New York: Bitcoin bounced and global stocks clawed back some of their recent losses on Friday as investors assessed the US Treasury’s efforts to push down long-term borrowing costs.
Bond yields were steady and oil prices rose as the United States and Iran remained deadlocked over a deal to reopen the Strait of Hormuz.
That was enough to allow equities to bounce, after having largely fallen over the past week.
Bitcoin climbed more than six percent to about $77,188 and is up more than 20 percent this week — to its highest level since May — as the US Treasury’s surprise move to buy back more of its own bonds increased liquidity and added to investors’ risk appetite.
The rally in the world’s biggest cryptocurrency by market value was also spurred by US President Donald Trump urging lawmakers to pass legislation aimed at encouraging crypto use.
“The turmoil in the debt markets continues despite efforts to calm feverish borrowing costs,” said Susannah Streeter, chief investment strategist at Wealth Club.
“Investors remain concerned about inflationary risks and the growing mountain of government borrowing, while at the same time, debt being issued by tech giants building out the AI revolution is offering stiff competition,” she added.
The three main US stocks indexes all closed higher after having mostly fallen this week.
“If you look at the past five trading sessions or so, if you were short, it’s probably not a bad time to do some short covering,” said Tom Cahill of Ventura Wealth Management.
In Europe, London, Paris and Frankfurt all closed higher. For Paris, it was the first gain after nine successive declines.
– US bond buy-back –
Even with Friday’s bounce, European stock indices “look set to post their worst weekly performance in nearly two months,” said David Morrison, an analyst at Trade Nation.
“The escalation in the US-Iran war, higher oil prices and inflation concerns are all factors weighing on equities,” he said.
“This week’s sell-off marks a stark reversal for markets that had entered August riding a stellar second-quarter reporting season.”
The US Treasury bought its own bonds this week in an effort to push down borrowing costs after the 30-year yield surged to levels last seen in 2007, just before the global financial crisis.
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European government bond yields are also at their highest levels in more than a decade.
Yields have risen on inflation fears and as the United States reported this week that its federal debt had topped $40 trillion.
The Treasury’s buy-back briefly brought some relief from higher yields, but they soon resumed rising.
Thahbib Rahman at Block Scholes said Treasury’s buy-back move had not meaningfully impacted long-dated Treasuries.
“The doubling of buybacks is not only small relative to the size of the treasury market but also doesn’t directly solve some of the structural factors responsible for higher yields,” he said.
Cahill said if 10-year US Treasury bond yields rose above 4.75 percent it would likely pressure the stock markets. Those yields were at 4.74 percent on Friday.
Traders will be closely watching next week’s annual meeting of central bankers, economists and finance chiefs in Jackson Hole, hoping for some clarification on monetary policy.
Earlier in Asia, stocks rose with tech-rich Seoul helped higher by a rally in chipmakers.
Samsung jumped 3.9 percent after saying it spent a massive $80 billion to buy back its own shares, following weeks of turbulent trading.
Hong Kong also rose, while Tokyo fell and Shanghai was flat.
– Key figures at around 2000 GMT –
New York – DOW: UP 1.0 percent at 53,277.01 points (close)
New York – S&P 500: UP 0.4 percent at 7,674.37 (close)
New York – Nasdaq Composite: UP 0.4 percent at 26,180.46 (close
London – FTSE 100: UP 0.6 percent at 10,816.56 (close)
Paris – CAC 40: UP 0.4 percent at 8,484.43 (close)
Frankfurt – DAX: UP 0.6 percent at 26,136.56 (close)
Tokyo – Nikkei 225: DOWN 0.3 percent at 66,016.36 (close)
Hong Kong – Hang Seng Index: UP 1.2 percent at 26,009.46 (close)
Shanghai – Composite: FLAT at 3,905.20 (close)
Dollar/yen: DOWN at 159.03 yen from 159.11 yen on Thursday
Euro/dollar: DOWN at $1.1679 from $1.1680
Pound/dollar: UP at $1.3647 from $1.3630
Euro/pound: DOWN at 85.58 pence from 85.68 pence
Brent North Sea Crude: UP 0.7 percent at $94.39 per barrel
West Texas Intermediate: DOWN 0.3 percent at $87.06 per barrel
