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Equity markets mixed as Treasury yields spike

Stock markets mostly put an end to the losses of the previous week on Monday, despite concerns about how long interest rates may have to stay elevated. The benchmark 10-year Treasury yield surged to 4.36% on Monday, its highest level since 2007. Higher yields generally put pressure on equity markets as investors move their money out of stocks and into fixed-income products to take advantage of more attractive yields.

Shane Strowmatt, LGT
Temps de lecture
5 minutes
market numbers
© Shutterstock

In New York, the major stock indices mostly managed to end the downward trend of the previous sessions with tech stocks logging solid gains. The Dow Jones Industrial finished Monday’s session down 0.11% at 34,463.69 points while the S&P 500 gained 0.69%, closing at 4399.77 points. The tech-heavy Nasdaq-100 jumped 1.65% to 14,936.69 points. The move was driven by chipmaker Nvidia, which surged 8.47% on Monday, as traders speculated about the company’s second-quarter earnings, due out Wednesday.

In Asia, stock markets were also mixed. Hong Kong's Hang Seng Index was up 0.2% in early trading, while the Shanghai Composite was trading down 0.4%. In Tokyo, the Nikkei 225 gained 0.8% and South Korea’s Kospi was trading up 0.3%. In Australia, the S&P/ASX 200 was roughly flat.

Australian mining group logged a 37% fall in year-on-year profit for the fiscal year 2023, saying growth was coming from some sectors in China. The world’s largest miner said demand in China for infrastructure and automotive were strong, despite the disappointing reopening of the world’s second-largest economy this year. BHP stock was trading down 1.4% on Tuesday.

The banking sector was under pressure again after S&P cut the credit ratings at several US banks on Monday, following a similar move by rating agency Moody’s recently. Funding risks and weaker profitability were the main reasons for the cuts, S&P said. S&P downgraded the ratings of UMB Financial Corps, Comerica Bank, Keycorp, Associated Banc-Corp and Valley National Bancorp. The KBW Bank Index ended Monday’s session down 0.27%.

In macroeconomic data, German producer prices fell 6.0% in July when compared with the same month a year earlier. It was the first price decrease for producers in more than two-and-a-half years. The strong fall was largely due to base effects, as input prices spiked this time last year due to the war in Ukraine. When compared to the previous month, producer prices still dropped by 1.1%. Producer prices are generally considered to be an indication about future movements in consumer prices. Consequently, some investors saw in the data some hope that inflation in Europe’s largest economy could soon come down from the high 6.2% the country posted in July.

Corporate news in focus: Q2 figures from Macy’s.

Economic data in focus: Richmond Fed Manufacturing Index (16:00), US existing home sales (16:00), weekly US API oil inventory (22:30).


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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.

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