BANGKOK (AP) — Equities in Europe and Asia dropped on Thursday, mirroring the slide on Wall Street as bond yields continued to tighten their grip.Thank you for reading this post, don't forget to subscribe!
Germany’s DAX plummeted by 1.1% to 14,722.60, while the CAC 40 in Paris declined by 0.8% to 6,860.72. Britain’s FTSE 100 was down by 0.7% at 7,361.04.
S&P 500 futures decreased by 0.7%, and the Dow Jones Industrial Average fell by 0.2% on Wednesday.
The S&P 500 experienced a 1.4% decline on Wednesday, falling back to its May levels. Big Tech stocks faced significant losses, dragging the Nasdaq Composite to its second-worst decline this year, with a drop of 2.4%. The Dow industrials also fell by 0.3%.
The 10-year Treasury yield surged towards 5%. It reached 4.95% early Thursday after dropping to 4.82% late Tuesday.
During Asian trading, Tokyo’s Nikkei 225 dropped by 2.1% to 30,601.78, and the Kospi in Seoul declined by 2.7% to 2,309.14.
Hong Kong’s Hang Seng experienced a 0.8% decline to 16,942.93, while the Shanghai Composite Index recovered by 0.5% to 2,988.30, bouncing back from earlier losses.
Sydney’s S&P/ASX 200 fell by 0.6% to 6,812.30. The SET in Bangkok declined by 1.4%, while Taiwan’s Taiex experienced a 1.7% decline.
Steeply rising Treasury yields have been exerting downward pressure on the stock market since summer. The 10-year yield now matches the Federal Reserve’s key interest rate, which is above 5.25% and at its highest level since 2001, as the central bank attempts to curb inflation.
Higher yields lead to a drop in the prices of stocks and other investments, while also slowing down the overall economy and intensifying pressure on the financial system. They have the greatest impact on stocks that are considered expensive or those for which investors have had to wait the longest for substantial growth. This primarily affects Internet-related, technology, and other high-growth stocks. On Wednesday, the S&P 500 saw its heaviest declines from Amazon (-5.6%), Nvidia (-4.3%), and Apple (-1.3%).
Alphabet, the parent company of Google and YouTube, reported stronger-than-expected profits, yet underperformed the market, with its stock falling by 9.5% due to concerns about a slowdown in the growth of its cloud-computing business.
Microsoft stood out by rising 3.1% after reporting stronger-than-expected profits and revenue in the summer. Its activities carry additional weight in the market since it is the second-largest company by market value.
Higher interest rates and yields have already taken a toll on the housing market, with mortgage rates reaching their highest level since 2000. The Fed’s goal is to control the economy enough to reduce inflation without causing a severe recession.
Preliminary US economic growth data for July-September is expected to be released on Thursday.
In the oil market, US benchmark crude fell by 15 cents to $85.24 a barrel in electronic trading on the New York Mercantile Exchange. On Wednesday, a barrel of US crude increased by $1.65 and closed at $85.39.
Brent crude, the international benchmark, fell by 16 cents to $88.96 a barrel. On Wednesday, it surged by $2.06 to reach $90.13 per barrel.
Last month, US oil surpassed $93 and has fluctuated since then, amid concerns that the ongoing Israel-Hamas war could disrupt supplies from Iran or other major oil-producing countries.
In currency trading, the US dollar rose to 150.45 JPY from 150.23 yen, driven by expectations that Japan’s central bank will maintain its long-standing near-zero interest rate stance at a policy meeting next week.
The large difference between the Japanese benchmark rate of minus 0.1% and much higher rates in the US and elsewhere has significantly boosted the value of the dollar against the yen. While this benefits export manufacturers who generate substantial profits in yen in their home countries, it reduces the purchasing power of the currency for imports.
The euro weakened to $1.0551 from $1.0568.