Bond sell-off back, stocks steady, earnings and geopolitics on the … – Reuters

HONG KONG/LONDON, Oct 17 (Reuters) – Bond yields rose on Tuesday and stocks steadied as markets continued to retrace last week’s moves to safe-haven assets, focusing on corporate earnings prospects and the resilience of the U.S. economy rather than tensions in the Middle East.

Banks were the big earnings draw and offered a mixed picture, with Bank of America and BNY Mellon’s results sending their shares higher in pre-market trading, but Goldman Sachs‘ weighing down its stock as profits fell.

In the bigger picture, Europe’s broad STOXX 600 index (.STOXX) gave back early gains to trade down 0.25% and U.S. futures dipped, after Asian stocks (.MIAPJ0000PUS) had climbed earlier in the day and S&P 500 had closed Monday up 1%.

Those moves marked something of a reversal after world shares slid on Friday as traders sought to de-risk their positions heading into a weekend when there was scope for geopolitical developments when markets were closed.

“We’re caught between two currents: first this push higher in bond yields which started in mid-summer, and we got to levels we weren’t expecting almost 5% on the 10-year U.S. Treasury and 3% on the Bund… which for me will continue,” said Jorge Garayo, rates strategist at Societe Generale.

“And then, what is happening in the Middle East, which caused a knee-jerk reaction immediately after with oil prices moving higher but has now kind of stabilised and risky assets are not doing badly.”

Benchmark 10-year bond yields in the U.S. and Germany (Bunds) rose around 5 basis points (bps) on Tuesday having risen 5-8 bps Monday – bond yields move inversely to prices. ,

The 10-year Bund yield was last 2.793%, and the 10-year Treasury yield 4.7375%, having fallen 15 bps last week – the biggest weekly decline since mid-July – and dipped as low as 4.53% as investors rushed to the safety of government debt, a sharp reversal from early October’s 16-year high of 4.887%. [ GVD/EUR]

GEOPOLITICS

Geopolitical risk was still firmly on investors’ radars however, with news U.S. President Joe Biden will visit Israel on Wednesday as the country prepares to escalate an offensive against Hamas militants that has raised fears of a broader conflict with Iran.

Iran’s Foreign Minister said Israel would not be allowed to act in Gaza without consequences, warning of “preemptive action” by the “resistance front” in the coming hours.

Israel’s shekel remained on the weak side of the 4 per dollar level it softened to for the first time since 2015 on Monday.

Russian President Vladimir Putin on Tuesday arrived in Beijing to meet Chinese President Xi Jinping even as the war in Ukraine raged on.

The widely watched trip is aimed at showcasing the trust and “no-limits” partnership between the countries, as Beijing is moving to strengthen ties with counties for its infrastructure-focused Belt and Road initiative.

But in a reminder of problems in China’s property sector, Tuesday marks the end of a 30-day grace period on a late payment from developer Country Garden (2007.HK). If investors do not receive the coupon payment, all of Country Garden’s offshore debts will be deemed in default.

In currency markets, the dollar index, which tracks the unit against six main peers was roughly steady at 106.1, with eyes on the yen, which took a wobble late in the European morning before stabilising.

The pound fell more than most, dipping as much as 0.5% after data showed growth in British workers’ regular pay slowed from a previous record high and job vacancies also declined, boosting the chance the Bank of England (BoE) will hold rates unchanged.

The Swiss franc was last at 0.9509 per euro after the common currency had fallen 0.9% against the safe haven on Friday to 0.94975, its lowest in a year.

Gold hung around near Friday’s three-week high of $1,932.53 an ounce and was last at $1,923.5 an ounce, and oil prices steadied after sliding more than $1 on Monday amid hopes the U.S. would ease sanctions on producer Venezuela and as Washington stepped up efforts to prevent an escalation of the war between Israel and Hamas.

Brent crude futures were 0.3% higher at $89.95 a barrel.

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