NEW YORK, Aug 16 (Reuters) – Global equity markets were flat while US Treasury yields rose on Tuesday, as recession worries persisted amid concern the Federal Reserve will continue its steep interest rate hikes despite nascent signs of a slowdown in inflation.
The yield curve between two- and 10-year Treasury notes, viewed as an indicator of impending recession, remained inverted at minus 40 basis points on Tuesday.
“It seems that the bond market doesn’t quite reflect the inflation happening in the economy,” said George Young, a portfolio manager at Villere & Company in New Orleans.
“The weird thing is that in the last couple of weeks bond yields have gone up and stayed up so there’s kind of a disconnect. There’s kind of a question maybe inflation isn’t that bad and we may actually be going into a recession. Market participants are all over the place,” he added.
MSCI’s gauge of stocks in 50 countries across the globe was up 0.05%. Overnight in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.07% lower, while Japan’s Nikkei lost 0.01%.
US Treasury yields edged higher as encouraging data from US retail giants suggested the Fed has room to further raise rates to cool inflation. Benchmark 10-year Treasury yields were at 2.8077% from 2.791% on Monday.
On Wall Street, the benchmark S&P 500 and the Dow reversed earlier losses and closed higher, with stocks in consumer discretionary, consumer staples, financials and industrials leading the rebound.
The Dow Jones Industrial Average rose 0.71% to 34,152.01, the S&P 500 gained 0.19% to 4,305.2 and the Nasdaq Composite dropped 0.19% to 13,102.55.
Oil prices dropped nearly 3% in volatile trading as recession worries raised uncertainty over global crude demand, even as markets awaited clarity on talks to revive a deal that could allow more Iranian oil exports.
Brent crude futures fell 2.9% to settle at USD 92.84 a barrel, after hitting a session high of USD 95.95. West Texas Intermediate crude (WTI) decreased 3.2%, settling at USD 86.53 a barrel, after rising to USD 90.65.
The dollar was flat, pulling back from earlier gains, amid expectations the US economy would be stronger than peers in the event of a slowdown in growth.
The dollar index was down 0.009%, with the euro up 0.1% to USD 1.017.
Safe-haven gold fell for a second straight session on Tuesday as an initially firmer dollar made the greenback-denominated metal more expensive.
Spot gold dropped 0.2% to USD 1,774.91 an ounce, while US gold futures fell 0.36% to USD 1,774.90 an ounce.
(Reporting by Chibuike Oguh; Editing by Sandra Maler/Alex Richardson/Ken Ferris)