Band Kevin Buckland
OTTAWA, August 4 (Reuters) – Crude oil sank along with Treasury yields and the dollar on Thursday as recession worries intensified following the Bank of England’s warning of a prolonged slowdown and ahead of a very hot US jobs report. expected Friday.
Stocks on Wall Street ended mixed, as gains in high-growth stocks were offset by a slowdown in energy stocks as a key U.S. jobs report loomed on Friday.
The S&P 500 .SPX fell slightly to 4,151.94, falling from a two-month closing high in the previous session.
The Dow .DJI fell 0.26% to 32,726.82 from a nearly three-month high on Wednesday.
The Nasdaq .NDXhowever, moved to a 0.44% gain at 13,311.041 after steep early losses, extending a three-month high.
The two-year Treasury yield US2YR=RR fell 7.1 basis points to 3.0366%, while the 10-year yield US10YR=RR slipped 6.3 basis points to 2.6846%.
The gap between them went as low as minus 39.2 basis points earlier in the day, the deepest reversal since 2000. An inverted curve is often considered to portend a recession.
Crude oil prices have fallen to levels not seen before Russia’s invasion of Ukraine. Crude Brent LCOc1 futures settled at $2.66 at $94.12, the lowest close since Feb. 18. Crude West Texas Intermediate (WTI) CLc1 futures settled at $2.34 at $88.54, the lowest close since Feb. 2.
Traders feared any recession would torpedo energy demand, while an unexpected rise in U.S. crude inventories also weighed on prices, which had soared to more than $120 a barrel this year.
Cleveland Federal Reserve Chair Loretta Mester said Thursday that the economy is not currently in recession, but the risks of a recession have increased, while reiterating the central bank’s determination to continue a aggressive tightening until there is convincing evidence of lower inflation.
The monthly U.S. nonfarm payrolls report will be closely watched on Friday to see if the tight labor market will continue to drive up wages. Thursday’s data showed an increase in jobless claims.
“Expectations that we’re heading into a recession are clear, and the clearest signal is coming from the Treasury market,” said Edward Moya, senior market analyst at OANDA in New York.
“Things are getting worse overseas, and we are expected to see more economic weakness at the end of the year, and it is difficult to be bullish on equities.”
The Bank of England made a bigger rate hike of half a point earlier in the day, joining the Federal Reserve and other central banks in an accelerated race to catch up with inflation. But the rise was widely expected, and investors were more focused on the central bank’s warning that a long recession is on the way.
“The main surprise seems to be the somewhat pessimistic economic forecasts that have also been given to us,” said Stuart Cole, chief macroeconomist at Equiti Capital.
“It’s a bit worse than what we saw in May, when the outlook was for one or two tough quarters of weak or negative growth and then a recovery.”
UK stock market index FTSE 100 .FTSE little changed, compared to weak gains in the pan-European STOXX 600 index .STOXX following strong corporate earnings.
The euro gained 0.59% to 0.84205 against the pound. EURGBP=D3and hit 0.8438 at some point for the first time since July 26.
Sterling GBP=D3 recovered however to be up 0.12% at $1.2163 after falling to $1.2065 for the first time since July 29.
The greenback accelerated its decline amid falling US yields, the dollar index =USD – which measures the currency against six major counterparties including the pound, euro and yen – slipping 0.68% to 105.76.
The dollar fell 0.66% to 132.94 yen JPY=EBSthe currency pair being particularly sensitive to long-term Treasury yields.
Spot gold XUA= jumped 1.5% to a one-month high of $1,794.79 an ounce, helped by falling US yields and a weaker dollar.
cryptocurrency bitcoin BTC=BTSP fell 1.3% to $22,536 as it continued its slow retreat from a month-and-a-half high of $24,676 hit on Saturday.
It failed to get a boost from Coinbase’s announcement of a tie-up with BlackRock to provide the fund manager’s institutional clients with access to crypto trading and custody services.
World exchange rates since the beginning of the yearhttp://tmsnrt.rs/2egbfVh
Overall asset performancehttp://tmsnrt.rs/2yaDPgn
Central Bank policy rateshttps://tmsnrt.rs/3zOw3Lx
(Reporting by Kevin Buckland; Additional reporting by Huw Jones; Editing by Alden Bentley, Kim Coghill, Mark Potter and Susan Fenton)
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