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Stocks stumble, yields jump on rates outlook; oil rallies

EconomyJan 14, 2022 04:52PM ET
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2/2 © Reuters. FILE PHOTO: An electronic stock quotation board is displayed inside a conference hall in Tokyo, Japan November 1, 2021. REUTERS/Issei Kato 2/2

By Koh Gui Qing

NEW YORK (Reuters) -Global stock markets stumbled again on Friday and U.S. Treasury yields climbed as cautious investors worried about how imminent U.S. interest rate hikes would affect the economy.

A warning from the largest U.S. bank JPMorgan Chase & Co (NYSE:JPM) that its profitability may fall below a medium-term target cast another pall on Wall Street.

By early evening, MSCI's gauge of stocks across the globe had shed 0.36%. The pan-European STOXX 600 index closed down 1.01% and had its worst week since Nov. 26, weighed in part by declines in technology stocks. (EU)

In the United States, a spate of bargain hunting toward the end of the day helped stocks to narrow losses. The Dow Jones Industrial Average fell 0.56%, the S&P 500 ended flat, and the Nasdaq Composite flipped into the black, rising 0.59%. [.N]

"We are now entering a period where the Federal Reserve will engage in a never-before-seen experiment: raising interest rates off zero and reducing the size of its balance sheet in the same year," said Nicholas Colas, co-founder of DataTrek Research.

"The market is still left wondering what results will come from their decisions," Colas said.

In line with expectations of rising rates, benchmark 10-year Treasury yields jumped to 1.7859%, rebounding toward a two-year high of 1.8080% struck earlier this week. Two-year Treasury yields hit a high of 0.9730%, a level last seen in February last 2020. [US/]

European bond yields also rose in choppy trade as investors focused on monetary policy tightening by central banks, though sharp falls in Germany's benchmark 10-year yield earlier this week led it to notch its biggest weekly fall in 10 weeks. [GVD/EUR]

Meanwhile, in Asia, the five-year Japanese government bond yield jumped to its highest since January 2016 and the yen rose after a Reuters report that Bank of Japan policymakers are debating how soon they can start an eventual interest rate hike.

Such a move could come even before inflation hits the bank's 2% target, sources said.

The dollar, which has been slugged by a three-day selling spree as investors bet that expectations of rate rises are already priced into the currency, finally steadied on Friday.

The dollar index, which measures the greenback against a basket of six currencies, bounced 0.34% to 95.167, pulling away further from a two-month low hit this week. [USD/]

A bounce in the dollar dragged on the euro, which lost 0.34% to 1.14135.

Sterling also slipped 0.22% to 1.36780, taking a breather after this week's rally that pushed it to a 2-1/2-month high.

GDP data on Friday showed that Britain's economy grew faster than expected in November and its output finally surpassed its level before the country went into its first COVID-19 lockdown.

Asian shares had fallen overnight after Fed Governor Lael Brainard on Thursday became the most senior central banker to indicate the Fed will hike rates in March.

Other Fed officials have shown their willingness to raise rates, after data this week showed U.S. consumer prices surged 7% year-on-year.

Bucking the weakness in equity markets, oil futures rose again, on course for a fourth weekly gain, boosted by supply constraints. [O/R]

Brent crude futures rallied 1.9% to a two-and-a-half month high of $86.44 a barrel. U.S. West Texas Intermediate crude jumped 2.6% to $84.28. Both Brent and U.S. futures entered overbought territory for the first time since late October.

Rising bond yields weighed on non-yielding gold, with spot gold down 0.31% at $1,816.53 per ounce. [GOL/]

"It’s clearly the impact of monetary policy tightening that’s being felt in markets here," said Guillaume Paillat, multi-asset portfolio manager at Aviva (LON:AV) Investors.

Paillat, who is expecting at least four Fed rate hikes this year, said it was "pretty much a done deal" that the tightening cycle would start in March.

"What matters over the coming days is going to be more about earnings," he added. "There’s still a bit of room for earnings to surprise to the upside."

Stocks stumble, yields jump on rates outlook; oil rallies
 

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Comments (8)
Critical Riff
Critical Riff Jan 14, 2022 4:10PM ET
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looks like the fed is really trying to push it up by any means necessary before the market closes
king michael
king michael Jan 14, 2022 1:09PM ET
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Biden government has been doing everything to hurt the economy and has been pushing millions of Americans to poverty and even homeless. The only possibility to save this country is if the whole Biden government  realize that they are a bunch of very incapable herds and simply step down.
Jay Garrelts
Jay Garrelts Jan 14, 2022 1:09PM ET
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Yeah let’s not forget Trump created half the money and signed a terrible deal with OPEC but those are facts ain’t nobody got time for facts anymore lol
Rff Fff
Rff Fff Jan 14, 2022 1:07PM ET
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When they signaled that dollar position in long trimmed,the green started to gain
Luke Lee
Luke Lee Jan 14, 2022 12:24AM ET
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why write an article with the headline "Asian shares are down" and then show a picture of Asian shares mostly being up?
David Bowie
Defcon2 Jan 14, 2022 12:24AM ET
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You're saying that red means up in Asia?
Kristian Ivanov
Kristian Ivanov Jan 14, 2022 12:24AM ET
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I wrote the same thing but with a mean word and investing didnt post.. hahaha
Luke Lee
Luke Lee Jan 14, 2022 12:24AM ET
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David Bowie  yes, take a closer look at the picture
Erski Gumby
SB20 Jan 14, 2022 12:24AM ET
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Because it’s Reuters.
Rff Fff
Rff Fff Jan 14, 2022 12:24AM ET
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When they signaled long position in dollar trimmed ,the dollar have started to gain
Chad RicherThanYou
Chad RicherThanYou Jan 13, 2022 11:56PM ET
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All in ALIBABA
Steffen vdm
Steffen vdm Jan 13, 2022 11:36PM ET
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Yesterday: "it's all priced in for now"
Joel Schwartz
Joel Schwartz Jan 13, 2022 10:38PM ET
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South Korea just raised interest rates. What is the FED waiting for? They’re behind the curve.
Shawn SMK
Shawn SMK Jan 13, 2022 10:33PM ET
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"Everyone is really nervous right now. It's because everything is potentially going to come under pressure from aggressive Fed policy," said Kyle Rodda, a market analyst at IG in Melbourne. He calls 0.25% interest hike aggressive, what a joke.
Tek Phou
Tek Phou Jan 13, 2022 10:33PM ET
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Market becomes volatile when 10yr yields goes from 1.4 to where it is today, which is essentially more or less an 0.25 increase.
Oldfashioned Owl
Oldfashioned Owl Jan 13, 2022 10:33PM ET
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Its propaganda. These so called experts do this to support each other to keep investments in green. Just think about it.
Steffen vdm
Steffen vdm Jan 13, 2022 10:33PM ET
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Stating the obvious. Reuters is also part of the gang. Always quoting those who have bullish views
 
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