US stocks rose at the end of trading on Monday, supported by the rise in shares of giant companies, at a time when Treasury bond yields stabilized near their highest levels in several years, while the dollar strengthened its gains against the euro and oil prices declined.
The Dow Jones Industrial Average rose 0.18 percent, the Standard & Poor's 500 Index rose about 0.7 percent, while the Nasdaq Composite Index increased about 1 percent, recording a new record level.
The shares received support from major technology companies, led by “Nvidia,” “Meta Platforms,” and “Microsoft.”
In Europe, stocks closed higher, despite French stocks falling to their lowest level in 6 months due to concerns about public finances, and Schneider Electric shares falling after its acquisition of the American software company BTC. The European STOXX 600 index rose 0.4 percent, after last week recording the lowest level in 4 months, with global bond yields rising due to inflation, an increase in corporate bond issuances, and a deterioration in financial expectations.
Latin American markets also rose, led by a rise in Brazilian stocks and the real, after the performance of right-wing Senator Flavio Bolsonaro exceeded opinion poll expectations in the first round of the presidential elections, and qualified for a run-off against the current leftist President Luiz Inacio Lula da Silva.
The MSCI World Stock Index rose 0.7 percent.
Lisa Shalit, chief investment officer at Morgan Stanley Wealth Management, said that the relative calm in stock markets despite the “perfect storm” in the bond market is understandable in light of the acceleration of economic growth and the boom in artificial intelligence, which is not greatly affected by interest rate levels.
She added that her team is monitoring three indicators to monitor any signs of pressure, which are the widening scope of adjustments to corporate and stock earnings expectations, yield differences on high-risk bonds, and the strength of the dollar, in addition to currency market fluctuations.
France is putting pressure on the euro
The euro recovered some of its losses to trade at $1.122, after falling as much as 0.8 percent to $1.1160, its lowest level in 17 months.
The euro fell about 2.5 percent last month, affected by investor concerns about the rise in French debt and political stagnation, with the presidential elections scheduled for next year approaching.
The spread required by investors to hold 10-year French bonds compared to safer German bonds rose to more than 150 basis points on Friday, raising fears that the pressures would spread to other European markets.
Neil Wilson, a strategist at Saxo, said that France represents the real source of risk regarding the risk premium on the euro, noting that the French government’s plans to reduce the budget deficit are still subject to Parliament’s scrutiny, and may eventually be eased.
French 10-year bond yields stabilized below Friday's peak of 4.993 percent, while German bond yields saw little change.
The euro's decline helped support the dollar, which also benefited from the rise in US Treasury yields. The dollar index rose 0.2 percent.
BlackRock Investment Institute strategists said in a note that the dollar’s steadfastness indicates that “it may be too early” to abandon its role in the long term, but they added that the markets are pricing in monetary tightening from the Federal Reserve greater than they expect, which limits the chances of the dollar’s rising wave continuing for a long period.
The 10-year US Treasury bond yield rose 3.4 basis points to 5.31 percent. Borrowing costs in major economies remain near multi-year highs, with deteriorating public finances, increased debt issuance and rising energy prices continuing to pressure bond markets.
Declining rate hike bets support stocks
Data released last week showed that job growth in the United States slowed more than expected during September, along with a significant reduction in jobs data for the previous two months, which led investors to largely rule out the Federal Reserve raising interest rates this month.
The Japanese Nikkei index rose 2.4 percent, while the MSCI index, the broadest index of stocks in the Asia-Pacific region excluding Japan, rose 1.3 percent.
CME's Fed Watch data shows that markets see a probability of about 24 percent for a rate hike this month, compared to 64 percent a week ago, while the December hike is still largely priced in.
Oil is falling
Oil prices fell in Monday's trading after a rise in crude exports from the Middle East and the G7 countries pledged to increase supplies, but losses remained limited due to continued fears of supply disruptions linked to the US-Israeli war on Iran.
Brent crude futures fell $1.93, or 1.89 percent, to settle at $100.32 a barrel, while US West Texas Intermediate crude fell $1.68, or 1.84 percent, to $89.43.
Gold stabilized in spot transactions at about $4,143 per ounce.
South Korean stocks fell on Tuesday as trading resumed after a long holiday, affected by a decline in chip company shares, at a time when investors awaited the results of Samsung Electronics’ operations scheduled to be issued later in the week.
The main KOSPI index fell 34.41 points, or 0.49 percent, to 6,969.33 points by 01:29 GMT, after local markets remained closed on Monday on the occasion of a public holiday.
Samsung Electronics shares fell 0.36 percent, while SK Hynix shares fell 2.72 percent.
Han Ji-young, an analyst at Keum Securities, said that Samsung Electronics' results for the third quarter will be the most prominent event, noting that the focus will be on the extent to which the results are able to push chip sector companies to raise their profit expectations and motivate foreign investors to return to buying.
In contrast, the shares of the battery company “LG Energy Solutions” rose 1.75 percent, and the shares of “Hyundai Motor” and “Kia” increased 1.01 and 0.18 percent, respectively.
“Posco Holdings” steel shares rose 0.64 percent, while “Samsung Biologics” pharmaceutical shares fell 1.70 percent.
Of the 913 shares traded, 411 shares rose, while 448 shares fell. Foreign investors recorded net stock sales of 564.5 billion won ($420.15 million).
On the currency front, the Korean won fell to 1343.0 against the dollar on the local settlement platform, compared to 1342.4 in the previous close.
In the bond market, the 3-year Korean Treasury bond yield, the most liquid, rose 0.7 basis points to 3.937 percent, while the 10-year bond yield fell 0.4 basis points to 4.382 percent.
The South Korean Finance Minister said that the country's economic growth is expected to be in the 3 percent range this year, with growth momentum expanding.
Oil prices rose slightly on Tuesday, with the geopolitical risk premium remaining in the market due to security tensions in the Middle East, at a time when the resilience of crude exports from the region and the agreement of the Group of Seven countries to withdraw quantities of emergency reserves contributed to allaying concerns about supplies.
Brent crude futures rose 27 cents, or 0.3 percent, to $100.59 per barrel by 03:30 GMT, while US West Texas Intermediate crude futures rose 30 cents, or 0.3 percent, to $89.73.
Priyanka Sachdeva, head of market research at Philip Nova, said that shipping data shows that crude exports from the region exceeded pre-war levels on several days during late September, indicating that producers were able to continue transporting supplies despite the turmoil surrounding the Strait of Hormuz, thanks to the use of alternative routes and logistical adjustments.
She added that considering this a “complete return to normal” is still an exaggeration, in light of the renewed attacks on oil tankers around the Strait of Hormuz and the increase in the number of incidents in recent days. She explained that the continued flow of crude does not eliminate the high costs of transportation, insurance, changing routes, and security risks.
Data showed that oil flows from Gulf countries, excluding Iran, rose in September to more than 81 percent of pre-war levels, driven by a recovery in Saudi exports. On the other hand, Iranian exports declined to zero due to the American blockade.
In another step aimed at alleviating fears of supply shortages, the G7 countries agreed on Friday to release 100 million barrels of diesel and crude oil from emergency reserves, and pledged to refrain from imposing restrictions on energy exports, after pressure from US President Donald Trump.
Vivek Dhar, an analyst at Commonwealth Bank of Australia, said that other factors in the market, including the decline in oil inventories, make traders hesitant to believe that the decline in prices can continue.
He added that oil shipping prices from the Gulf to Asia also rose to new record levels, an indication of the tightness of the shipping market, and it also highlights another aspect of the oil supply chain that does not have a large margin to withstand further disruptions.
