Stocks climb with Treasury yields, Sterling climbs

By Sinéad Carew and Huw Jones

NEW YORK/LONDON (Reuters) – U.S. equities were rising with Treasury yields on Thursday as investors looked beyond upcoming rate hikes while oil prices rose with a focus on supply concerns outweighing recession fears.

In foreign exchange markets, the euro edged toward parity with the safe-haven dollar, which was flat against a basket of major currencies. [FRX/]

Sterling was rising after the resignation of Britain's Prime Minister Boris Johnson under pressure from his political party following a string of resignations and scandals. On Wednesday, the pound had hit its lowest level since March 2020 as Johnson was insisting he would stay.

The technology heavy Nasdaq was leading gains with outperformance in chip stocks. And with U.S. Treasury yields rising, Wall Street investors were also starting to look ahead to the point where the Federal Reserve would be able to pause its interest rate hiking cycle.

"The primary thing right now is the direction of Treasury yields. It's giving folks a reason to believe the Fed is close to its end point in raising interest rates. That's giving the market some confidence to step in and buy growth stocks that had been beaten down," said Robert Pavlik, senior portfolio manager at Dakota Wealth, also citing recent declines in commodity prices.

Minutes from the Fed's June meeting published on Wednesday showed that at the time policymakers discussed how a more restrictive stance might be needed if elevated inflation persisted.

The Dow Jones Industrial Average rose 233.34 points, or 0.75%, to 31,271.02, the S&P 500 gained 42.33 points, or 1.10%, to 3,887.41 and the Nasdaq Composite added 186.83 points, or 1.64%, to 11,548.68.

Semiconductor stocks were outperforming with a boost from Samsung Electronics' strong quarterly results.

The pan-European STOXX 600 index rose 1.97% and MSCI's gauge of stocks across the globe gained 1.29%.

Meanwhile the euro sought to claw back from its near two-decade trough against the greenback and avoid going below parity for the first time since December 2002.

"The euro is in freefall and we have not heard any official from the European Central Bank commenting. It's as if they are locked in a bunker," Kevin Thozet, investment committee member at Carmignac asset management, said.

The dollar index rose 0.065%, with the euro down 0.28% to $1.0153.

The Japanese yen strengthened 0.01% versus the greenback at 135.91 per dollar, while Sterling was last trading at $1.1997, up 0.56% on the day.

Also Bank of England policymaker Catherine Mann said on Thursday that central banks should move quickly and aggressively when raising interest rates due to the lack of clarity about how long surging inflation will last.

GRAPHIC: Euro/dollar heads towards parity?

Unlike the Bank of England and the Fed, the ECB has yet to begin raising interest rates despite record high inflation in the euro zone, but the central bank is expected to increase rates by 25 basis points later this month.

GRAPHIC: Inverted U.S. Treasury curve a harbinger of recession”>


U.S. Treasury yields edged higher on Thursday as investors waited on key jobs data due on Friday for clues about the strength of the economy. [US/]

Benchmark 10-year notes last fell 25/32 in price to yield 3.0019%, from 2.911% late on Wednesday. The 2-year note last fell 5/32 in price to yield 3.0489%, from 2.961%.

Oil prices rose steeply on Thursday after sharp losses in the previous two sessions, as investors returned their focus to tight supply even as fears of a global recession persisted.

U.S. crude recently rose 5.83% to $104.27 per barrel and Brent was at $106.07, up 5.34% on the day. [O/R]

Spot gold added 0.2% to $1,741.51 an ounce, while U.S. gold futures gained 0.59% to $1,745.20 an ounce.

Earlier, Asian stocks gained, with MSCI's broadest index of Asia-Pacific shares outside Japan up 1% from a two-month low.

South Korea's KOSPI index had gained 1.8% with a boost from Samsung, which reported its best second-quarter profit since 2018 on strong sales of memory chips to server computer makers even with demand from smartphone makers cooling.

(Reporting by Huw Jones in London, Tom Westbrook in Singapore and Sam Byford in Tokyo; Editing by Bernadette Baum and Chris Reese)

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