Stocks fall, bonds yields climb as Iran war prompts central bank recalibration
· CNA · JoinRead a summary of this article on FAST.
Get bite-sized news via a new
cards interface. Give it a try.
Click here to return to FAST Tap here to return to FAST
FAST
NEW YORK, March 20 : Global shares fell for a third straight session and were poised for a third consecutive weekly decline on Friday while bond yields rose on worries the Iran war would keep upward pressure on oil prices and rekindle inflation.
Iran attacked an oil refinery in Kuwait on Friday and Israel killed a spokesman of Iran's Revolutionary Guards, while three U.S. officials told Reuters that thousands of additional U.S. troops will be deployed to the Middle East.
An Axios report on Friday said that the Trump administration is considering plans to occupy or blockade Iran's Kharg Island to pressure Iran to reopen the Strait of Hormuz.
On Wall Street, U.S. stocks were lower in the initial stages of trading, with the S&P 500 energy index the best performer of the 11 major S&P 500 sectors.
CNA Games
Guess Word
Crack the word, one row at a time
Buzzword
Create words using the given letters
Mini Sudoku
Tiny puzzle, mighty brain teaser
Mini Crossword
Small grid, big challenge
Word Search
Spot as many words as you can
Show More
Show Less
The Dow Jones Industrial Average fell 270.24 points, or 0.59 per cent, to 45,751.19, the S&P 500 stumbled 60.15 points, or 0.91 per cent, to 6,546.48 and the Nasdaq Composite tumbled 273.59 points, or 1.24 per cent, to 21,817.10.
Global bond yields have also moved higher, after policy announcements from multiple central banks this week indicated that interest rates were likely to either be on hold, or could potentially move higher should the war keep pressure on prices.
The yield on benchmark U.S. 10-year notes rose 8.9 basis points to 4.372 per cent and is poised for its third straight weekly gain.
The 2-year note yield, which typically moves in step with interest rate expectations for the Fed, rose 9.5 basis points to 3.928 per cent, and was on pace for its largest three-session jump since May as markets begin to price in the possibility of rate hikes from the central bank this year.
"People are beginning to worry about inflation because of oil prices, even though we as the U.S. are energy independent. And so we're less affected than certainly than Asia and Europe with respect to the Middle East but we're not immune to it," said Scott Welch, chief investment officer at Certuity in Potomac, Maryland.
"People are starting to factor that into their inflation perspectives, and that's driving yields up, so 4.25 per cent to 4.5 per cent is probably where we'll be for a while on the 10-year."
MSCI's gauge of stocks across the globe fell 9.18 points, or 0.92 per cent, to 985.98 and is down nearly 7 per cent over the past three weeks, its biggest drop in nearly a year, and the pan-European STOXX 600 index dropped 1.14 per cent and was also on track for a third straight week of declines.
Major global brokerages see a higher likelihood of the European Central Bank and Bank of England delivering rate hikes, potentially as early as April, after policymakers warned that the Middle East war is driving renewed inflation risks.
Euro zone government bond yields rose for a third day in a row, while the British 10-year gilt yield soared to its highest since July 2008. It was last up 17 basis points to 5.018 per cent.
Germany's two-year yield, which is up around 65 basis points for the month, was last up 9.2 bps at 2.661 per cent.
ENERGY CHOKEHOLD
U.S. crude rose 1.24 per cent to $97.33 a barrel and Brent advanced to $109.35 per barrel, up 0.64 per cent in choppy trade. Crude was lower earlier in the day after the U.S. outlined moves to manage the oil supply crisis, while leading European nations, Japan and Canada offered to join efforts to secure safe passage for ships through the Strait of Hormuz.
Natural gas prices have also surged, with those in Europe skyrocketing as much as 35 per cent on Thursday, as Iranian and Israeli strikes hit some of the Middle East's most important gas infrastructure.
DOLLAR FALLS FROM PEAK
The dollar index, which measures the greenback against a basket of currencies, gained 0.42 per cent to 99.70, with the euro down 0.44 per cent at $1.1537. The greenback was poised for its first weekly decline in three.
Two Fed officials said the war and its impact on energy markets were clouding the outlook for the economy and monetary policy, as one policymaker laid out an outlook calling for notably more interest rate cuts than most U.S. central bank officials currently support.
Against the Japanese yen, the dollar strengthened 0.86 per cent to 159.08, moving closer to the 160 mark that has prompted intervention in the currency by Japanese officials.
Newsletter
Week in Review
Subscribe to our Chief Editor’s Week in Review
Our chief editor shares analysis and picks of the week's biggest news every Saturday.
Sign up for our newsletters
Get our pick of top stories and thought-provoking articles in your inbox
Get the CNA app
Stay updated with notifications for breaking news and our best stories
Get WhatsApp alerts
Join our channel for the top reads for the day on your preferred chat app