Singapore/London – Global stocks rose on Tuesday and U.S. Treasury yields remained stable, giving the dollar a breathing room as investors assess the debt burden of the world's largest economy.
Investors are still digesting the market dynamics on Monday, when U.S. Treasury bonds began to sell off sharply due to concerns about U.S. fiscal conditions, while Wall Street stocks struggled, though both rebounded in the afternoon trading session.
This calm trend has been maintained in stock market trading in Asia and Europe, with major stock indexes generally rising about 0.1%, while the German Dax index hit a new all-time high, despite the decline in stock futures of the S&P 500.
Moody's downgrades in the U.S. credit rating later Friday highlighted concerns about the possible impact of a major tax cut that Congress is pushing for, which will face a key vote later this week.
The 10-year Treasury yield fell 3 basis points last Friday to 4.44%, after hitting a one-month high of 4.56% on Monday; meanwhile, the 30-year bond yield also saw a similar decline, falling to 4.91%, while the previous trading day saw a 18-month high of 5.037%.
Although we only think its impact is limited, the rapid recovery is somewhat surprising, said Mohit Kumar, chief economist at Jefferies. He noted that the downgrade was not unexpected given concerns about U.S. debt and deficit.
However, Japan's ultra-long-term bond yields soared to an all-time high on Tuesday, a phenomenon reflecting tensions in the wider market, directed by poor performance in 20-year securities auctions.
Japan's 20-year Treasury bond yield surged to 2.555%, up 15 basis points from the previous year, setting its highest level since 2000, while the 30-year Treasury bond yield reached a record high of 3.14%.
Hirofumi Suzuki, chief monetary strategist at Sumitomo Mitsui Bank, pointed out that Japanese government bonds are no exception and are facing a major trend of rising global yields.
Market participants are …evaluating demand in every auction, while stability is always elusive. I think this pressure on this rise is likely to continue in the short term.
UNEASY RBA
Global investors had to deal with other matters on Tuesday, with the Australian dollar falling 0.5% to $0.64,255 after the Reserve Bank of Australia cut interest rates as expected. Still, the bank is cautious about further easing and noting that the global outlook is grim.
As concerns from the Reserve Bank of Australia (RBA) grow intensify, Charu Chanana, chief investment strategist at Saxo in Singapore, said the easiest path for currencies may still be lower.
Especially if domestic data weakens further, or global risks are intensified again.
China's blue chip index rose 0.6% after the central bank lowered its benchmark loan interest rate for the first time since October.
What is also highly concerned is CATL's strong debut in the Hong Kong market, as Tesla's battery supplier, its stock price rose 12.5% at the opening. The company's listing financing in Hong Kong reached US$4.6 billion, becoming the world's largest listing financing case this year.
In the money market, the euro rose 0.2% to USD 1.1265, continuing to maintain a 0.6% increase on Monday, while the U.S. dollar against the Japanese yen fell 0.38% to 144.27, which is also the second time that it fell on Monday.
In the commodity market, oil prices rose slightly as investors tried to grasp the possible breakdown of U.S.-Iran negotiations on Tehran's nuclear activity and the reduced possibility of further influx of Iran's crude oil supply into the market.
Brent crude oil futures prices rose 0.34% to $65.75 a barrel.
Gold prices fell 0.2% to $3,220 an ounce, while demand for safe-haven assets decreased.
