US Treasuries under selling pressure as markets stabilise

US Treasuries were under selling pressure on Thursday and European and Asian bourses rallied, as markets appeared to stabilise after a tumultuous session the previous day amid investor anxiety over signs of a global economic slowdown.

The yield on the US 10-year note ticked up 4.9 basis points to 1.7395 per cent as investors shifted away from fixed income markets following a rally the previous day that was fuelled by expectations of looser monetary policy and their “haven” appeal.

German 10-year Bund yields also rose, gaining 2.4bp to minus 0.557 per cent, while the yield on UK 10-year gilts added 3.4bp to 0.519 per cent.

Equities in Europe took their cue from their Asian counterparts, enjoying some relief from recent losses. Europe’s benchmark Stoxx 600 opened 1 per cent higher, with Germany’s Dax up 0.9 per cent and France’s CAC 40 adding 1.2 per cent. London’s FTSE 100 rose 0.6 per cent.

China’s CSI 300 index of Shanghai and Shenzhen-listed names added 1.3 per cent, while Hong Kong’s Hang Seng index was up 0.7 per cent. That followed data showing Chinese exports increased in July, bucking expectations that they would fall. “China trade figures in July were encouraging. This could help ease concerns over China’s growth outlook amid escalating trade war risk,” said Ken Cheung, a strategist at Mizuho Bank. 

Both the onshore and offshore variants of the renminbi strengthened about 0.2 per cent, despite China’s central bank setting the currency’s closely watched official midpoint below the seven-to-the-dollar point for the first time since 2008. However, renminbi “sentiment remains fragile given the elevated trade war risk,” Mr Cheung added.

Overnight, the S&P 500 closed 0.1 per cent higher after earlier trading as much as 2 per cent lower in a volatile session, as central banks in India, New Zealand and Thailand slashed interest rates and new warning signs emerged over the health of the German economy. The Philippines’ central bank is expected to join the global monetary easing wave later this afternoon after its second-quarter gross domestic product numbers disappointed. 

Oil clawed back some of its recent losses, with Brent, the international marker for crude, up 2.9 per cent to $57.89.

S&P 500 futures were pointing to gains of about 0.5 per cent when Wall Street begins trading later on Thursday.

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