By Tom Wilson
LONDON (Reuters) – World share markets stumbled on Thursday as U.S. bonds yields hit nine-month peaks, with the dollar shrugging off a U.S. credit downgrade to hit a four-week high and the British pound dipping after the Bank of England raised interest rates.
European shares slipped 0.6%, bruised by disappointing earnings reports and elevated U.S. bond yields, on course for their third straight day of losses.
UK shares, however, ticked higher after the Bank of England raised its key interest rate by a quarter of a percentage point to a 15-year peak of 5.25%. The index was last down 0.7%.
Sterling extended losses after the BoE decision, falling as much as 0.7% to its lowest since June 30. It was last down 0.2% at $1.2680.
The BoE decision was closely watched for clues on how central banks globally will balance taming inflation and maintaining growth. The BoE’s monetary policy committee (MPC) was split on the size of the rate hike.
“This split does leave a sense that the MPC itself is uncertain over what to do,” said Stuart Cole, chief macro strategist at Equiti Capital, “and indeed of how much of a danger the UK economy is at risk of being tipped into recession as monetary policy is tightened ever further.”
Wall Street was set to open in negative territory, too.
S&P 500 futures and Nasdaq futures were down 0.2% and 0.4% respectively, set for more pain after a wave of selling a day earlier.
Pressuring stocks were a climb in long-term U.S. Treasury yields after stronger-than-expected private employment data and the announced refunding of the U.S. government’s maturing debt.
U.S. 10-year yields hit a new nine-month peak of 4.17%, while 30-year yields rose to a fresh nine-month top.
That helped the U.S. dollar stay buoyant near a one-month high of 102.75 against its major peers. The strong private payrolls data added to signs of U.S. labour market resilience, with the nonfarm payrolls report due on Friday. [FRX/]
APPLE AND AMAZON
Investors were awaiting earnings results from Apple and Amazon that may give clues on whether the tech sector’s sky-high valuations are justified.
Apple is expected to report the largest third-quarter drop in revenues since 2016 as sales of iPhones slow.
Amazon, a bellwether for consumer spending, is expected to report a more than 8% rise in second-quarter revenue, aided by a recovery in the advertising and e-commerce businesses.
In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.4%, extending losses after a drop of 2.3% a day earlier.
Still, Chinese blue chips rose 0.9% and Hong Kong’s Hang Seng index added 0.3% after a private survey showed China’s services activity expanded at a faster place in July.
Analysts at Morgan Stanley downgraded China shares to equal weight, given the still-negative earnings revisions and weak return on equity and profit margins.
(Reporting by Tom Wilson in London and Stella Qiu in Sydney; Editing by Mark Potter and Bernadette Baum)
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