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Stocks Climb, Oil Jumps as Treasury Yield Tops 3%: Markets Wrap

Updated on
  • WTI crude surges above $71 a barrel after supply report
  • Emerging-market currencies give up gains for the year
Oksana Aranov, fixed income strategist at JPMorgan Asset Management, discusses the impact of a 3% 10-year yield.

U.S. stocks advanced as energy shares rallied with oil on speculation crude supplies may not keep up with demand. Ten-year Treasury yields topped 3 percent.

West Texas oil climbed above $71 per barrel after an unexpected drop in U.S. stockpiles and as the market came to terms with President Donald Trump’s decision to withdraw from the Iran nuclear deal. Bank shares rallied as the 10-year yield spiked. Walmart Inc. weighed on the major gauges after its deal to buy a controlling stake in India’s biggest online seller was met with skepticism. A measure of emerging-market currencies erased its 2018 gains.

Stocks extended gains in afternoon trading, with the risk-on tone in markets spreading after North Korea’s good-will gesture of releasing U.S. citizens as captives. Still, markets remained bound in a trading range amid the threat of increased geopolitical tension in the Middle East just as concern spreads over the implications of higher Treasury yields and recent dollar strength. A $25 billion auction of 10-year U.S. notes drew yields of 2.995 percent, just short of carrying a 3 percent coupon for the first time in almost seven years.

“This tug-of-war remains in the market, regardless of the positive headlines on North Korea, regardless of the positive headlines on earnings,” said Quincy Krosby, the chief market strategist at Prudential Financial Inc. “This is a market that has to sort that out, and that 10-year yield flirting with 3 percent again is a reflection of that tug-of-war.”

Elsewhere, stocks in Europe climbed as the MSCI Asia Pacific Index fell. Indonesia’s rupiah weakened to a two-year low on worries about capital outflows from emerging markets. Turkey’s lira gained after President Recep Tayyip Erdogan called a meeting to discuss issues including the exchange rate, fueling speculation that authorities may take measures to stem a market rout. Argentina’s peso fell toward a record low as the government begins meetings with the International Monetary Fund to discuss a possible credit line.

Terminal users can read more in our markets live blog.

Some key events coming up this week:

  • The Bank of England decides on policy Thursday.
  • U.S. inflation data for April is due the same day.

And these are the main moves in markets:

Stocks

  • The S&P 500 Index added 1 percent to the highest close since April 18.
  • The Dow Jones Industrial Average rose 0.8 percent and the Nasdaq Composite climbed 1 percent. Small caps lagged behind.
  • The Stoxx Europe 600 Index rose 0.6 percent.
  • The MSCI Emerging Market Index rose 0.1 percent.
  • The MSCI Asia Pacific Index sank 0.4 percent.

Currencies

  • The Bloomberg Dollar Spot Index was little changed.
  • The euro slipped 0.1 percent to $1.185.
  • The British pound was little changed at $1.3545.
  • The Japanese yen fell 0.5 percent to 109.72 per dollar, the weakest in a week.

Bonds

  • The yield on 10-year Treasuries rose two basis points to 3 percent.
  • Germany’s 10-year yield was little changed at 0.56 percent.
  • Britain’s 10-year yield increased two basis points to 1.46 percent.

Commodities

  • West Texas Intermediate crude increased 3.1 percent to $71.17 a barrel, the highest in more than three years.
  • Gold slipped 0.2 percent to $1,311.72 an ounce.

— With assistance by Andreea Papuc, Yumi Teso, Chris Anstey, Todd White, Samuel Potter, and Janine Wolf

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