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While you were sleeping: UPDATED Bond selloff deepens as yields climb

Oil prices continued their rally following a deal to curb output.

Margreet Dietz
Fri, 02 Dec 2016

Yields on US Treasurys climbed and Wall Street was mixed as energy and bank stocks rose while tech stocks slid amid bets that economic growth will accelerate.

Oil prices continued their rally following a deal by Opec and other producers to curb output. Futures in New York rose another 3.3% to settle at $US51.06 a barrel while the Brent global benchmark gained 4% to $US53.94, its highest since August 2015.

At the close on Wall Street, the Dow Jones Industrial Average rose 68.35 points, or 0.4%, to 19.191.93. However, the Nasdaq Composite Index slumped 1.4% to 5251.11 and the Standard & Poor's 500 Index fell 0.35% to 2191.08.

The Dow moved higher with gains in shares of Chevron and those of Goldman Sachs, up 2.8% and 2.1% respectively. Shares of Microsoft and Visa posted the biggest declines in the Dow, trading 2.1% and 2% weaker respectively.

Slides in tech stocks – seen as benefiting less from anticipated spending boosts and deregulation under US President-elect Donald Trump – weighed on a market that's trading near record highs. 

Bond yields rise to 17-month high 
Meanwhile, bond prices continued to fall as yields on the 10-year Treasury note closed eight basis points higher at 2.4481%, a 17-month high. Yields on the 10-year note climbed 56 basis points in the month of November, according to Bloomberg.

"The market has moved with remarkable swiftness to price in the anticipated reflationary impact of a Trump administration," Matthew Cairns, a strategist at Rabobank International in London, told Bloomberg.

"This has, in turn, prompted a notable rotation out of fixed income and into equities."

Although the US Federal Reserve is widely expected to raise its target interest rate at this month's meeting, investors will scrutinise Friday's nonfarm payrolls report to gauge the timing of additional hikes. It's expected to show that US employers added 180,000 workers, while the unemployment rate held at an eight-year low of 4.9%, according to a Bloomberg poll.

On Thursday, a Labour Department report showed initial claims for state unemployment benefits rose 17,000 to a seasonally adjusted 268,000 for the week ended November 26.

Separately, an Institute for Supply Management report showed its index of national factory activity added 1.3 percentage points to a reading of 53.2 in November, the highest level since June.

"The factory sector has started to show some building momentum, strengthening the case for Federal Reserve action at the December policy meeting," Kevin Cummins, senior economist at RBS in Stamford, Connecticut, told Reuters.

In Europe, the Stoxx 600 Index ended the day with a 0.3% decline from the previous close. France's CAC 40 Index slid 0.4%, the UK's FTSE 100 Index fell 0.5% and Germany's DAX Index dropped 1%.


Margreet Dietz
Fri, 02 Dec 2016
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While you were sleeping: UPDATED Bond selloff deepens as yields climb