Stocks gain as bonds recover; rising tensions boost oil prices

Global stocks and bonds rallied on Thursday, ahead of US data and central banker comments that ‌could reinforce investor expectations the Federal Reserve will raise rates this month.

A recovery in global bonds helped improve sentiment in equities, while the ​yen powered towards ⁠its biggest two-day rally since a boost from official intervention early last month. Oil reversed earlier losses to rise ‌above $95 a barrel, as uncertainty prevailed over renewed ‌military strikes between the US and Iran.

In Europe, the STOXX 600 rose 0.2%, breaking three days of losses, while US futures were up around 0.1%.

In premarket trading, shares in Broadcom fell around 2% after the company reported fourth-quarter revenue forecasts that fell short of expectations, while shares in Snowflake soared by over 20% after ‌the cloud data platform provider delivered a stronger annual revenue forecast.

Investors’ immediate focus is Friday’s US payrolls report after disappointing private labour data for August. Fed ⁠Board Governor Christopher Waller is due to speak, after New York Fed President John Williams said on Wednesday rising long-term bond yields were a reflection of a solid economy rather than inflation fears, adding that he was still collecting information to drive his next monetary policy decision.

“There is an interpretation about why yields are moving higher - is it good, or bad? I feel that the negative reasons are more often put forward than the positive reasons. Negative reasons being: too much supply of debt, fiscal risk, geopolitics and, normalisation of risk premium because of oil. But it might be that a key reason ​behind higher yields is simply higher nominal growth,” Lombard Odier chief economist Samy Chaar said.

“If demand is strong and it’s ‌demand that is keeping yields at high levels, it’s quite a good environment for multi-asset portfolios, in the sense that you want to be exposed to profit growth with equities, and you want to be exposed to carry as well, with credit,” he said.

Money markets currently assign a roughly 60% chance of ⁠a rate hike from the Fed this month, up from less than 40% a week ago.

Sovereign bond yields fell, having hit multi-year highs in the last week as concerns have deepened about tighter monetary policy and deteriorating fiscal conditions.

Benchmark US 10-year yields were down 2 basis points ​at 4.77%, while 10-year ‌German yields were also down 2 bps at 3.353%.

The dollar index, which tracks the US currency against a basket of six others, fell ‌0.4%, largely as a function of the push higher in the yen. Mounting expectations that the Bank of Japan will raise rates sooner rather than later have pushed the Japanese currencyup by over 2.5% in the last two days to trade around 156.1, set for its biggest two-day rise since a round of historic U.S./Japanese intervention ‌in early August.

The ‌euro gained 0.18% to trade around $1.1609, while the pound was up 0.1% at $1.349 ⁠and the Swiss franc strengthened to 0.8087 francs, leaving the dollar down 0.5%.

In commodities, the oil price fell for the ‌first time in nearly a week, although investors remained on edge after the US and Iran exchanged their largest barrage of attacks since July, reviving fears of a broader regional escalation in the Middle East.

Brent crude rose for a fourth day, up ⁠1% at $96.62 a barrel. Gold rose 1.1% to $4,434 an ounce. It is now nearly 13% above June’s seven-month lows, as geopolitical uncertainty and concern ​about the debasement of the US dollar have lured investors back into the market.

The Dutch central bank on Wednesday said it had moved a large part of its gold reserves from North America to vaults in London over the past six months to be ⁠better prepared for a potential crisis.

Aluminium rose for a fifth straight session on Thursday, touching its highest in three weeks on continued supply tightness and a slight improvement ‌in economic risk sentiment that also boosted other industrial metals.

Benchmark three-month aluminium on the ​London Metal Exchange ⁠was up 0.6% at $3,303 a metric tone in official open-outcry ‌activity. The metal earlier ‌hit $3,306.50 for its highest since August 13.

“Aluminium is supported by physical market tightness and expectations of firmer seasonal demand in China,” said ING commodities strategist Ewa Manthey.

LME aluminium ‌stocks  of 245,975 tonnes are the lowest since 1990. In top metals consumer China, ⁠Shanghai Futures Exchange inventories have fallen for 11 weeks running from a six-year high of 528,885 tonnes on June 12 to 391,498 tonnes.

Analysts expect the aluminium market to remain in deficit this year despite hopes for returning supply from smelters in the Middle East, which accounts for about 9% of global capacity.

Copper gained 0.4% ​to $14,270 a tone as the LME complex was boosted by a weaker ‌dollar and fading expectations of a September increase to US interest rates. A weaker US currency makes dollar-denominated metals more affordable for holders of other currencies.

The copper curve ⁠remained in backwardation, indicating near-term tightness, but the premium on the cash contract over the three-month forward  has narrowed to $93 a tone, from more than $500 on August 17, as available ​stocks  have ‌edged higher.

Agencies