Wall Street Rally Despite Elevated Bond Yields

Barry Adams
24 Oct, 2022
New York City

U.S. stocks opened higher on Monday following a week of volatile trading and bond yields edged lower. 

Energy prices turned lower and natural gas prices dropped to a new 3-month low on weakening demand and falling exports to Europe. 

Crude oil declined $2.12 to $82.91 a barrel and natural gas fell 7 cents to $4.87 a thermal unit. 

The yield on 2-year Treasury notes rose to 4.49%, 10-year Treasury notes fell to 4.18% and 30-year Treasury bonds eased to 4.32%. 

 

European Markets Advance, Bond Yields Ease

European markets traded higher and investors digested two private economic surveys and political developments in the region. 

Economic activities in the eurozone declined deeper into recessionary territory in October, according to S&P Global. 

The PMI index dropped to 47.1 in October from 48.1 in September, the survey showed. 

In a separate report, the UK private sector activities declined to 47.2 in October from 49.1 in September, the S&P Global/CIPS Composite indicated. 

 

Sunak Wins UK PM Race, Meloni Appointed Italian PM 

In political developments, Rishi Sunak won the leadership race for the Conservative Party after Penny Mordaunt pulled out of the race two minutes before the deadline and tweeted that Sunak had "her full support."

Former prime minister Boris Johnson pulled out of the race on Sunday night, paving the way for Sunak to lead the party. 

Giorgia Meloni was sworn in as Italy's first woman prime minister on Saturday. 

The DAX index advanced 1.8% to 12,965.60, the CAC-40 index gained 1.9% to 6,148.85 and the FTSE 100 index 7,018.39. 

The euro fell to 98.38 U.S. cents and the British pound edged up to $1.13. 

Brent crude oil gained $1.23 to $92.30 a barrel and TTF natural gas declined 18% to $94.80 per MWh.  

The yield on 10-year German bunds fell to 2.32%, French bonds eased to 2.86%, Italian bonds declined to 4.59% and the UK bonds to 3.81%. 

 

China GDP Expansion Slows, Xi Jinping Wins Historic Third Term 

 China's third quarter GDP rose 3.9%, better-than-expected 3.4%, according to the National Bureau of Statistics of China.

For the first nine-months of 2022, GDP has expanded 3%, less than the target rate of 5.5% set by the government.

The latest economic release did not mention the government target rate and was delayed until the Chinese Communist Party Congress ended.

Xi Jinping was appointed as the head of the party for the third time, matching only to the tenure of the founder Mao Zedong. 

 

Tech Stocks Plunge in China Trading, Korea Supports Bond Market 

The Nikkei 225 average increased 0.3% to 26,974.90, the Hang Seng index plunged 6.4% to 15,180.69 and Shanghai Composite Index dropped 2.0% to 2,977.56. 

Chinese market indexes plunged after Xi Jinping tightened his grip on power and tech stocks led the decliners. Alibaba, Tencent and Baidu plunged more than 11% on the worries that stricter policies for tech companies may hamper growth. 

Markets in India were closed to celebrate Diwali and the arrival of new year tomorrow. 

The Kospi index in Seoul, Korea gained 1.0% to 2,236.16 after the government offered credit market support of 50 trillion won or $34.7 billion, providing a temporary relief from bond market defaults and support real estate sector.