Global stocks fall as US bond yields continue to surge

Traders work on the floor of the New York Stock Exchange. (AFP pic)

NEW YORK: US and European stocks tumbled Friday on worries about higher borrowing costs spurred by this week’s sudden jump in US Treasury bond yields.

Markets remained focused on yields of the 10-year US Treasury, which rose for the third straight day, this time to 3.225%.

Analysts said the sudden surge in interest rates had deepened worries about higher inflation and an uptick in costs for loans and mortgages.

Art Hogan, chief market strategist at B. Riley FBR, said the jump this week in yields had been “breakneck” and could be “disruptive” to stocks.

“The bond market has sold off all week and interest rates have been pushing higher, because traders are worried the Fed is going to have to be more aggressive in its rate hikes,” said FTN Financial’s Chris Low. “That tightening fear is finally starting to spill over into stocks.”

Among major US indices, the Nasdaq fell the most at 1.2%.

Earlier, London, Paris and Frankfurt all lost at least 1%.

The declines in stocks came after the US Labor Department estimated that the country added 134,000 net new positions last month, far weaker than analysts expected and a figure that was likely dented by Hurricane Florence.

However, the unemployment rate fell to 3.7% last month from 3.9%, an unusually large drop and the lowest reading since December 1969.

Analysts viewed the jobs report as good enough to keep the Federal Reserve on course to keep lifting interest rates. The jobs data also followed a trove of positive economic indicators released earlier in the week.

Among individual stocks, Tesla Motors slumped 7.1% after Chief Executive Elon Musk mocked the US Securities and Exchange Commission on Twitter, sparking worries that an SEC settlement on fraud charges with Musk that let him remain CEO could fall apart.

In Europe meanwhile, shares in Danske Bank stumbled 6.2% in Copenhagen, a day after the lender revealed it was being investigated by the US Department of Justice over possible money laundering related to more than 200 billion euros (US$235 billion) that had moved through the Danish lender’s Estonian branch.

In London, Unilever shares dipped after the Anglo-Dutch consumer giant axed post-Brexit plans