European shares and the euro dropped Wednesday as Brent crude rose above $100 a barrel on renewed Middle East tensions, while widening French bond spreads kept fiscal worries alive. Wall Street futures were mixed after the S&P 500 and Nasdaq closed at record highs a day earlier.
Oil shock pressures European shares
Europe's STOXX 600 fell 0.45%, pulling MSCI's main world stocks index down 0.28%, as Brent crude rose 1% to $101.58 a barrel. The move came after a storm bore down on US oil-producing regions and Yemen's Iran-backed Houthis attacked Saudi Arabia, tightening supply expectations. Nasdaq futures slipped 0.11% and S&P 500 futures were roughly unchanged, a day after the S&P 500 closed at a record high, up about 0.6%, the Nasdaq gained 0.4% to also hit an all-time high, and the Dow Jones Industrial Average rose 0.5%.
In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.5%, led by declines in Hong Kong and Singapore, though the index remains up 0.9% for the month. Raymond James economist Jeremy Batstone-Carr said markets in the early stage of the fourth quarter — typically equities' strongest — are being driven by a confused mix of signals. According to Investing.com: "stocks up, US breadth down, yields up, oil down and up, and down".
French bond spreads widen on fiscal doubts
The yield spread between French and safe-haven German Bunds widened again after narrowing for two days, last trading at 131 basis points after nearly touching 160 bps last week. French bonds have been under pressure as investors weigh expectations of higher European Central Bank rates alongside political uncertainty before the 2027 election. The wider spreads weighed on the euro, which slipped 0.47% to $1.1208, having touched a 17-month low of $1.1161 earlier this week.
Dollar firms as Treasury auctions loom
The dollar index rose 0.33% to 102.18, rebounding after a 0.27% slide in the prior session. The yen weakened 0.1% to 158.30 per dollar and sterling dipped 0.2% to $1.3228. The US 10-year Treasury yield rose 3.8 basis points to 5.307%, with investors awaiting a 10-year auction later Wednesday and a 30-year sale Thursday that will gauge demand for US debt. Longer-dated yields hit a 24-year high Monday amid a selloff running since late August on inflation and fiscal-outlook concerns.
The Federal Reserve will publish minutes from its September 15-16 meeting Wednesday. Traders have scaled back bets on a rate increase this month to 19%, down from about 50% a week earlier. Spot gold slipped 0.6% to $4,135.28 an ounce.
Source: Investing.com
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