Equities Hold Steady, US Yields Near 5% – Europe Market Wrap

Even as investors wrestled with the danger of higher-for-longer interest rates and an Israeli counter-strike, the Wall Street selloff appeared to be easing.

US market futures edged higher, indicating a comeback after the S&P 500 dropped more than 1% in the previous two days. 2-Yr Treasury yields approached 5%. The dollar has climbed for the fifth day in a row, the longest run since January.

Furthermore, economic data continues to highlight the US economy’s strength, while turmoil in the Middle East raises the danger of higher energy prices and inflation, undermining hopes for imminent US interest rate decreases. With earnings season starting, there is growing anxiety that mega-cap leaders will struggle to justify their high prices.

Traders no longer fully expect a Fed rate drop before November. Treasury 10-year rates have risen by more than 10 basis points to 4.64% since the beginning of the week, while 2-year yields are approaching 5%.

UK rate futures point to about 46 BPS of BoE rate cuts by December, compared with 50 BPS before labour market data.