Traders work on the floor of the New York Stock Exchange yesterday. Stocks were back in positive territory following two days of sell-offs.
NEW YORK: Equities markets stabilised in choppy trading yesterday, while Treasury yields hit their highest levels in almost two years in the wake of the Federal Reserve’s plans to withdraw its economic stimulus.
Markets are adjusting to the Fed’s plan laid out earlier in the week for the central bank to scale back its asset purchases later this year if the US economy keeps improving as expected.
This has roiled markets around the world since Chairman Ben Bernanke outlined the timeline on Wednesday, with interest rates rising and equities markets selling off. “It’s all one big unwind. That’s been a negative for Treasuries as hedges are unwound,” said Sean Murphy, a Treasuries trader at Societe Generale in New York.
Easing fears about an immediate banking crisis in China helped make for a calmer tone, but short-term funding rates there remain elevated, especially for smaller lenders.
US stocks were modestly higher by early afternoon following a two-day selloff and 10-year Treasuries yields rose above 2.50 percent, their highest level since August 2011. The dollar rose and was headed for its biggest weekly gain in almost a year.
MSCI’s broad world stock index, which tracks shares in 45 countries, was off 0.2 percent, and Europe’s broad FTSE Eurofirst 300 index ended down 1 percent.
The Dow Jones industrial average added 21.95 points, or 0.15 percent, at 14,780.27. The Standard & Poor’s 500 Index was up 2.70 points, or 0.17 percent, at 1,590.89. The Nasdaq Composite Index was down 13.17 points, or 0.39 percent, at 3,351.45.
Benchmark 10-year Treasury notes were down 17/32 in price to yield 2.4844 percent, while 30-year bonds dropped 22/32 in price to yield 3.555 percent.
The dollar continued to climb as Bernanke’s view that the US economy is improving prompted traders to start pricing in a rise in interest rates in late 2014.
The dollar rose 0.4 percent against a basket of currencies, putting it on track for a weekly gain of 2 percent, the biggest since early July, 2012. The euro fell 0.5 percent to $1.3153 and the dollar gained 0.4 percent against the yen to 97.656 yen.
There was little respite across the emerging markets, with MSCI’s benchmark index down 0.8 percent. The emerging markets index has fallen close to 6 percent this week, making for a year-to-date loss of nearly 15 percent, and many in the market see further falls ahead.
Gold drew some demand. Spot gold recovered from a three-year trough and was up 1.6 percent at $1,289.26 an ounce, while gold futures added 0.9 percent to $1,297.20 an ounce. Reuters
