For the quarter, 10-year US yields were showing their biggest rise since 2009, while France’s 10-year bond yield had its biggest jump in nearly four decades

International News via Reuters:

Global bonds closed out their worst month in years on Wednesday, with the benchmark 10-year US Treasury yield rising on the day and posting its biggest monthly increase since 2022, while the S&P 500 registered a decline for September and European shares suffered their first monthly fall in six.

For the quarter, 10-year US yields were showing their biggest rise since 2009, while France’s 10-year bond yield had its biggest jump in nearly four decades. France’s 10-year yield had its biggest monthly rise in almost four years. 

Bond yields have surged this month as prices tumbled, with soaring energy costs fueling inflation fears and the AI boom boosting economic growth, leaving investors to position for a period where interest rates stay higher for longer. Higher rates are seen as a negative for stocks because they increase borrowing costs for businesses and consumers.

Among the latest data on inflation was a report Wednesday that showed US inflation increased less than expected in August and price pressures were more moderate in the prior month than previously reported.

Stocks rose and two-year US bond yields initially fell on the news as expectations that the Federal Reserve will hike interest rates next month decreased. Separately, the final reading of second-quarter GDP data was revised higher to a 2.2% annualized rate, thanks to solid consumer spending and investments helping to fuel the buildout of AI infrastructure.

“The market was able to breathe a collective sigh of relief today,” said Adam Sarhan, chief executive of 50 Park Investments in New York. “It takes pressure off the Fed to raise rates.”

The Fed increased interest rates this month for the first time since 2023 in an effort to combat inflation. The market was last pricing in a roughly 63% chance that the Fed will keep rates steady next month compared with a 55% chance before the US inflation release, according to the latest data from LSEG.

Elsewhere, inflation rose sharply in five German states in September, while France’s harmonised inflation rate was 3.4%, up from 2.6% in August, and Italy’s jumped to 4.1% from August’s 3.2%.

The spread between French and German 10-year borrowing costs was last at its highest since 2012.

On the last trading day of the month, 10-year US yields were up 53 basis points for their biggest monthly climb since September 2022. Yields on 30-year bonds have risen about 39 basis points this month for their largest increase since December 2024.

Sovereign yields are an anchor for global markets, a reference price for investing in riskier assets.

Stocks were mostly lower on the day. The Dow Jones Industrial Average fell 443.87 points, or 0.86%, to 50,906.05, the S&P 500 fell 19.30 points, or 0.25%, to 7,651.54 and the Nasdaq Composite rose 63.52 points, or 0.24%, to 26,861.06. 

While down on the month, the S&P 500 notched its second straight quarterly gain.

MSCI’s gauge of stocks across the globe fell 1.86 points, or 0.16%, to 1,134.00. The index was down more than 1% for the month.

The pan-European STOXX 600 index fell 0.5% on the day.  It is down 2.5% for the month and 1% for the third quarter.

OIL GAINS FOR DAY, MONTH

Oil prices rose by about $1 a barrel on the day and registered steep monthly gains, on stalled US-Iran peace talks and tightening US fuel markets.

The Brent November futures contract, which expires on Wednesday, settled up 91 cents, or 0.9%, at $103.50 a barrel. The more active December contract was up $1.87, or 1.9%, at $98.03. US West Texas Intermediate crude settled at $90.42, up $1.04, or 1.2%.

Brent recorded a monthly gain of around 14%, its biggest since July, while WTI increased by about 5% on the month.

The US dollar was last flat against major currencies on the day following the US inflation data. But the greenback, which has been strengthening along with rising US Treasury yields and expectations of more Fed rate hikes, gained for the month against some major currencies. 

The euro had a monthly loss against the dollar after two consecutive months of gains.

Spot gold fell 0.64% to $4,154.17 an ounce and was down for the month.

Reporting by Caroline Valetkevitch in New York and Danilo Masoni in Milan; additional reporting by Rae Wee and Rocky Swift; Editing by Thomas Derpinghaus, Christian Schmollinger, Chizu Nomiyama, David Gaffen and Sanjeev Miglani

This scenario plays out in neighborhoods across Cuba’s capital of Havana daily, where power outages exacerbated by a US oil blockade have crippled the already crumbling infrastructure that supplies water to the city’s nearly two million people

International News via Reuters:

Cuban housewife Yuamilka Hechavarria was asleep last Tuesday when water rushed into the cistern of the crumbling tenement where she lives in old Havana.

She jumped from bed, scrambling in the darkness of a blackout to top off a bucketful before the tap went dry. It was the first time her building had seen water in two months.

This scenario plays out in neighborhoods across Cuba’s capital of Havana daily, where power outages exacerbated by a US oil blockade have crippled the already crumbling infrastructure that supplies water to the city’s nearly two million people. Many regularly go without running water for days or weeks.

Hygiene is among the first casualties of the situation, explains Hechavarria, a healthcare worker, who for weeks had been forced to buy water from street vendors or scavenge it from nearby broken pipes.

Diarrhea has run rampant throughout her building, she says, as tenants struggle to keep even tiny apartments clean.

“There’s no one in this building who hasn’t gotten sick,” said Hechavarria, adding that she too was recovering from a recent bout of fever and diarrhea.

Officials in both the United States and Cuba have begun to sound the alarm.

Health authorities in Cuba have warned in recent days of the spread of viruses, including a strain of viral hepatitis, as power and water increasingly fail. And a US health alert earlier this month warned travelers and residents of a “significant increase in diarrheal illness across Cuba, associated ​with the continuing degradation of the water and energy infrastructure.”

Since the US imposed a fuel blockade in January, blackouts across Havana now regularly surpass 24 hours, hampering refrigeration and further crippling antiquated water infrastructure of which nearly 90% depends on electric-powered pumps, according to Cuba’s National Institute of Hydraulic Resources.

Around 3.5 million people, or just under half the island’s population, now suffer from water shortages, the United Nations Office for the Coordination of Humanitarian Affairs has said.

NO ESCAPE FROM NEW REALITY

Hechavarria’s home — a poorly ventilated, one-room hovel she shares with her 7-year-old son and husband — would make any doctor cringe, despite her best efforts to maintain order and hygiene.

Thirty families live in similarly cramped quarters in the same small two-story building.

A recent power surge damaged her refrigerator, leaving her without a way to conserve food. She uses it instead to store medicine, beans, and rice.

Plates litter her kitchen counter and sink. She reuses dirty dish water to clean the floor or flush the toilet. She uses soap only when she can afford it.

Her husband, meanwhile, is responsible for pushing a homemade handcart fitted with two large barrels at least once weekly to a pipe that juts from the wall of a local school.

If classes are in session and there is power, the school fires an electric pump that allows water to flow from the pipe into an alleyway.

On a recent weekday morning, neighbor Andres Jimenez, a 76-year-old retired metal worker, had arrived at the spot just as the power went out. Only a trickle of water remained.

“If there’s no power, they don’t run the pump,” he said.

Concerns over hygiene would have to wait, he added.

Nurse Maria Elena Parlado, who lives nearby and works in a clinic in the neighborhood, said there is no escaping the new reality.

“Look around us,” she said, pointing to a roadside trash heap beside a small stream of sewage running along the sidewalk.

Even the clinic where she treats local residents for fast-spreading viral outbreaks is without water, she said.

“Between one patient and another I should be washing my hands, but sometimes I can’t.”

Reporting by Ayose Naranjo and Dave Sherwood, additional reporting by Alien Fernandez and Mario Fuentes; Editing by Bill Berkrot

Stocks fared better, however, largely unfazed by the recent surge in bond yields, supported by robust earnings growth, strength in the global economy and continued enthusiasm for artificial intelligence

International News via Reuters:

Global bonds inched up on Wednesday but were set for their worst month in years, hit by a mix of deteriorating government finances, a glut of debt issuance and rising inflation as the seven-month-old US-Israeli war on Iran keeps energy costs elevated.

Stocks fared better, however, largely unfazed by the recent surge in bond yields, supported by robust earnings growth, strength in the global economy and continued enthusiasm for artificial intelligence. Equity indexes rose across Asia overnight and were broadly unchanged in Europe, while US futures pointed to a slightly lower open on Wall Street.

The rise in borrowing costs has been front-and-centre for investors, given that sovereign yields are an anchor for global markets, a reference price for investing in riskier stocks and a benchmark for mortgages and corporate borrowing.

Benchmark 10-year US Treasury yields held just below their highest level since June 2007 at 5.2363% in the European hours, down 1.9 basis points (bps). They were set for a rise of more than 47 bps this month, the largest move in about two years. Bond yields move inversely to prices. 

The 2-year Treasury yield dipped 1.0 bps to 4.8787% after New York Federal Reserve President John Williams pushed back against expectations for earlier policy tightening, though it remained more than 50 bps higher for the month.

“We have reached yield levels that are becoming genuinely significant,” said Carlo Franchini, head of institutional clients at Milan-based Banca Ifigest. “The temptation to move out of equities could become an issue.”    

However, Franchini said he was not yet taking profits on stocks, betting that equities could remain supported through October if easing tensions around the Strait of Hormuz helped bring down oil prices and relieve some of the pressure on bond yields. “In my view it is better to stay long,” he said.

With bond markets searching for fresh direction, investors were awaiting the Fed’s preferred inflation measure, the PCE index, for August later in the day. Economists polled by Reuters expect annual inflation of 3.7%, while money markets now see roughly even odds of an October rate hike by the Fed, down sharply from more than 70% on Tuesday.

Yields on 10-year German and French government bonds hit 17-year and 18-year highs this week and were set for rises of about 26 bps and 63 bps, respectively, for the month. [GVD/EUR]

German inflation figures for September were also due, while data in Europe showed French consumer prices rising more than expected in September and Italy’s annual EU-harmonised inflation rate accelerating to 4.1% amid soaring energy costs. .

In Japan, the 10-year government bond yield hovered near multi-decade highs, up 11 bps this month. [JP/]

STOCKS DEFY THE YIELD SURGE

Despite the sharp rise in sovereign borrowing costs this quarter, stock markets have remained broadly resilient.

Europe’s pan-regional STOXX 600 was down 0.07% at 1111 GMT, coming off opening highs and setting the index for a monthly loss of around 2%. It is down 0.6% for the quarter.

MSCI’s broadest index of Asia-Pacific shares excluding Japan rose 0.16% and was down  1.3% this month. Japan’s Nikkei jumped 1.9%, ending the month up 0.7%, while South Korea’s Kospi scored a monthly gain of 0.3%.

Nasdaq futures edged 0.14% lower and S&P 500 futures were down 0.04%. The S&P 500 was broadly unchanged this month, and up 2.3% so far in the quarter.

“What was surprising to us was the sanguine reaction of the equity market where the growth in nominal GDP was driving earnings optimism,” said Mohammed Apabhai, Citi’s head of Asia-Pacific trading strategy, in a note, referring to the recent rise in bond yields.

“US equity markets are reacting to the rise in bond yields but only outside of the tech space.”

In Chinese shares, the blue-chip CSI 300 index rose 0.3%, struggling to lift off a one-year low made earlier in the week. The gauge is down 12.5% this quarter, the largest since the height of COVID-19 lockdowns.

DOLLAR GETS A LIFT

In currency markets, the dollar was on track for a monthly gain of almost 2% against a basket of currencies, helped by the rise in yields, though it fell 0.19% on the day.

That left the euro trading just above a 16-month low at $1.1357, up 0.15% on the day. It was headed for a monthly loss of 2.2% as the currency struggled in the face of a global energy shock and growing political risk in Europe.

Sterling was up 0.44% to $1.3288 after data showed the British economy grew faster than previously estimated in the second quarter, bolstering expectations of a Bank of England rate hike by year-end. It remained down 1.9% for the month.

The yen added 0.14% to 157.05 per dollar and was eyeing a monthly gain of around 1.7%, with investors wary of pushing the currency lower due to the threat of a joint intervention by Tokyo and Washington.

In commodities, US crude was up 1.04% at $90.31 a barrel and Brent rose 0.85% to $103.47, both set for monthly gains on concerns about prolonged supply disruptions due to the ongoing Middle East war. [O/R]

Spot gold added 0.08% to $4,184.3 an ounce, down almost 6% this month. Bitcoin was up 0.4% at $83,915, set for an over 6% monthly gain. [GOL/]  

Reporting by Danilo Masoni, Rae Wee and Rocky Swift; Editing by Thomas Derpinghaus, Christian Schmollinger and Chizu Nomiyama

France’s interior ministry had no immediate comment on why France was seeking to wind down the agreement. Britain’s interior ministry did not respond to a request for comment

International News via Reuters:

France and Britain are in talks to end their “one in, one out” migration deal, a French interior ministry source said on Wednesday.

“We are discussing the terms of withdrawal from the agreement with the British,” the source said.

Under the agreement, announced last year in a bid to reduce small-boat crossings of the English Channel, Britain deported undocumented people arriving in small boats to France, in exchange for accepting an equal number of legitimate asylum seekers with British family connections.

France’s interior ministry had no immediate comment on why France was seeking to wind down the agreement. Britain’s interior ministry did not respond to a request for comment.

Under the terms of the deal, there was a target timeframe of no more than three months from someone’s arrival in Britain to transfer to France.

Britain had to return an individual within 14 days of their arrival, and France did not have to accept unaccompanied minors or people who pose a pre-existing security threat, the treaty said.

Reporting by Makini Brice in Paris; Writing by Mateusz Rabiega in Gdansk; Editing by Alison Williams