US Treasury yields fall from a 16-year high

A pullback in Treasury yields took some pressure off equities Monday, allowing mega-cap technology shares to push higher ahead of some major earnings reports this week, though the major equity indices faltered at the end of the session. The S&P 500 fell 0.2% and the Dow Jones slipped 190 points while the Nasdaq added nearly 0.3%. The yield on the 10-year US Treasury note retreated to 4.84% after rising above 5%, the highest point since 2007. Meantime, European shares were little changed yesterday, with the German DAX closing virtually flat at a seven-month low while the Euro Stoxx 50 Index edged up 0.4%.  

Summary for 24.10.2023 

• Most Asian equities extended recent losses on Tuesday following weak business activity readings from Japan and Australia, while Chinese markets rebounded from pre-pandemic lows as a state-run fund began snapping up some equities. Shares in Japan and Hong Kong declined, while Australian and Chinese equities rose. 
• European shares are poised to edge lower as worries over global interest rates remain in focus. Elsewhere US equity futures rose this morning as investors look ahead to earnings reports from major technology firms. 
• Oil prices rose on Tuesday, recovering a measure of steep losses as traders continued to seek new developments in the Israel-Hamas war, while a swathe of upcoming readings on business activity also came into focus. Crude prices tumbled around 3% on Monday as a series of diplomatic missions to Israel and Gaza pushed up hopes over a de-escalation in the conflict. This was also accompanied by Hamas agreeing to free some hostages. 
• Some of the market’s most prominent bond bears are saying the historic rout in US Treasuries has gone too far. Billionaire investor Bill Ackman wrote in a social media post-Monday that he unwound his bet against US government bonds amid rising global risks, while Bill Gross, co-founder of Pacific Investment Management Co., wrote that he’s buying short-dated interest-rate futures in anticipation of a recession by year-end. 
• Chevron Corp was down 3.7% after it agreed Monday to buy Hess Corp. For $53 billion in shares, in the latest oil industry tie-up following Exxon Mobil’s acquisition of Pioneer Natural Resources earlier this month. Hess was down 1.1%. 
• Walgreens Boots Alliance jumped 3.3% yesterday after JPMorgan upgraded the pharmacy chain’s equity as Walgreens’s new chief executive took the reins. 
• Volkswagen shares fell to their lowest since April 2020 on Monday after the German carmaker cut its profit margin outlook for the current year, disappointing some investors. Blaming negative effects from raw materials hedges, VW indicated a return on sales of 7.0-7.3%, down from the 7.5-8.5% forecast previously while keeping its outlook for deliveries and sales. Shares were down 0.9% in Frankfurt yesterday.  
• UniCredit this morning posted a bigger-than-expected 36% annual rise in Q3 profit as higher rates continued to lift income from lending, while the strain on borrowers is yet to materialise. Core capital also strengthened above expectations, rising to 17.2% of risk-weighted assets from 16.5% at the end of June. Meanwhile, the bank said on Monday it applied to become the biggest investor in Alpha Bank by acquiring a 9% stake from Greece’s bank bailout fund, as it also agreed to buy most of Alpha’s Romanian unit.  
• Also this morning, Novartis raised its full-year earnings forecast for the third time on strong drug sales, after its generic drugs business Sandoz was spun off and listed on Oct 4. The Swiss drugmaker said in a statement that it expects group core operating income to grow by a percentage of “mid to high teens” in 2023, up from “low double-digit to mid-teen” predicted previously.