By Chris Prentice and Yoruk Bahceli
NEW YORK (Reuters) -European shares recovered from a six-week low and key U.S. treasury yields rose to decade highs on Monday as investors awaited a Federal Reserve meeting later this week.
Wall Street trading was mixed, with the Dow Jones Industrial and the S&P 500 giving back earlier gains while the tech-heavy Nasdaq Composite gained on earnings optimism.
Global benchmark oil futures fell after rising $1 a barrel, under pressure from potential interest rate hikes and uncertainty around Chinese demand.
The Dow Jones Industrial Average fell 121.76 points, or 0.36%, to 34,377.24, the S&P gained 9.62 points, or 0.22%, to 4,379.33 and the Nasdaq gained 127.27 points, or 0.96%, to 13,418.46 by 1:18 p.m. ET (1718 GMT).
The pan-European STOXX 600 ended higher, after rising as much as 0.9% intraday, recovering from Friday’s six-week low. Energy and mining sectors gained, tracking higher crude oil and metals prices.
Germany’s DAX rose 0.2% even as official data showed a higher-than-expected fall in German producer prices in July.
Adyen slumped 8.6% after two brokerages downgraded the Dutch digital payments firm’s stock after the company missed half-year expectations on Aug. 17.
Earnings from AI-darling Nvidia on Wednesday will be another major test of valuations.
“Wall Street is having a hard time deciding what to do with stocks,” said Edward Moya, senior market analyst with OANDA. “Everyone is expecting an impact from the surge in yields, but it seems like tech companies have held up. Nvidia is going to be key.”
Longer-dated U.S. Treasury yields were up, with the 30-year yield hitting 4.468%, its highest since April 2011. Bond yields move inversely with prices. [US/]
The 10-year Treasury hit 4.35%, the highest since November 2007 – before the collapse of Lehman Brothers almost a year later fully ushered in the Great Financial Crisis.
“People are starting to get worried about the (bond) selloff and are looking ahead to (Federal Reserve Chair Jerome) Powell and what he says later this week about peak rates,” said Principal Global Investors’ chief global strategist, Seema Shah.
The key event for the week is the Fed’s Jackson Hole conference, where markets assume Powell will note the jump in yields and the recent run of strong economic data. The Atlanta Fed’s GDP Now tracker is running at a heady 5.8% for this quarter.
A majority of polled analysts think the Fed is done hiking, while traders are betting on a 40% chance of a final Fed hike by November.
CHINA’S CENTRAL BANK SURPRISES
Disappointment earlier weighed on Asian shares.
China’s central bank trimmed its one-year lending rate by 10 basis points and left its five-year rate unmoved. That was a surprise to analysts who had expected cuts of 15 bps to both as recovery in the world’s second-largest economy has lost steam due to a worsening property slump, weak spending and tumbling credit growth.
“The small injection of stimulus by China’s central bank in the ailing economy has proved largely underwhelming given the scale of the challenges erupting across sectors, but it has given investors hope there could be more to come,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
Analysts said concern around downward pressure on the yuan, which has lost nearly 6% against the dollar this year, is likely limiting the size and scope of rate cuts.
The European single currency was up 0.2% on the day at $1.0897, having lost 0.88% in a month, while the dollar index, which tracks the greenback against a basket of currencies of other major trading partners, was down at 103.32.
In commodities, spot gold prices rose 0.2% to $1,892.00 an ounce.
Brent crude fell 0.25% to $84.59, while U.S. crude futures rose 0.11% to $81.34 a barrel.
(Reporting by Yoruk Bahceli and Wayne Cole, additional reporting by Dhara Ranasinghe; Editing by David Evans, Mark Potter and Nick Macfie)
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