WALL Street stocks were mixed yesterday after the US narrowly avoided a government shutdown, while European indexes tumbled on renewed interest rates concerns.  

The US Congress passed a last-minute funding bill on Saturday to keep federal agencies running for another 45 days, just hours before a midnight deadline.

“This measure means the government will remain open until November 17, providing natural disaster aid but not additional funding for Ukraine or border security,” Edward Moya of the Oanda trading platform wrote in a note to clients.

The Dow Jones Industrial Average slipped and the S&P 500 was flat, while the tech-rich Nasdaq Composite Index advanced 0.7%.

In Europe, stocks continued their recent decline as rising oil prices fuelled renewed concern about inflation, dimming hopes that central bankers will soon start rolling back rate hikes.

Treasury yields jump

With a temporary extension of US government funding secured, Wall Street traders “quickly returned to fuelling the bond market selloff,” said Moya.

Treasury yields remained lofty with the yield on the 10-year US Treasury – a focal point for investors – reaching the highest level since 2007.

Treasury bond yields are seen as a proxy for US interest rates and closely watched.

“The stock market is certainly highly sensitive right now to the movement in Treasury yields, and particularly the 10-year yield,” said Patrick O’Hare of Briefing.com.

The argument can be made, he told AFP, that if the 10-year note yield can move lower, a rebound effort in the stock market could come to fruition.

The lacklustre start to October follows a dreary September, when indexes on both sides of the Atlantic fell to multi-month lows as investors kept a wary eye on Treasury yields. 

Higher for longer

Earlier yesterday, Federal Reserve vice-chair for supervision Michael Barr told a conference in New York that he expected interest rates will need to remain at a “sufficiently restrictive level” for “some time” in order to get inflation down to the US central bank’s 2% target. 

“The Fed and ECB [European Central Bank] are practically done with hikes,” analysts at ING said in a research note. 

“Rather it’s all about the risk that rates don’t get cut – by enough, or in a timely fashion,” they added. 

A fall in the eurozone unemployment rate to 6.4% in August failed to lift sentiment in Europe, as investors take a cautious stance ahead of the corporate earnings season. 

In Asia, Tokyo closed slightly lower, giving up early gains spurred by a positive Bank of Japan business confidence survey as sentiment reverted to risk-avoidance.

Asian markets were subdued with bourses in Hong Kong, mainland China, South Korea and India shut for holidays. 

Among those trading, Singapore, Sydney, Wellington, Kuala Lumpur and Manila were in the red while Taipei, Jakarta and Bangkok saw gains.

On foreign exchange markets, the yen was weakening towards the 150 level against the dollar.

The yen’s weakness is fuelling speculation that the government may step in to prop up the currency.

Key figures around 2030 GMT

New York - Dow: DOWN 0.2% at 33,433.35 points (close)

New York - S&P 500: FLAT at 4,288.39 (close)

New York - Nasdaq: UP 0.7% at 13,307.77 (close)

London - FTSE 100: DOWN 1.3% at 7,510.72 (close)

Frankfurt - DAX: DOWN 0.9% at 15,247.21 (close)

Paris - CAC 40: DOWN 0.9% at 7,068.16 (close)

EURO STOXX 50: DOWN 0.9% at 4,137.63 (close)

Tokyo - Nikkei 225: DOWN 0.3% at 31,759.88 (close)

Hong Kong - Hang Seng Index: Closed for a holiday

Shanghai - Composite: Closed for a holiday

Euro/dollar: DOWN at US$1.0484 from US$1.0573 Friday

Pound/dollar: DOWN at US$1.2094 from US$1.2199

Euro/pound: FLAT at 86.66 pence from 86.66 pence

Dollar/yen: UP at  ¥149.84 from  ¥149.37

Brent North Sea crude: DOWN 1.6% at US$90.71 per barrel – AFP, October 3, 2023.

West Texas Intermediate: DOWN 2.2% at US$88.82 per barrel