* U.S. Treasuries yields lowest in 3 months as tapering seen
* Wall St down after four record sessions for S&P 500 on
* China short-term rates spike boosts demand for dollar,
yen, Swiss franc
By Angela Moon
NEW YORK, Oct 23 (Reuters) - U.S. Treasuries yields fell to
the lowest in three months on Wednesday on reinforced
expectations that the Federal Reserve is unlikely to reduce its
stimulus efforts in the near term, while global equity markets
ended their recent winning streak.
On Wall Street, the S&P 500 was down after a four-day streak
of record highs as shares of Caterpillar and a number of
chipmakers tumbled on weaker-than-expected results.
European shares snapped a nine-day winning streak, hit by
plans for a tougher stress test for euro zone banks, as well as
weak earnings numbers and forecast downgrades in other sectors.
The FTSEurofirst 300 index lost 0.6 percent.
Global equity markets weakened as China's primary short-term
money rates rose on concerns the People's Bank of China may
tighten its cash supply to address inflation risks, which could
hurt growth in the world's second-largest economy. Shanghai
shares fell 1.3 percent.
In the U.S. Treasuries market, the focus was largely
centered on next week's Federal Reserve policy meeting, where
the U.S. central bank is expected to keep its $85 billion a
month bond purchase program unchanged.
"The Fed is kind of handcuffed from doing any tapering; the
consensus is pushing it out to March. The weak (jobs) number
supports it," said Sean Murphy, a Treasuries trader at Societe
Generale in New York.
A Reuters poll conducted on Tuesday showed 9 of 15 U.S.
primary dealers see the Fed starting to reduce bond purchases in
March, with many of them blaming Washington's fiscal impasse for
a "significant" impact on the Fed's timing.
The benchmark 10-year U.S. Treasury note was up
6/32, the yield at 2.4908 percent.
TOUGHER BANK HEALTH TESTS
The STOXX Europe 600 Banks index dropped 2.1 percent for its
weakest day in two months after the European Central
Bank said it would review the quality of a broader-than-expected
range of assets held by top regional lenders next year. That may
result in them having to raise fresh capital.
The Spanish IBEX and Italian FTSE MIB
recorded their worst sessions since August.
On Wall Street, Caterpillar Inc was one of the
biggest decliners on the S&P, slumping 6 percent to $83.83 after
the heavy-equipment machinery maker cut its full-year outlook
for a third time.
The Dow Jones industrial average was down 58.81
points, or 0.38 percent, at 15,408.85. The Standard & Poor's 500
Index was down 8.48 points, or 0.48 percent, at 1,746.19.
The Nasdaq Composite Index was down 23.78 points, or
0.61 percent, at 3,905.79.
MSCI's world equity index, which tracks
shares in 45 countries, fell 0.6 percent.
The dollar, yen and Swiss franc all rose on Wednesday after
a spike in China's short-term money-market interest rates drove
risk aversion, driving bids for the three safe-haven currencies.
China's primary short-term money rates rose in
a delayed reaction to signals from regulators that they are
considering tightening liquidity to tamp rising inflationary
A policy adviser to the People's Bank of China told Reuters
on Tuesday that the authority may tighten cash conditions in the
financial system to address inflation risks.
Concerns about soft U.S. jobs data for September, which
appeared to rule out a cut in U.S monetary stimulus before next
year and caused a plunge in the dollar, took a back seat as
Chinese money market rates climbed to levels not seen since
"The weight of a weak U.S. non-farm (payroll data released
on Tuesday) is surpassed by rising risk aversion on concerns
over China's money market. Profit-taking takes hold," said
Camilla Sutton, chief currency strategist at Scotiabank in
The dollar rose against riskier commodity-linked currencies
such as the Australian and New Zealand dollars. The Aussie
dollar fell 0.8 percent versus the greenback to US$0.9629
, while the New Zealand currency dropped 1.5 percent to
The yen was also in demand, with the dollar down 0.9 percent
at 97.24 yen and the euro 0.8 percent weaker at 134.08
The Swiss franc also rose, as the dollar slipped 0.4 percent
to 0.8912 franc and the euro fell 0.3 percent to 1.2290
In commodities trading, U.S. oil prices fell, extending one
of the year's sharpest sell-offs, after government data showed a
surprisingly large increase in crude supplies.
U.S. crude settled down $1.44 at $96.86 while Brent
crude fell $2.17 to $107.80 a barrel.