Treasuries Hold Gains After Rally, Stocks Decline: Markets Wrap

(Bloomberg) — Treasuries broadly held on to gains that pulled yields down from multi-decade highs, as traders looked past higher oil prices and their inflationary implications. Asian equities fell.

The benchmark 10-year Treasury yield held at 5.25% on Friday, having climbed to a 24-year high in the previous session. Government debt in Japan, New Zealand and Australia advanced.

US bonds rebounded on Thursday from a bruising global selloff as pressure in European markets spurred demand for haven assets. Mostly dovish commentary from Federal Reserve officials also supported the Treasuries rally, ahead of Friday’s US payroll data.

The bounceback gathered pace as concerns around France’s fiscal and political situation pushed euro-area risk premiums higher. Longer-maturity UK gilt yields also briefly climbed above 6%. French bond futures held near an all-time low, while their German equivalents climbed for a fourth day amid concerns about contagion from France’s debt risks.

Bonds have been under pressure from elevated inflation concerns, leaving the path for energy prices and any escalation between Washington and Tehran key to whether the rebound in Treasuries can hold. That raises the stakes for Friday’s US jobs report, which may offer clues on how much scope the Fed has to take a more measured approach to further tightening.

“With markets mostly driven by geopolitical risk and monetary policy uncertainty, the tone this Friday will be dictated by any fresh headlines about the war or US nonfarm payrolls data,” Kyle Rodda, a senior analyst at Capital.com, wrote in a note. “After solid private payrolls and jobless claims numbers this week, the ultimate question is whether the labor market remains little impediment to future rate rises.”

Meanwhile, the prospect of renewed US-Iran hostilities lifted oil, with Brent rising 0.3% to $102.60 a barrel, after gaining 4% on Thursday.

The Pentagon may soon deploy another aircraft carrier and 10,000 sailors and marines to the Persian Gulf, giving US commanders more options should President Donald Trump decide to escalate attacks on Iran.

MSCI’s Asia Pacific equities benchmark fell 0.8%, with Hong Kong leading with a 2.6% drop. Shares of HSBC Holdings Plc fell about 5%, tracking peers on worries about rising bond yields.

In Japan, the yen was little changed around 158 per dollar after Tokyo’s key inflation gauge rose, backing the Bank of Japan’s stance on continuing to raise the benchmark rate.

Bonds remained in focus amid remarks from several policymakers. Fed Vice Chair Philip Jefferson, who said policymakers should take more time before deciding whether additional rate increases are needed to slow inflation.

He echoed comments from New York Fed President John Williams, who earlier this week said there was no urgency in considering another hike after the Federal Open Market Committee’s decision to lift rates in September.

However, Dallas Fed President Lorie Logan said the central bank must continue raising rates to fully cool inflation.

“We continue to think the Fed remains oriented towards a limited two or three hike mini-cycle in the base case,” said Krishna Guha at Evercore. “It does not currently see demand so strong as to create obvious danger of demand-driven overheating risk.”

Corporate Highlights:

Nike Inc. said it’s consolidating its operations and cutting jobs while warning that its sales slump is poised to deepen. Anthropic PBC is seeking to go public as soon as the middle of November, according to people familiar with the matter. Taiwan Semiconductor Manufacturing Co. is weighing a new campus in Texas that would add tens of billions of dollars in new investment to the company’s multiyear expansion into chipmaking in the US. Some of the main moves in markets:

Stocks

S&P 500 futures rose 0.2% as of 10:58 a.m. Tokyo time Nikkei 225 futures (OSE) fell 0.7% Japan’s Topix fell 1% Australia’s S&P/ASX 200 rose 0.4% Hong Kong’s Hang Seng fell 2.4% Euro Stoxx 50 futures fell 0.3% Currencies

The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1236 The Japanese yen was little changed at 158.10 per dollar The offshore yuan was little changed at 6.7109 per dollar Cryptocurrencies

Bitcoin rose 0.3% to $84,889.48 Ether rose 0.6% to $2,714.96 Bonds

The yield on 10-year Treasuries advanced two basis points to 5.26% Japan’s 10-year yield declined one basis point to 3.085% Australia’s 10-year yield declined four basis points to 5.36% Commodities

West Texas Intermediate crude rose 0.1% to $92.99 a barrel Spot gold fell 0.6% to $4,151.57 an ounce This story was produced with the assistance of Bloomberg Automation.

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