Treasuries Hit as Traders Weigh US Election Risks: Markets Wrap

(Bloomberg) — The world’s biggest bond market got hit as traders weighed the potential economic implications of the November US presidential election.

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The growing prospect of a Donald Trump presidential victory is making yield curve steepeners an attractive bet as growth will likely slow and inflation quicken under such a scenario, according to Morgan Stanley. As a result, longer-term bonds continued to largely underperform shorter ones. The US Supreme Court ruled that Trump has some immunity from criminal charges for trying to reverse the 2020 election results, all but ensuring that a trial won’t happen before the November election.

“With the eternal question of whether rising debts and deficits matter for interest rates and the funding costs a government has to pay, maybe we’re getting a taste that now it does?” said Peter Boockvar at the Boock Report. “Regardless of who wins in November though, we know the US financial situation is only going to get worse, especially if current federal spending as a % of GDP at 23-24% remains well above the historical trend of about 20%.”

Treasury 10-year yields advanced seven basis points to 4.47%. The S&P 500 fell to 5,450. Nvidia Corp. sank, leading losses in tech. Chewy Inc. surged after Keith Gill — known online as “Roaring Kitty” — disclosed a passive stake in the online pet food and product retailer.

European shares snapped a four-day losing streak and the euro rose as French election results suggested there’s a smaller probability of extreme policies coming from the far-right.

Corporate America faces the highest earnings bar in almost three years as it prepares to report second-quarter results, according to Goldman Sachs Group Inc.’s David Kostin.

“The magnitude of earnings-per-share beats is likely to diminish as consensus forecasts set a higher bar than in previous quarters,” Kostin said. “We expect the outperformance ‘reward’ for stocks beating estimates will be smaller than average again this quarter.”

Corporate Highlights:

• Boeing Co. agreed to buy back Spirit AeroSystems Holdings Inc. for $37.25 a share in an all-stock deal that values the supplier at $4.7 billion, unwinding a two-decade separation as the embattled US planemaker tries to fix its manufacturing defects.

• Meta Platforms Inc. has been slapped with a warning over its subscription model for ad-free services on Instagram and Facebook, risking potentially heavy fines in the European Union’s latest attack on Big Tech under tough new rules.

• A.P. Moller-Maersk A/S withdrew its bid for DB Schenker, the logistics unit of Deutsche Bahn AG that’s been reported to be valued at more than €15 billion ($16.1 billion).

• Air France-KLM is experiencing pressure on projected unit revenue this summer season at French units because passengers are avoiding Paris in the summer months to skirt possible disruptions and high prices during the Olympic Games.

• BYD Co. sold a record number of electric and hybrid cars in the second quarter, sales data compiled by Bloomberg News shows, as price cuts and new technology stoked consumers into purchases.

Story continues

Key events this week:

• Eurozone CPI, unemployment, Tuesday

• US job openings, Tuesday

• Jerome Powell and Christine Lagarde speak at ECB forum in Portugal, Tuesday

• China Caixin services PMI, Wednesday

• Eurozone S&P Global Eurozone Services PMI, PPI, Wednesday

• US Fed minutes, ADP employment, ISM Services, factory orders, initial jobless claims, durable goods, Wednesday

• Fed’s John Williams speaks, Wednesday

• UK general election, Thursday

• US Independence Day holiday, Thursday

• Eurozone retail sales, Friday

• US jobs report, Friday

• Fed’s John Williams speaks, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 was little changed as of 10:38 a.m. New York time

• The Nasdaq 100 was little changed

• The Dow Jones Industrial Average was little changed

• The Stoxx Europe 600 rose 0.4%

• The MSCI World Index was little changed

Currencies

• The Bloomberg Dollar Spot Index rose 0.1%

• The euro rose 0.3% to $1.0740

• The British pound rose 0.1% to $1.2659

• The Japanese yen fell 0.4% to 161.54 per dollar

Cryptocurrencies

• Bitcoin rose 1.4% to $62,768.48

• Ether rose 1.2% to $3,457.98

Bonds

• The yield on 10-year Treasuries advanced seven basis points to 4.47%

• Germany’s 10-year yield advanced nine basis points to 2.59%

• Britain’s 10-year yield advanced nine basis points to 4.26%

Commodities

• West Texas Intermediate crude rose 0.4% to $81.85 a barrel

• Spot gold fell 0.2% to $2,321.53 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Lynn Thomasson, Julien Ponthus, John Viljoen, Catherine Bosley, Matthew Burgess, Vildana Hajric and Sagarika Jaisinghani.

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