Shares staunch bleed after worst selloff since January

September 29, 2021

By Matt Scuffham

NEW YORK (Reuters) -Investors sought to stanch the bleeding on Wednesday after world stock markets suffered their worst rout since January and U.S. and European borrowing costs raced to their highest in months.

Stock indices in the United States and Europe staged a partial recovery after a heavy sell-off in tech stocks on Tuesday had consigned Wall Street to its steepest drop since mid-July.

The Dow Jones Industrial Average rose 240.91 points, or 0.7%, to 34,540.9, the S&P 500 gained 27.86 points, or 0.64%, to 4,380.49 and the Nasdaq Composite added 53.10 points, or 0.37%, to 14,599.78.

The pan-European STOXX 600 index rose 0.6%, with investors looking past a 2.2% fall in the previous session.

MSCI’s gauge of stocks across the globe gained 0.08%.

Declines in tech stocks earlier in the week created opportunities for investors looking for value, analysts said.

“Bargain hunters have stepped into the fold today as they have swooped in to snap up relatively cheap stocks,” said David Madden, market analyst at Equiti Capital.

The global benchmarks for borrowing costs – the yields on U.S. and German government bonds – also edged lower after their spikes had helped fuel the volatility.

“We have seen bond yields retrace today but the chatter about tapering is likely to resurface in the near term,” said Madden.

Benchmark 10-year notes last fell 3/32 in price to yield 1.5444%, from 1.536% late on Tuesday.

Those Treasury yields have jumped roughly 20 basis points over the last week and are set for their biggest monthly jump since March.

“The question that will come in the next 10 days is will the U.S. Treasury yield keep pushing above 1.5%,” said Societe Generale strategist Kenneth Broux.

German and British 10-year bond yields are set for the biggest monthly rise since February — gilt yields have soared almost 40 basis points this month to 1%.

Broux said the question for October and the rest of the year would be whether the inflation pressures that central banks train their focus on start to abate. “The 1.5% level (on U.S. Treasuries) is really pivotal,” he said.

The dollar rallied to a one-year high against rival currencies. The greenback is on course for its best year since 2015 just as doubts re-emerge about the global recovery from the COVID pandemic and Washington is bogged down in debt ceiling talks that could lead to a government shutdown. China is also grappling with a power crunch and property sector worries that have hit its economy.

The dollar index rose 0.661%, with the euro down 0.67% to $1.1603.

Gold fell to its lowest in seven weeks on Wednesday as the dollar advanced.

Spot gold dropped 0.5% to $1,725.26 an ounce. U.S. gold futures settled 0.8% lower at $1,722.9.

Overnight Asia-Pacific shares had managed to restrict falls to 1.2%. Not including Japan, the region was heading for a 9.4% decline for the third quarter, its worst quarterly performance since the first three months of 2020, when global markets were roiled by the initial spread of COVID-19.

China’s worsening power crunch pushed investors out of Chinese stocks vulnerable to factory shutdowns, including chemicals and steelmaking, even as the country’s economic planning agency sought to reassure residents and businesses.

Debt saddled property giant China Evergrande’s shares did leap 15% though, after it said it planned to sell a 9.99 billion yuan ($1.5 billion) stake in Shengjing Bank.

But investors are still waiting to see whether the developer makes some now-overdue bond payments and rating firm S&P Global said another major property firm, Fantasia, was also at growing risk of default.

In commodity markets, oil prices dropped, having broken through $80 a barrel for the first time in nearly three years the day before.

U.S. crude oil futures settled at $74.83 per barrel, down 0.6%. Brent crude futures settled at $78.64 per barrel, also down 0.6%.

(Additional reporting by Alun John in Hong Kong and Dhara Ranasinghe and Sujata Rao in London; Editing by Edmund Blair, Kirsten Donovan, William Maclean and Jonathan Oatis)

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