Volkswacht Bodensee - Stocks edge higher in cautious rebound after sell-off

A surge in US Treasury yields as well as German government bonds reflects expectations that central banks will keep rates high in their fight against inflation.

But the yield on the 10-year US Treasuries retreated on Wednesday -- a day after hitting a 16-year peak a day earlier -- as a private sector jobs report came in below expectations.

The tight central bank monetary policy could cut into growth prospects as firms and consumers face higher borrowing costs, jeopardising hopes for the "soft landing" sought by officials.

"The US economy is expected to slow down significantly, potentially to a rate below 1 percent in the fourth quarter. It may even stall early next year," said Stephen Innes, a partner at SPI Asset Management.

That was why oil prices also declined further Wednesday after surging last week, he said, even as an OPEC meeting in Vienna pointed to no change of the output cuts announced by Saudi Arabia and Russia.

Signs of a strong US labour market have also raised expectations the Federal Reserve will keep benchmark rates higher for longer.

But payroll firm ADP reported the US private sector added only 89,000 jobs last month, well below expectations. All eyes will now turn to the September nonfarm payroll numbers due Friday.

The historic ouster of the chief Republican in the House of Representatives, Kevin McCarthy, has also rekindled US political worries, as it could again complicate a debt deal with President Joe Biden's Democrats that would avoid a crippling federal government shutdown in November.

"McCarthy's removal could elevate the risk of a US credit rating downgrade," said Walid Koudmani, chief market analyst at the online trading group XTB.

- 'Winds of worry' -

"Chill winds of worry are swirling about high interest rates settling in and there is set to be little respite from the sell-off," said Susannah Streeter, head of money and markets at stockbroker Hargreaves Lansdown.

"This fresh bout of anxiety has been prompted by new jobs data in the US indicating that vacancies unexpectedly jumped in August."

In Asia, Tokyo and Seoul, which resumed trade after a long holiday weekend, led sharp declines on Wednesday. Markets in mainland China were closed for a week-long holiday.

Japanese stocks were also rattled after the yen fell further against the dollar, which moved past 150 yen for the first time in the year.

Japan's top finance officials declined to comment Wednesday on whether Tokyo had intervened in currency markets to support the yen, as they did when the dollar broke past 150 yen in October 2022.

The yen has been pressured by the ultra-loose monetary policy of the Bank of Japan, which is trying to engineer sustainable economic growth after years of deflation, in contrast with the interest rate hikes made over the past year in the US and Europe.

- Key figures around 1400 GMT -

New York - Dow: DOWN 0.1 percent at 32,984.60 points

London - FTSE 100: DOWN 0.5 percent at 7,430.59 points

Frankfurt - DAX: UP 0.2 percent at 15,112.93

Paris - CAC 40: UP 0.3 percent at 7,015.76

EURO STOXX 50: UP 0.3 percent at 4,107.37

Tokyo - Nikkei 225: DOWN 2.3 percent at 30,526.88 (close)

Hong Kong - Hang Seng Index: DOWN 0.8 percent at 17,195.84 (close)

Shanghai - Composite: Closed for a holiday

Euro/dollar: UP at $1.0510 from $1.0467

Pound/dollar: UP at $1.2156 from $1.2077

Euro/pound: DOWN at 86.47 pence from 86.66 pence

Dollar/yen: DOWN at 148.93 yen from 149.02 yen Tuesday

Brent North Sea crude: DOWN 2.5 percent at $88.68 per barrel

West Texas Intermediate: DOWN 2.7 percent at $86.81 per barrel

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S.Leonhard--VB