Micron's AI Boost Overshadowed as Treasury Yields Hit Peaks

Summary

Micron forecast quarterly revenue above estimates and said customers raised long-term supply commitments to $32 billion, but its results failed to lift Asian stocks. US Treasury yields hit fresh peaks despite slower-than-expected August inflation trimming bets on a Fed hike this month. Japan's Tankan survey showed business confidence at an eight-year high, strengthening the case for BOJ rate hikes. Hong Kong and China markets were closed for a holiday.

Equities

The FTSE 100 closed 0.29% lower at 10,606 on Wednesday, recording its biggest monthly decline since March as higher oil prices and bond yields kept inflation concerns in focus. The index still posted its seventh consecutive quarterly gain, while the FTSE 250 rose 0.68% on the day but fell over September.

Oil prices rose, with Brent crude moving above $103 a barrel, while the yield on the 10-year British gilt remained near two-decade highs. Banks fell 0.7% and pharmaceutical stocks dropped 1%, while Airtel Africa fell 3.3% late on Wednesday.

Greggs shares jumped 8.2% on Wednesday after the fast-food chain raised its annual profit outlook as underlying sales growth accelerated in the third quarter. Saga surged 22.8% to a near seven-year high after forecasting a materially higher annual profit, supported by strong demand for its cruise and insurance businesses.

UK economic growth was also revised higher, with the economy expanding 0.5% in the second quarter from April to June, according to the Office for National Statistics. Traders were pricing in at least one 25-basis-point Bank of England rate increase this year, while policymaker Alan Taylor questioned whether a single hike would be practical.

In the US, the S&P 500 fell 0.25% to 7,651.54 on Wednesday, while the Nasdaq Composite gained 0.24% to 26,861.06 and the Dow Jones Industrial Average dropped 0.86% to 50,906.05. The S&P 500 and Nasdaq both recorded their second consecutive quarterly gains.

Microsoft, Apple and Nvidia rose during Wednesday's session, helping the S&P 500 technology sector gain 0.6%. Hewlett Packard Enterprise climbed 3.9% after raising its long-term networking revenue growth forecast and announcing a $1.2 billion deal with Vultr.

Moderna fell 5.3% on Wednesday after Citigroup downgraded the biotech company to sell from neutral. US private employment increased by 90,000 in September, while the annual PCE inflation rate was 3.4% in August, below economists' 3.7% forecast.

Forex & Commodities

The US dollar rose early on Thursday to its highest level in more than three months, supported by higher US Treasury yields. The dollar index reached 101.7, its strongest level since June 25, after gaining 2% in September.

The euro fell early this morning to $1.132, extending a September decline that reflected concerns over European debt and energy prices. Sterling also moved down to $1.325 after falling in September as the stronger dollar weighed on the pound.

The dollar rose against the yen early on Thursday to ¥158.3. The yen had strengthened in September, while concern about possible Japanese currency intervention continued to limit the extent of the dollar's gains. A summary of the Bank of Japan's September meeting showed some policymakers saw a need to accelerate interest rate increases or bring them closer to the central bank's goal.

The latest US inflation data reduced expectations of a Federal Reserve rate increase in October. Markets were pricing a 38% chance of a hike, down from 45% before the data, while the probability of a December increase remained at 97%. US nonfarm payrolls data for September is due on Friday.

Spot gold rose early this morning to $4,175 per ounce after falling more than 6% in September. The metal gained as softer US inflation reduced expectations of an October Fed rate increase, although the stronger dollar remained a constraint.

Oil prices fell early on Thursday, with Brent crude down to $96.92 a barrel and US West Texas Intermediate at $89.18. Recovering Gulf exports and a rise in US crude inventories eased supply concerns, while investors assessed renewed US-Iran diplomatic efforts.

US crude inventories increased by 922,000 barrels to 427.3 million barrels in the week to September 25, against expectations for a 264,000-barrel draw. Saudi Arabia has also resumed oil tanker loadings from Yanbu, while OPEC+ producers are expected to keep November output targets unchanged when they meet on Sunday.