Europe Stocks Drop, Treasuries Extend Slide on Fed: Markets Wrap
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(Bloomberg) -- European shares retreated for a third day as global bonds deepened their slump on concern about higher US interest rates and investors watched for fresh signs of weakness in China.
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The Stoxx 600 slipped 0.4% at the open, while US equity futures edged higher after Wednesday’s drop on Wall Street. The US 10-year yield rose as much as six basis points to 4.31% on Thursday, taking it to around three basis points away from last October’s peak, which was the highest since 2007.
Minutes from the US Federal Reserve’s July meeting fanned concerns the central bank will continue to raise interest rates to quell inflation, driving bonds down even as higher yields draw in buyers. Jitters over China’s economy and its perilous debt burden persisted, with one of the nation’s biggest shadow banks said to be planning to restructure its liabilities, hiring KPMG LLP to conduct an audit of its balance sheet.
“Markets are taking the prospect of another hike from the Fed increasingly seriously, with futures now pricing in a 45% chance of a further hike by the November meeting,” Deutsche Bank AG strategist Jim Reid wrote. “But as well as the upcoming decisions, it’s clear that investors are adjusting to the fact that rates could remain at a higher level for some time.”
China ramped up its efforts to stem losses in its currency on Thursday by offering the most forceful guidance since October through its daily reference rate for the managed currency. The offshore yuan slipped against the greenback.
The nation’s economic issues now present “a headwind — not just to the US economy, but to the global economy,” US Deputy Treasury Secretary Wally Adeyemo said.
Minutes from the US Federal Reserve’s July meeting fanned concerns the central bank will continue to raise interest rates to quell inflation, driving bonds down even as higher yields draw in buyers. Jitters over China’s economy and its perilous debt burden persisted, with one of the nation’s biggest shadow banks said to be planning to restructure its liabilities, hiring KPMG LLP to conduct an audit of its balance sheet.
“Markets are taking the prospect of another hike from the Fed increasingly seriously, with futures now pricing in a 45% chance of a further hike by the November meeting,” Deutsche Bank AG strategist Jim Reid wrote. “But as well as the upcoming decisions, it’s clear that investors are adjusting to the fact that rates could remain at a higher level for some time.”
China ramped up its efforts to stem losses in its currency on Thursday by offering the most forceful guidance since October through its daily reference rate for the managed currency. The offshore yuan slipped against the greenback.
The nation’s economic issues now present “a headwind — not just to the US economy, but to the global economy,” US Deputy Treasury Secretary Wally Adeyemo said.
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