* U.S. Treasuries yields slip to 3-month low as Fed tapering
* S&P 500 snaps four-session winning streak on earnings
* China short-term rates spike lifts dollar, yen, Swiss
By Angela Moon
NEW YORK, Oct 23 (Reuters) - U.S. Treasuries yields fell to
their lowest in three months on Wednesday on more bets that the
Federal Reserve will maintain its stimulus efforts until next
year, while global equity markets ended their recent winning
In the aftermath of a disappointing U.S. jobs report on
Tuesday, overnight buying helped yields fall further on
Wednesday. The benchmark 10-year U.S. Treasury note
gained 4/32, the yield at 2.4962 percent.
On Wall Street, the S&P 500 snapped its four-session winning
streak as shares of Caterpillar and a group of chipmakers
tumbled after they reported earnings.
European shares also 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
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 bond market, the focus was largely centered on next
week's Fed policy meeting, where the U.S. central bank is
expected to keep its $85 billion a month bond purchase program
"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. [ID:nL1N0IC1HH
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 $83.76 after
the heavy-equipment machinery maker cut its full-year outlook
for a third time.
The Dow Jones industrial average lost 54.33 points,
or 0.35 percent, to close at 15,413.33. The Standard & Poor's
500 Index fell 8.29 points, or 0.47 percent, at 1,746.38.
The Nasdaq Composite Index was down 22.49 points, or
0.57 percent, at 3,907.07.
MSCI's world equity index, which tracks
shares in 45 countries, fell 0.6 percent.
In the currency market 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.
- Budget, Tax & Economy