US stocks rebound after interest rate fears spurred sell-off

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Wall Street stocks staged a rebound at the open on Friday after a week in which equities have been buffeted by rising oil prices and growing expectations that interest rates will stay higher for longer.

Wall Street’s benchmark S&P 500 rose 0.2 per cent at the New York opening bell after hitting its lowest level since June overnight. The tech-focused Nasdaq Composite advanced 0.3 per cent, lifting off its lowest points since August.

The S&P has lost 2.4 per cent and Nasdaq 3 per cent after US policymakers issued a hawkish forecast for future monetary policy, signalling one more rate increase this year and fewer cuts in 2024.

Bolstering the Federal Reserve’s case, the S&P Global flash composite purchasing managers’ index, a measure of manufacturing and services sector activity in the US, came in at 50.1 in September, only slightly below 50.2 in the previous month.

The figure remained above the neutral 50 mark which separates contraction from expansion, signalling continued economic resilience that gives the US central bank more leeway for monetary tightening.

Longer-dated US Treasuries retreated after rising sharply on Thursday. The yield on the benchmark 10-year Treasury, which hit a 16-year high in the previous session, fell 0.03 percentage points to 4.45 per cent.

The dollar, which tends to strengthen when investors expect rates to stay high, advanced as much as 0.2 per cent against a basket of six peer currencies before paring its gains. It remained near its highest level since March.

Concerns over central bank policy plans echoed in the eurozone, where the equivalent PMI came in at 47.1 in September, above analysts’ forecasts of 46.5.

Europe’s region-wide Stoxx Europe 600 fell 0.2 per cent, dragged lower by industrials stocks, while France’s Cac 40 declined 0.5 per cent and Germany’s Dax gave up 0.1 per cent.

Adding to the pressure on central banks across the world, supply cuts from leading exporters pushed oil prices up 30 per cent since June, threatening to hamper global efforts to bring inflation back to the 2 per cent target.

Brent crude, the international benchmark, rose 1.1 per cent to trade at $94.32 a barrel on Friday, after Russia barred the export of diesel and petrol in its latest move to prompt up prices. West Texas Intermediate, the US marker, added 1.6 per cent to $91.03.

European energy stocks buoyed the region’s blue-chip indices, with the Stoxx Europe 600 energy index rising 0.6 per cent.

Meanwhile, the Japanese yen weakened 0.5 per cent to trade at ¥148.23 to the dollar after the Bank of Japan announced its widely expected decision to stick with an ultra-low interest rate policy on Friday.

The policy comes even as Japan’s consumer price growth exceeded the central bank’s 2 per cent target for the 17th consecutive month, with the “core” figure rising 3.1 per cent in August.