BEIJING: Global stock markets were mixed on Tuesday after a bond sell-off on Wall Street fuelled anxiety about a possible US economic slowdown and Australia raised interest rates. London, Shanghai and Hong Kong declined. Frankfurt opened higher and Tokyo gained.
The yen, trading at two-decade lows, fell further to almost 133 to the dollar. Wall Street futures were lower after the benchmark S&P 500 index rose 0.3 per cent on Monday and the market price of a 10-year Treasury bond fell.
That increased its yield, or the difference between the day's price and the payout at maturity.
The difference between short- and long-term Treasury yields is narrowing, which is "making me a little nervous", because it suggests investors think a US recession is more likely, said Jeffrey Halley of Oanda in a report.
"I don't think the US is at stagflation yet, or a period with high inflation and low growth, but if oil stays above USD 120.00 a barrel, it might soon be," Halley said. In early trading, the FTSE 100 in London lost 0.2 per cent to 7,595.92 while Frankfurt's DAX gained 1.3 per cent to 14,653.82. The CAC in Paris added 1 per cent to 6,548.78.
Markets are swinging between gains and losses as investors weigh evidence about whether the Federal Reserve's interest rate hikes can cool inflation that is running at a four-decade high without tipping the US economy into recession.
On Wall Street, the S&P 500 future was off 0.6 per cent and that for the Dow Jones Industrial Average lost 0.5 per cent. On Monday, the Dow edged up less than 0.1 per cent. The Nasdaq composite gained 0.4 per cent to 12,061.37.
The yield on the 10-year Treasury, or the difference between the market price and the payout if held to maturity, jumped back above 3 per cent to 3.04 per cent, up from 2.95 per cent late Friday. The Treasury yield is moving toward its levels from early and mid-May.
Then, it reached its highest point since 2018 amid expectations for the Federal Reserve to raise interest rates aggressively. Bond buyers usually want a higher payout in exchange for tying up their money for longer periods.
A flattening of the yield curve, or the long-term payout falling to match short-term bonds, is seen as an indicator of a possible recession because it shows investors expect economic conditions to be worse than they are now.
In Asia, the Shanghai Composite Index lost less than 0.1 per cent to 3,234.77 after Chinese authorities further eased anti-virus restrictions that shut down businesses in Shanghai and other major cities.
The Nikkei 225 in Tokyo gained 0.1 per cent to 27,943.95 while the Hang Seng in Hong Kong shed 0.8 per cent to 21,481.75. Sydney's S&P-ASX 200 sank 1.6 per cent to 7,091.50 after the Australian central bank raised a key interest rate by 0.5 percentage points, its biggest margin in 22 years, to cool inflation that is at a two-decade high.
The Kospi in Seoul tumbled 1.6 per cent to 2,628.88 and India's Sensex fell 1.2 per cent to 54,992.34. New Zealand and Singapore declined while Jakarta advanced. In currency markets, the yen fell to 132.91 to the dollar from Monday's 132.01.
The yen has weakened because Japanese interest rates have stayed near record lows while US and European rates rise. That helps Japanese exporters making their goods cheaper abroad but pushes up prices of imports for consumers and manufacturers.
The euro fell to USD 1.0689 from USD 1.0691. Benchmark US crude gained 45 to $118.95 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell 37 cents on Monday to USD 118.50.
Brent crude, the price basis for international oil trading, advanced 38 cents to USD 119.89 per barrel in London. It lost fell 21 cents the previous session to USD 119.51.