By Alun John and Ankur Banerjee
LONDON/SINGAPORE (Reuters) -Long-dated bond yields in Europe hit multi-year highs on Tuesday as investors grow increasingly worried about the state of finances in countries around the world, while stocks slid, the dollar gained, and gold touched a fresh record high.
As markets suffered a sharp September back-to-school shock, the Japanese yen also tumbled after a close aide to Prime Minister Shigeru Ishiba said on Tuesday he would resign from his post.
Later in the day, U.S. business activity data will be the first in a raft of important economic figures to come this week.
Britain’s 30-year bond yield rose nearly 6 basis points to 5.697%, its highest since 1998, France’s rose a similar amount to 4.513%, its highest since 2009, and Germany’s was at its highest since 2011 at 3.41%.
Bond yields move inversely to prices, and yields especially on super-long-dated 30-year bonds have been soaring around the world, with investors concerned about the scale of debt in countries from Japan to the United States.
“The pain trade in bond markets seamlessly carried over from August into September,” said Kenneth Broux, head of corporate research FX and rates at Societe Generale.
“And the flurry of new primary issuance that awaits investors in the coming days and weeks threatens to exacerbate the global sell-off in the long end.”
More than 100 billion euros ($117 billion) is planned in European bond issuance in September and October.
The U.S. 30-year yield was also up 6 bps at 4.8% but that was only its highest since July, while benchmark 10-year Treasury yields rose 6 bps to 4.28%.
But Britain and France are in particular focus.
French Prime Minister Francois Bayrou looks set to lose a confidence vote next week as opposition parties balk at his cuts to government spending, while British finance minister Rachel Reeves is expected to raise taxes in her autumn budget in order to remain in line with her fiscal targets.
Sterling also tumbled sharply, down 1.3% on the dollar at $1.3370, and at its weakest in nearly a month on the euro.
Currencies were volatile elsewhere too, and the dollar was last up nearly 1%on the yen, at 148.6 as dovish-leaning remarks from a Bank of Japan official and the resignation of a key ruling party official pulled down the Japanese currency.
The euro also slid 0.7% to $1.631. and Broux said the dollar was seeing some safe-haven properties for the first time since April’s tariff shock.
“It is only one day of course,” he said noting the moves could provide “an attractive entry point if (nonfarm payrolls) surprises to the downside on Friday and the clamour grows for the Fed to cut.”
All that hurt stocks, and Europe’s broad Stoxx 600 share benchmark was down 1%, with rate-sensitive real estate stocks down nearly 3%.
U.S. share futures fell 0.7%
BUSY WEEK FOR US DATA
Still to come is U.S. business activity data, the first instalment in a packed week of economic figures which will either underscore expectations the Federal Reserve will cut rates later this month, or put them into question.
The most important of the week’s data is Friday’s U.S. nonfarm payrolls report, which will be preceded by data on job openings and private payrolls, providing investors and the Fed a clearer picture of the labour market that has become the centre of policy debate.
Markets widely expect the Fed to lower interest rates later this month, pricing in an 89% chance of a 25-basis-point cut.
The prospect of near-term Fed cuts, long-term worries about inflation, and global market jitters combine to a perfect environment for precious metals.
Gold rose as high as $3,508.5 an ounce early on Tuesday, its highest on record, while silver rose to a 14-year high.
Both then retreated in European trading hit by a rebound in the dollar.
Oil prices rose as concerns about supply disruptions grew amid an escalation of the conflict between Russia and Ukraine. Brent crude rose 1.5% to $69.17 a barrel. [O/R]
(Reporting by Alun John in London and Ankur Banerjee in Singapore; editing by Jacqueline Wong, Mark Heinrich and Chizu Nomiyama )
