Global Stocks Experience a Decline as Oil Prices Surge, Investors Weigh the Possibility of Rate Hikes
World stock indexes have eased and benchmark 10-year Treasury yields have risen to their highest level in over a week as oil prices spike, while investors are carefully considering the prospects of further interest rate hikes in the United States. Concurrently, data reveals that orders for US factory goods in July declined less than anticipated. However, economic indicators from China and Europe have sparked concerns about a potential slowdown in global growth.
According to a private-sector survey, China’s services activity expanded at its slowest pace in eight months in August due to weak demand, which continues to plague the world’s second-largest economy. Furthermore, data from the Eurozone and Britain indicates a decline in business activity last month, with the dominant services industry in both regions falling into contraction.
Market strategist Paul Nolte from Murphy & Sylvest Wealth Management in Elmhurst, Illinois, emphasized the rising interest rates and highlighted that investors are closely monitoring the rate path of the Federal Reserve. Meanwhile, Federal Reserve Governor Christopher Waller commented that recent economic data allows the central bank to evaluate if there is a need for further rate increases, noting that there is currently no compelling reason to raise short-term borrowing costs.
While higher oil prices have boosted the shares of certain energy companies, the Dow Jones Industrial Average led the decline among the three major stock indexes on Wall Street. Oil prices have reached their highest level since November after Saudi Arabia and Russia extended their voluntary supply cuts until the end of the year.
Furthermore, the pan-European STOXX 600 index and MSCI’s global stocks gauge experienced losses of 0.23% and 0.60% respectively. In the US Treasury market, the yield on the benchmark 10-year Treasury note rose by 9 basis points to reach 4.26%, its highest level since August 25.
As concerns over global growth intensify due to Chinese economic data, the US dollar has gained strength, reaching a nearly six-month high against a basket of currencies. The Australian dollar, specifically, has fallen over 1% and hit a fresh 10-month low after Australia’s central bank maintained interest rates without any changes for a third consecutive month.
The surge in oil prices has seen Brent crude futures rise by $1.04 (1.2%) to settle at $90.04 per barrel, while US crude futures gained $1.14 (1.3%) to settle at $86.69 per barrel.
In the precious metals market, spot gold has dropped by 0.7% to $1,925.48 per ounce, and US gold futures have fallen by 0.74% to $1,925.50 per ounce.
As investors navigate through these market movements, uncertainties persist regarding the future direction of stocks, oil prices, and interest rates. The global economy remains exposed to various factors, including geopolitical tensions and the ongoing effects of the COVID-19 pandemic.
