A gauge of the global stocks reached an intraday record on July 12, 2021, as the United States Treasuries yields held above 5-month lows that were reached in the past week. All that happened as investors sought signs of whether the Delta variant of the Covid-19 virus may dent global economic recovery.
Worries about a slowing economic recovery as a result of the climbing cases of this variant throughout the world helped in sending the yield on the benchmark 10-year US Treasury note to a 5-month low of 1.25% in the past week. This yield had surged to as high as 1.78% in March 2021 as expectations for growth picked up with the increasing vaccination rates.
Analysts also cited a lack of supply for the drop in yields. The Treasury is scheduled to sell $58 billion in 3-year notes and $38 billion in 10-year notes on July 12, followed by $24 billion in 30-year bonds on July 13.
Earnings season is expected to get underway this week, together with major inflation data on the consumer and producer prices, and comments from Fed Chair Jerome Powell. All that market data and information is expected to help the investors get an idea of economic growth prospects and the central bank’s policy path.
The chief market strategist at National Securities in New York, Art Hogan, said:
“If you are going to make a bet on the 10-year after it has gone from 1.75% in March to 1.25% last week, the week we start earnings, have Jay Powell on Capitol Hill twice and both CPI and PPI, that is not well thought out.
At some point this week we will likely find a balance in between that tug-of-war of fears of inflation and fears of growth slowing down because you really can’t have both, and we are not going to have one or the other.”
Benchmark ten-year notes last dropped 2/32 in price to yield 1.3628% late on July 9.
The equity gains on Wall Street were fairly modest, with financials among the best-performing segments on the session before the results from Goldman Sachs, JPMorgan Chase, and Bank of America on Tuesday.
The Dow Jones Industrial Average (DJIA) rose 85.84 points (0.25%), to reach 34,956, the Nasdaq Composite added 0.79 points (0.01%), to 14,702.71, while the S&P 500 gained 7.73 points (0.18%), to 4,377.28.
European equities also climbed to reach an intraday record of 461.01. on its part, the pan-European STOXX 600 index rose by 0.66%, while the MSCI’s gauge of stocks across the globe gained by 0.41% after hitting a record high of 727.02.
Jerome Powell’s testimony later in the week will be monitored keenly after the People’s Bank of China late last week moved to free up $154 billion for the banks to buttress the country’s economic recovery. The European Central Bank (ECB) said that it would discuss a change to its forward guidance on policy direction at the coming week’s meeting.
Worries about slowing economic growth impacted the crude oil prices, outweighing the possibility of tighter supply after discussions among the producers stalled in the past week.
US crude recently fell by 0.97% to trade at $73.84 per barrel, and Brent was trading at $74.99, down 0.74% on the day. The haven dollar moved a bit higher on the fears about the pandemic and its possibility to stop economic growth.
The dollar index gained 0.088%, with the euro losing 0.11% to $1.186.