By Herbert Lash and Amanda Cooper
NEW YORK/LONDON (Reuters) -Global shares fell on Tuesday, crushed by a fresh surge in Treasury yields, after data showed U.S. job openings rose more than expected in August in yet another sign of a resilient economy that suggests interest rates will be higher for longer.
The dollar initially rose but later fell sharply against the yen after briefly rising above the psychological 150 yen-per-dollar level for first time since October 2022, leading some to see signs of intervention by the Bank of Japan.
Japan’s finance ministry did not respond to requests for comment. But the dollar’s sharp move lower was hard for the market to ignore.
“It has all the hallmarks of intervention in all honesty, said Michael Brown, market analyst at Trader X in London.
Others in the market disagreed with that assessment, saying the breach was due to the strong Job Openings and Labor Turnover Survey, or JOLTS report for August, which snapped three straight monthly declines. Employers also held on to their workers in August.
“U.S. economic strength continues to surprise on the upside,” Ronald Temple, chief market strategist at Lazard in New York said in comments to media.
“The Fed’s rate hike cycle is likely over, but data like today’s pose the risk that one more hike might be needed.”
The 10-year Treasury note rose 9.6 basis points to 4.779%, a new 16-year high, and the dollar fell 0.44% to 149.165 yen.
Major U.S. and European stock indexes tanked more than 1%.
MSCI’s gauge of stocks across the globe shed 1.36%, and the pan-European STOXX 600 index lost 1.06%.
On Wall Street, the Dow Jones Industrial Average fell 1.13%, the S&P 500 lost 1.33% and the Nasdaq Composite dropped 1.63%. The benchmark 10-year Treasury yield has soared to its highest since late 2007. On Monday, they staged their biggest one-day rise since early September, a move that punctured a rally in stocks, commodities and currencies.
The latest catalyst was two Fed officials saying on Monday monetary policy will need to stay restrictive for “some time” to bring inflation back down to the central bank’s 2% target.
The yen is a particular casualty of the dollar’s march to 10-month highs and the rise in Treasury yields, given a yawning gap between U.S. interest rates and those in Japan.
Monetary authorities in Japan are sticking with a policy of keeping borrowing rates extra low, removing an incentive for investors to own the country’s currency or its bonds.
Traders are attaching a 26% chance of another U.S. rate hike in November and a 45% chance of an increase by December, according to CME Group’s FedWatch Tool.
SENSE OF URGENCY
Japanese Finance Minister Shunichi Suzuki said on Tuesday authorities were watching the currency market closely and stood ready to respond, repeating a warning against speculative moves that did not reflect economic fundamentals.
In the last week, Suzuki has said authorities are watching the yen with either a “high” or “strong” “sense of urgency” seven times.
Last September, Japanese authorities conducted their first intervention in 24 years, when the yen weakened past 145 per dollar.
Speculation has mounted that they will step in again, given the yen is under constant pressure as benchmark 10-year U.S. yields now boast their largest premium over their Japanese counterparts since last November at nearly 400 basis points.
Oil prices recovered after hitting a three-week low as investors weighed a stronger dollar, darkening global economic signals and tightening supply.
U.S. crude recently rose 1.29% to $89.97 per barrel and Brent was at $91.28, up 0.63% on the day.
Gold prices languished near a seven-month low, weighed down by a robust dollar and elevated bond yields as the likelihood of U.S. interest rates staying higher for longer dominated sentiment.
Spot gold dropped 0.1% to $1,825.49 an ounce.
(Additional reporting by Ankur Banerjee in Singapore; Editing by Jamie Freed, Susan Fenton, Jan Harvey and Deepa Babington)
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