US Stocks Bounce in Early Trading, Gilts Slide: Markets Wrap

(Bloomberg) — US stocks turned higher in early trading, while Treasuries held steady despite producer price data keeping pressure on the Federal Reserve to tighten policy. UK markets were roiled once again by policy concerns.

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The S&P 500 rebounded, staging a comeback after a five-day slump. The tech-heavy Nasdaq 100 outperformed. Treasuries were little changed, with the policy-sensitive two-year yield holding near 4.3%. The dollar was steady.

Data showed prices paid to US producers rose in September by more than expected ahead of a key measure of consumer inflation due Thursday that’s set to return to a four-decade high.

The yield on 30-year gilts rose above 5% after the Bank of England confirmed its plan to end emergency bond purchases, but the pound rallied above $1.10. The BOE also signaled interest rates are likely to rise sharply in November and warned that some UK households may face a strain over debt repayments that’s as great as before the 2008 financial crisis.

“The Bank of England is a test case for how hawkish central banks can be without doing damage to financial stability,” said Michael Metcalfe, global head of macro strategy at State Street Global Markets.

Kristina Hooper, chief global market strategist for Invesco, said in a note that while world economy is slowing after rate hikes, there’s yet to be a meaningful decline in inflation.

“This is an extraordinary monetary policy tightening environment and we are waiting to see…