Global shares slide as US bond yields rise

Worries as 10-year Treasuries near level that triggered spasms in the past

WORLD stocks slipped yesterday ahead of a blizzard of earnings from the world’s biggest firms and as wary investors watched US bond yields approach peaks that have triggered market spasms in the past.

The yield on 10-year US Treasuries hit its highest level since January 2014 at 2.99 percent, pushing the gap – or spread – to German bonds to the widest in 29 years and the dollar higher in the process.

Traders were also getting a round of global economic surveys that should show in the coming days whether economic softness in the first quarter was merely a passing phase linked to wintry weather and the lunar New Year holidays in Asia.

Readings from Japan, France and Germany were all relatively reassuring. Japan’s PMI data firmed as output and domestic demand picked up, France got help from its services sector, while Germany came in above forecast despite weaker new orders numbers.

“It’s a good reading; it’s still encouraging,” said Chris Williamson, the chief business economist at IHS Markit, of the combined euro-zone numbers, which he said pointed to quarterly gross domestic product growth of 0.6 percent.

On the geopolitical front, there was plenty to digest too.

North Korea said on Saturday it would immediately suspend nuclear and missile tests, scrap its nuclear test site and instead pursue peace and economic growth.

Talk of a trip by the US Treasury Secretary to China fuelled hopes that the recent trade tensions between the world’s two biggest economies may be thawing.

Oil prices edged down in the cross-currents but were not far from their highest since late 2014. The market had wobbled on Friday when US President Donald Trump tweeted criticism of the role played by the Organisation of the Petroleum Exporting Countries (Opec) in pushing up global prices, but quickly steadied.

Brent crude oil futures were off 20 cents at $73.83 (R903.57) per barrel and US crude eased to $68.16. Aluminium prices leapt up again to add to this month’s 25 percent surge following US sanctions on Russia’s producer-giant Rusal.

“Underlying (oil market) sentiment is bullish,” said Saxo Bank senior manager Ole Hansen. “And we have Opec potentially trying to ‘overtighten’ the market.”

In stock markets, MSCI’s world index fell 0.25 percent after Asia had shed 0.5 percent overnight, and Europe slipped 0.2 percent as results from Switzerland’s biggest bank, UBS, disappointed and the rise in yields added pressure generally.

More than 180 companies in the S&P 500 are due to report their results this week, including Amazon, Alphabet, Facebook, Microsoft, Boeing and Chevron. Of particular concern for US analysts will be executives’ views about their exposure to China, amid the recent worries about a trade war.

Back in commodity markets, the spike in oil has driven up both market expectations of future inflation and longterm bond yields. Yields on 10-year Treasuries are at the highest since early 2014 and again threatening the hugely important 3 percent bulwark. The last time yields neared this number in 2013 it rocked risk appetite and sent stocks sliding. It also came shortly before oil prices went on a mighty 75 percent tumble.

“Another $5-a-barrel increase in oil will be enough for US 10-year yields to threaten 3 percent. Oil is now at the cusp of levels where higher prices will spark greater foreign exchange and broader asset market volatility,” said Deutsche Bank’s macro strategist, Alan Ruskin.