Stocks Rebound, Bonds Steady Before Key US Data: Markets Wrap

(Bloomberg) — Stocks rose and bonds steadied after a bruising selloff as traders awaited a crucial US inflation reading for clues on the interest-rate outlook. The dollar headed for its best month since June.

MSCI’s Asia Pacific Index climbed 0.9%, on course for its biggest advance in three weeks, with 10 of the benchmark’s 11 industry groups rising. Equity-index futures signaled shares will also open higher in Europe and the US.

Bonds remained in focus after yields on the longest-maturity Treasuries climbed to the highest levels since 2002 on Tuesday, extending this week’s gain as a rally in oil prices prompted traders to price in further interest-rate hikes by the Federal Reserve. US yields steadied across the curve on Wednesday, with the 10-year holding at 5.23%.

Brent crude climbed 0.6% to $103.20 a barrel, recouping some of its losses from Tuesday. Oil flows from the Middle East are returning toward pre-war levels despite continued risks to shipping, according to separate estimates from JPMorgan Chase & Co. and Goldman Sachs Group Inc.

Oil prices and US-Iran tensions remain key sources of uncertainty, with markets looking for clearer signs of progress in negotiations after conflicting signals in recent days. Global bond yields have climbed to multi-year highs as elevated energy costs threaten to boost inflation and reinforce expectations for further Fed rate hikes. For equities, attention will turn to corporate earnings next month for indications of whether profits can support valuations.

“The selloff in bonds can stop for one of the following reasons: a quick resolution of the US-Iran conflict, a material fall in stock prices driven by a slowdown in hard economic data, or lower earnings and forward guidance,” said Arjun Vij, a fund manager at JPMorgan Asset Management.

What Bloomberg’s Strategists Say…

“Until global economic growth decelerates sufficient enough to offset the inflationary impulse from AI capex and energy disruptions, the floor for long-end yields keeps rising. Bond markets will need more than reflexive ETF inflows to reverse the broader uptrend in yields.”

— David Savage, Macro Squawk. Click here for the full analysis.

Yields on Treasury 30-year bonds rose for a sixth day on Tuesday to 5.56% as investors demanded greater compensation to hold the securities amid concerns about persistent inflation, higher government spending and a surge in corporate borrowing to finance the AI buildout.

Traders are ramping up bets that Treasury yields will keep climbing, raising the risk of an abrupt unwind of those positions on any sign of a marked economic cooling. Money markets are pricing a series of rate hikes over the next year.

Equities have remained under pressure in September with MSCI’s All Country World Index losing 1%. The corresponding Asian benchmark has dropped 0.4%, its third decline in four months.

A Bloomberg gauge of the dollar steadied, wrapping up its best month since June as the Fed’s renewed focus on taming inflation pushed up rate expectations and US bond yields. The yen strengthened 0.2% to 156.95 per dollar.

Elsewhere, Chinese property stocks slumped after Beijing rolled out a mortgage subsidy program that analysts said fell short of expectations.

In tech, SoftBank Group Corp., an investor in OpenAI, rose more than 6% after people familiar with the matter said the artificial intelligence startup sought to raise at least $30 billion in fresh funding at a $1.4 trillion valuation.

Traders will now turn their attention to Wednesday’s Bureau of Economic Analysis’s Personal Consumption Expenditures reading, the Fed’s preferred measure of inflation. August’s personal income and outlays report should show an acceleration in monthly headline and core inflation, according to Bloomberg Economics.

Upside surprises would reinforce the Fed’s hawkish stance and support the case for further tightening, Tim Waterer, chief market analyst at KCM Trade, wrote in a note. Softer numbers, however, could raise questions about the need for a follow-up rate hike in October and potentially take some of the steam out of the recent rise in Treasury yields, he said.

“Between the oil price, bond yields and key US inflation and jobs data, there are plenty of things to keep an eye on for the rest of the week,” Waterer wrote.

Corporate Highlights:

Apple Inc. Chief Executive Officer John Ternus is moving to overhaul the iPhone maker in an effort to accelerate product development, broaden its range of devices and create a leaner organization with a greater focus on engineering. Anthropic PBC warned that its technology poses “catastrophic or existential risks to humanity” and mapped out plans to spend hundreds of billions of dollars in its prospectus, Reuters reported.

Some of the main moves in markets:

Stocks

S&P 500 futures rose 0.2% as of 6:50 a.m. London time Nasdaq 100 futures were little changed The MSCI Asia Pacific Index rose 0.9% The MSCI Emerging Markets Index rose 0.2% Japan’s Topix rose 1.9% Australia’s S&P/ASX 200 rose 1.1% Hong Kong’s Hang Seng was little changed The Shanghai Composite rose 0.4% Euro Stoxx 50 futures rose 0.7% Currencies

The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1340 The Japanese yen rose 0.2% to 156.96 per dollar The offshore yuan was little changed at 6.7060 per dollar The British pound was little changed at $1.3239 Cryptocurrencies

Bitcoin fell 0.2% to $83,391.7 Ether fell 0.5% to $2,674.84 Bonds

The yield on 10-year Treasuries was little changed at 5.23% Japan’s 10-year yield declined 1.5 basis points to 3.070% Australia’s 10-year yield declined four basis points to 5.33% Commodities

Spot gold fell 0.2% to $4,174.85 an ounce West Texas Intermediate crude rose 0.2% to $89.56 a barrel This story was produced with the assistance of Bloomberg Automation.

–With assistance from Ruth Carson.

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