A selloff across global bonds and equities paused on Friday as oil retreated from a four-month high, but the surge in energy costs left Treasury yields near multi-year peaks and hardened bets on central-bank rate hikes. S&P 500 futures bounced 0.4% while Asian markets closed sharply lower.
S&P 500 futures rose 0.4% on Friday as a selloff that had gripped global stock and bond markets took a breather. Nasdaq futures added 0.3% over the same stretch. The relief came as oil pulled back from a four-month high, even as the week's spike in crude kept inflation fears alive.
Oil eases after a four-month spike
Brent crude touched a four-month high of $109.97 a barrel on Friday after jumping 6% the day before, then ran into selling pressure and was last down almost 2% at $105.90. It was still set for a weekly rise of about 10%.
Oil flows stayed restricted through the Strait of Hormuz as the U.S. and Iran traded attacks, while Iran-aligned Houthis seized Yemen's port of Mocha, threatening Saudi exports through the Red Sea. Comments from President Donald Trump that the conflict could last beyond the November midterm elections added to the unease, and bond yields surged globally on heightened inflation fears. According to Reuters: "Markets are pricing in a scenario of higher rates for longer," said Gustav Helgesson, macro strategist at SEB.
Yields hold near multi-year highs
The 10-year Treasury yield was little changed at 4.946%, after earlier touching its highest in almost three years at 4.979%. The 30-year yield scaled a 19-year top of 5.3836% before falling back to 5.359%, and the 2-year yield hit a 14-month peak of 4.5961% as markets priced about a 67% probability the Federal Reserve raises interest rates this month. Thursday's U.S. bond selloff was partly driven by a Treasury buyback programme that fell short of an expected $6 billion.
CPI print looms over the Fed
August U.S. consumer price data due later in the day could decide whether the Fed hikes next week. Forecasts center on a 0.2% monthly rise in core CPI, though risks skew higher after overnight producer-price data showed stickiness. Analysts at JPMorgan expect eight of nine developed-market central banks to raise rates by year end, including the Fed, the Bank of Japan and four European central banks. The European Central Bank raised rates on Thursday for the second time this year, with some officials eyeing further tightening in October.
Asia bears the brunt
Europe's STOXX 600 rose 0.2% on Friday but was still down 2% for the week. Asian stocks fared worse: the MSCI Asia-Pacific index excluding Japan lost 1.5%, while Japan's Nikkei tumbled 1.9%.
The U.S. dollar index held steady at 99.04 after gaining 0.4% against major peers on Thursday. Gold rose 0.6% to $4,342 an ounce, recovering part of Thursday's near-2% drop.
Source: Investing.com
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