerns about inflation staying above the target and the economy showing continued strength. The 10-year U.S. yields reached a high of 4.884% overnight.
The rush to sell bonds took a break due to a U.S. private payrolls report that was milder than expected and a 5% decrease in oil prices.
As of 09:03 GMT on Thursday, the yield on the U.S. 10-year bond was at 4.7498%.
In Europe, government bond yields had mixed movements. The 10-year German bond yield, which serves as a benchmark, increased by 2 basis points to 2.961%. Notably, the German bond yield curve showed less inversion than it had since March.
European stock market indexes experienced slight gains, with the STOXX 600 rising by less than 0.1% for the day.
The MSCI world equity index, which keeps tabs on stocks in 47 different countries, rose by 0.2%. This bounce followed the previous session when it had reached its lowest point since late March.
Traders are currently keeping an eye on U.S. jobs data to understand if the bond sell-off trend will persist. We’ll get information on U.S. initial jobless claims later today, and then on Friday, we’ll see the non-farm payrolls data and the unemployment rate, which will provide more insights.
“Many are wondering: can interest rates keep going up, and when will they start causing significant problems for the economy?” said Baylee Wakefield, who manages portfolios at Aviva Investors.
“If we get more positive news from the non-farm payrolls report on Friday, investors might become less concerned about the possibility of higher interest rates by the end of the year.”
Experts believe we need more evidence to determine if the job market is indeed cooling down. ING FX analysts cautioned in a note to their clients that perhaps the markets are giving too much importance to Wednesday’s private payrolls data.
“There’s a risk that the pause in bond movements and the correction in the dollar are overly dependent on the expectation of disappointing jobs data,” ING stated in their client note.
In the world of currencies, the U.S. dollar index is currently at 106.83, a bit lower than its recent peak of 107.34 earlier this week. The euro is holding steady at $1.05035.
The Japanese yen also saw some improvement after the changes in the market on Wednesday, and it’s currently trading at 149 yen per dollar.
Earlier this week, there were speculations that Japanese authorities might have taken steps to support their currency, but data from the Bank of Japan’s money market on Wednesday suggested that this probably didn’t happen.
Despite the recent strength of the U.S. dollar, analysts believe that there might be weaknesses ahead, as indicated by a Reuters poll.
Oil prices, which saw a significant drop on Wednesday, are holding relatively steady because the future demand for oil remains uncertain.
Gold’s price is slightly lower at $1,819.3.
