NEW YORK :Global equity markets were flat while U.S. Treasury yields rose on Tuesday, as recession worries persisted amid concern the Federal Reserve will continue its steep interest rate hikes despite nascent signs of a slowdown in inflation.
The yield curve between two- and 10-year Treasury notes, viewed as an indicator of impending recession, remained inverted at minus 40 basis points on Tuesday.
“It seems that the bond market doesn’t quite reflect the inflation happening in the economy,” said George Young, a portfolio manager at Villere & Company in New Orleans.
“The weird thing is that in the last couple of weeks bond yields have gone up and stayed up so there’s kind of a disconnect. There’s kind of a question maybe inflation isn’t that bad and we may actually be going into a recession. Market participants are all over the place,” he added.
MSCI’s gauge of stocks in 50 countries across the globe shed 0.07 per cent. Overnight in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.07 per cent lower, while Japan’s Nikkei lost 0.01 per cent.
U.S. Treasury yields edged higher as encouraging data from U.S. retail giants suggested the Fed has room to further raise rates to cool inflation. Benchmark 10-year Treasury yields were at 2.8222 per cent from 2.791 per cent on Monday
On Wall Street, the Dow reversed earlier losses and was trading higher, with stocks in consumer discretionary, consumer staples, and healthcare leading the rebound. Benchmark S&P 500 was flat in afternoon trading.
The Dow Jones Industrial Average rose 0.54 per cent to 34,094.94, the S&P 500 lost 0.04 per cent to 4,295.4 and the Nasdaq Composite dropped 0.51 per cent to 13,060.90.
Oil prices dropped more than 3 per cent in volatile trading as recession worries raised uncertainty over global crude demand, even as markets awaited clarity on talks to revive a deal that could allow more Iranian oil exports.
Brent crude futures fell 3.47 per cent to $91.80 a barrel, after hitting a session high of $95.95. West Texas Intermediate crude (WTI) decreased 3.69 per cent to $86.11 a barrel, after rising to $90.65.
The dollar gained as the greenback benefited from expectations the U.S. economy would be stronger than peers in the event of a slowdown in growth. The dollar index rose 0.038 per cent, with the euro up 0.04 per cent to $1.0164.
Safe-haven gold fell for a second straight session on Tuesday as a firmer dollar made the greenback-denominated metal more expensive. Spot gold dropped 0.1 per cent to $1,776.89 an ounce, while U.S. gold futures fell 0.36 per cent to $1,774.90 an ounce.