CNBC Daily Open: Investors flocked to U.S. Treasurys for safety

The US Treasury constructing throughout a renovation in Washington, DC, US, on Tuesday, Aug. 15, 2023.

Nathan Howard | Bloomberg | Getty Images

This report is from at present’s CNBC Daily Open, our new, worldwide markets publication. CNBC Daily Open brings buyers up to velocity on every part they want to know, regardless of the place they’re. Like what you see? You can subscribe here.

What you want to know at present

Markets continued rallying
U.S. stocks rose Tuesday, boosted by falling Treasury yields and easing oil costs. Small-cap shares, particularly, rose greater than the broader market. Asia-Pacific markets traded higher Wednesday. South Korea’s Kospi popped 2.35% to hit a two-week excessive, boosted by chip companies. Hong Kong’s Hang Seng Index added round 1.8%, on tempo for its fifth consecutive profitable session.

Samsung’s anticipating income to plunge 78%
Samsung Electronics expects operating profit to are available at 2.4 trillion Korean gained ($1.79 billion) for the third quarter. That’s a staggering plunge of 78% yr over yr, dragged down by the agency’s semiconductor enterprise. Still, that is greater than triple the 670 billion gained in working revenue the corporate earned final quarter — and slightly higher than analyst expectations. Shares jumped 3%.

China’s customers are nonetheless cautious
Retail gross sales in China for the Sept. 29 to Oct. 5 vacation interval rose by 9% from a yr in the past, in accordance to state stories. While that is a sooner charge of progress in contrast with August, retail sales grew less than 3% a year for the reason that begin of the pandemic, in accordance to estimates from UBS. In different phrases, there is a restoration in consumption — but it surely’s a gradual one.

Alameda allegedly took FTX cash
Caroline Ellison, the previous head of Alameda Research and ex-girlfriend of FTX founder Sam Bankman-Fried, took the stand as the federal government’s star witness Tuesday. Ellison testified she and her ex-boss dedicated fraud. Alameda “took round $14 billion” from FTX clients, Ellison stated. “I despatched stability sheets to lenders on the course of Sam that incorrectly said Alameda’s property and liabilities.”

[PRO] Safety in dividend shares
Investors apprehensive about current volatility in markets — surging oil costs, spiking Treasury yields and the Israel-Hamas conflict — can flip to safe stocks with high dividends, stated analysts. After screening for such shares, CNBC Pro discovered 10 with dividend yield above 4% and a debt-to-capital ratio of lower than 80%, amongst different standards.

The backside line

In instances of danger, buyers flip to secure property. And there is not any asset perceived as safer — whereas remaining liquid — than a U.S. Treasury bond.

Yields for U.S. Treasurys fell Tuesday as buyers swarmed for safety amid the Israel-Hamas conflict. The 10-year Treasury yield dropped round 13 foundation factors to 4.649%, whereas the 2-year yield settled simply above the 5% stage throughout Asia buying and selling hours. As yields transfer inversely with costs, meaning bond costs went up, pushed up by demand.

Falling yields offered some aid to shares. The S&P 500 rose 0.52%, the Dow Jones Industrial Average picked up 0.4% and the Nasdaq Composite superior 0.58%.

Another vivid spot was the small-caps Russell 2000, which climbed 1.14% for its fifth consecutive profitable day, the primary time it is executed so since July 13. That offers the index a 0.83% achieve yr to date — fairly outstanding should you keep in mind it sank into the red for the year simply over per week in the past.

(Readers will discover this implies each shares and bonds moved in tandem — however their sometimes inverse relationship has been severed ever for the reason that pandemic.)

“I feel that transfer decrease in yields has supported fairness markets broadly. It may be bringing aid to markets that maybe there may be some type of peak on this quickly upward shifting yield in the previous few weeks,” stated Mona Mahajan, Edward Jones senior funding strategist.

Still, the Bank of England issued a rare warning on the valuation of U.S. know-how shares. “Given the affect of upper rates of interest, and uncertainties related to inflation and progress, some dangerous asset valuations seem to be stretched,” the U.K. central bank’s financial policy committee said Tuesday. And the excessive value premiums are “pushed primarily by the continued energy within the U.S. tech sector,” the report added.

With September’s producer value index popping out later at present, and the patron value index Thursday, buyers can higher choose how a lot danger is price taking — or if a safer asset just like the U.S. Treasury bond makes extra sense amid doubtlessly larger charges and geopolitical upheaval.

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