European stocks stabilize from 1-month lows.
European equities inched higher on Thursday, attempting to stabilize following a punishing weekly sell-off, as a global bond market relief rally and dovish commentary from a top Federal Reserve official offered brief respite to battered risk assets.
The pan-European STOXX 600 rose 0.12%, snapping a three session losing streak after hitting an over one-month low on Wednesday.
The modest uptick follows a tumultuous start to September, during which continental bourses were heavily bruised by a sovereign debt rout that pushed global yields to multi-year peaks, surging energy prices linked to military exchanges in the Persian Gulf, and aggressive re-pricing of central bank rate hikes.
A global sell-off in fixed income saw German 10-year Bund yields touch 2011 highs of 3.37% and U.S. 10-year Treasury yields approach 4.80%. Rising risk-free rates eroded the equity risk premium, compressed valuation multiples – particularly for growth and tech names – and raised debt-refinancing anxieties.
Gold climbs above $4,400.
Gold prices rose on Thursday, climbing back above $4,400 an ounce after a 1% gain in the previous session, as a softer dollar and lower Treasury yields eased some of the pressure from recent Federal Reserve rate hike bets.
Investors now turn to Friday’s U.S. nonfarm payrolls report for the next major policy clue. A weaker dollar also helped support bullion after a sharp rise in the Japanese yen put currency intervention back in focus.
At 01:10 ET (05:10 GMT), XAU/USD rose 0.9% to $4,429.23 an ounce, while Gold Futures gained 1.4% to $4,474.75. XAG/USD advanced 0.6% to $65.75 an ounce, while XPT/USD rose 0.8% to $1,774.92. The US Dollar Index fell 0.2% to 99.39.
Federal Reserve Bank of New York President John Williams provided another reason for investors to reassess the rate outlook.
Fresh labor market data added to that softer backdrop. U.S. companies added 38,000 jobs in August, according to the ADP employment report.
Williams said there is evidence that U.S. inflation is continuing to ease as the impact of tariffs fades. He also said higher energy prices are not spreading into other services.
Asian currencies rise as yen surges toward 158.
Asian currencies were mixed on Thursday as the greenback strengthened modestly, while the Japanese yen extended its rally toward 158 per dollar and investors remained focused on the Federal Reserve’s rate outlook and renewed U.S.-Iran tensions.
The U.S. US Dollar Index rose 0.1% to 99.43, while the EUR/USD pair fell marginally to $1.1595 and the GBP/USD pair slipped to $1.3493.
The yen remained the standout mover. The USD/JPYpair fell 0.6% to 157.81, after the yen rose as much as 0.5% to 157.99 and climbed 1.2% during New York trading on Wednesday. It reached an intraday peak of 157.95 in Asia, extending a 0.9% overnight gain.
Yen rally fuels intervention debate as BOJ hike bets shift
BOJ board member Hajime Takata said Wednesday that a 25-basis-point hike was not necessarily set in stone and that back-to-back increases remained possible.
Markets have since assigned a small probability to a 50-basis-point September hike, compared with about 90% pricing for a 25-basis-point move at the start of the week.
DBS said it had doubts that the yen’s overnight surge reflected intervention because the move was much smaller than previous interventions and the yen had not outperformed the South Korean won this week.
The bank said there was a clear fundamental reason for the yen’s gains, with Takata opening the door to a larger and potentially back-to-back rate increases.
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