Stocks fall, Treasury yields rise before central banks meet

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  • S&P 500 futures slip, Nikkei futures down
  • The Fed leads a series of central bank meetings
  • Market tilts towards 75 bp from Fed, PBOC
  • Dollar firm nears multi-year high

SYDNEY/LONDON, Sept 19 (Reuters) – The benchmark U.S. 10-year yield hit its highest level in a decade on Monday, while stocks slipped and the dollar firmed as investors braced for a packed week of central bank meetings. Biggest rise in the US.

Markets are fully priced in for a 75 basis point increase in interest rates from the Federal Reserve, with a 20% chance of a full percentage point increase in the future.

They also point to a real possibility of rates hitting 4.5% as the central bank is forced to push the economy into recession to tame inflation. read more

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Higher interest rates fueled a sell-off in government bonds, and the benchmark U.S. 10-year Treasury yield hit 3.508% by midday in London, its highest level since April 2011. 3.961%.

European government bond yields also rose.

“Asset performance during this Fed tightening cycle has been very different from the norm for other rate hike episodes,” said David Chau, global market strategist at Invesco.

“Typically, the central bank tightens when the economy is booming and most assets do well. However, most assets have suffered this time due to inflation and sudden policy changes.”

Trading was thin on Monday as British markets closed for Queen Elizabeth’s funeral. read more

Europe’s STOXX index (.STOXX) It fell as much as 1% to its lowest level in more than 10 weeks, dragged down by rate-sensitive tech stocks and French stocks (.fchi) It was hit by the collapse of a planned merger between the two television companies. (.SX8P) read more

S&P 500 futures lost 0.9%, and Nasdaq futures fell 1%. Asian stock markets also fell earlier. (.MIAPJ0000PUS)

Bitcoin hit a three-month high of $18,271, moving in line with investors’ risk appetite.

Tight time

Interest rate hikes are expected not only in the US. Most central banks meeting this week – from Switzerland to South Africa – are expected to hike, with markets divided on whether the Bank of England will move by 50 or 75 basis points. read more

China’s central bank went its own way, cutting the repo rate by 10 basis points to support its ailing economy. Chinese blue chips (.CSI300) It still finished 0.1% lower.

The other exception is the Bank of Japan, which is due to meet this week and shows no sign of abandoning its uber-easy yield curve policy despite a sharp decline in the yen. read more

The dollar rose 0.43% to 143.56 yen on Monday, retreating from a recent 24-year high of 144.99 on warnings of tough intervention by Japanese policymakers.

The euro fell 0.22% to $0.9993, and sterling fell 0.34% to $1.1383, a 37-year low on Friday, as traders eyed an emergency mini-budget from new British finance minister Kwasi Kwarteng, expected on Friday.

The dollar index, which measures the currency against six stocks, was 0.3% stronger at 109.97.

“We expect the USD to make a fresh cyclical high above 110.8pts this week as the global economy continues to deteriorate,” CBA analysts said in a note.

The rise in the dollar and yields have been a drag on gold, which fell 0.78% to $1,662 an ounce last week after hitting the lowest level not seen since April 2020.

Oil prices fell, pressured by a stronger dollar and subdued growth outlook. Brent crude fell 2.6% to $89. US crude was down 2.8% at $82.70.

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Reporting by Wayne Cole in Sydney and Alun John in London; Editing by Sam Holmes, Christian Schmollinger, Ed Osmond and Catherine Evans

Our Standards: Thomson Reuters Trust Principles.

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