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Monday, June 17, 2024

US Treasury yields up, Wall Street down on rate and China worries

Longer-dated US Treasury yields hit a 10-month peak, while US stocks grappled in volatile trading as concerns of prolonged high interest rates and China‘s economic challenges took center stage. Benchmark 10-year yields reached 4.312%, testing October’s 4.338%. A surge beyond this level would mark the highest yields since 2007.

Stronger-than-anticipated economic data combined with Federal Reserve meeting minutes emphasizing inflation containment bolstered yields, dampening stocks and other markets.

The Fed’s July meeting minutes displayed divided views on further rate increases, with inflation still a priority.

US Labor Department’s report of reduced jobless claims suggested ongoing tight labor conditions, hinting at the Fed’s ongoing efforts to cool the economy.

Amid reports surpassing economist predictions, including retail sales, the prospect of the Fed maintaining higher rates for a longer duration became evident.

Wall Street initially mixed, turned lower due to the uncertain economic landscape.

Dow Jones down 0.25%, S&P 500 down 0.11%, Nasdaq Composite fell 0.3%. MSCI’s world index dropped 0.34%, reaching its lowest since July 6.

In the currency market, the dollar index showed slight gains, rising 0.03% to 103.405.

In contrast, China’s economic struggles added to investor concerns.

Turmoil in the property sector and a debt restructuring announcement from Zhongzhi Enterprise Group highlighted challenges in China’s post-pandemic recovery.

China’s central bank’s efforts to maintain liquidity and support the economy brought some relief to markets, including oil, which had experienced declines due to fears of reduced Chinese demand.

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