European stocks and the euro have dropped as oil prices rise above $US100 amid renewed Middle East tensions while fiscal concerns continue to weigh on sentiment.
MSCI’s main world stocks index fell 0.28 per cent on Wednesday, while Europe’s STOXX 600 was down 0.45 per cent.
Nasdaq futures fell 0.11 per cent while S&P 500 futures were roughly unchanged.
The S&P 500 hit a fresh record on Tuesday, up about 0.6 per cent on the day, while the tech-heavy Nasdaq gained 0.4 per cent to also mark a record high.
The Dow Jones Industrial Average rose 0.5 per cent.
MSCI’s broadest index of Asia-Pacific shares excluding Japan was down 0.5 per cent, led by declines in Hong Kong and Singapore.
The index is up 0.9 per cent so far in October.
“In the very early stages of the fourth quarter, typically the best quarter of the year for equity returns, markets are being driven by a confusing ‘stocks up, US breadth down, yields up, oil down and up, and down’ narrative,” said Jeremy Batstone-Carr, an economist at Raymond James.
Brent crude rose one per cent to $US101.58 per barrel as the market weighed supply constraints from a storm heading for US oil-producing regions and attacks by Yemen’s Iran-backed Houthis on Saudi Arabia.
The French yield spread versus safe-haven German Bunds – a market gauge of the risk premium investors demand to hold French debt – was wider after narrowing for two days.
It was last at 131 bps, and reached almost 160 bps last week.
French bonds have been under pressure as expectations of higher European Central Bank rates and political uncertainty before the 2027 election raise doubts over France’s ability to fix its finances.
The rekindling of investor concerns weighed on the euro, which slipped 0.47 per cent to $US1.1208.
It slid to a 17-month low against the dollar at $US1.1161 earlier this week.
Wider yield spreads in the euro area weigh on the single currency by boosting expectations of European Central Bank monetary easing, reviving worries about fiscal sustainability and stoking fears of increasing fragmentation in the euro area.
The yield on the US 10-year Treasury bond was up 3.8 bps at 5.307 per cent.
Market participants would closely watch a 10-year Treasury bond auction later in the day and a 30-year auction on Thursday, which would show the depth of investor demand for US debt, analysts said.
US longer-dated yields hit a 24-year high on Monday amid a persistent sell-off since late August due to inflation and the fiscal outlook.
The dollar index, which measures the greenback against a basket of currencies, rose 0.33 per cent to 102.18 following a 0.27 per cent slide in the prior session.
The Japanese yen weakened 0.1 per cent to 158.30 per dollar. Sterling dipped 0.2 per cent to $US1.3228.
The Federal Reserve on Wednesday will publish the minutes of its September 15-16 policy meeting, which will be scrutinised for potential rate moves over the next few months.
Traders scaled back expectations of a Fed rate increase this month to 19 per cent from about 50 per cent a week earlier.
Spot gold was down 0.6 per cent at $US4,135.28 per ounce.
Australian Associated Press is the beating heart of Australian news. AAP is Australia’s only independent national newswire and has been delivering accurate, reliable and fast news content to the media industry, government and corporate sector for 85 years. We keep Australia informed.
