Bond market groans slap down Wall St; Klarna files IPO plan

Wall Street started the traditionally soft September in a glum mood as tech stocks such as Nvidia declined amid revived fears about the health of various economies as European government bond yields spiked higher and gold prices hit fresh highs.

Good giant Kraft-Heinz led the S&P 500 lower as the company said it plans to carve up the business, with one entity housing the sauces, spreads and seasonings arm and another selling grocery staples in the US.

Still, investment bankers have some good news with Swedish fintech Klarna filing plans for an initial public offering in the latest sign firms are regaining their confidence to rejoin public markets.

And futures are pointing to a soft start to the day for the ASX when trading opens today, with Australian Bureau of Statistics figures expected to show a pick-up in economic growth across the Tasman, while Reserve Bank of Australia governor Michele Bullock will speak on technology and the future of central banking.

Autumnal fall

Stock markets on both sides of the Atlantic were weaker as US trading rooms returned from a long weekend with a heightened level of nervousness. The CBOE Volatility Index – known as Wall Street’s fear gauge – spiked 19% as 30-year government bond yields in the UK, Germany and France rose to multi-year highs.

The S&P 500 fell 1% and the tech-heavy Nasdaq declined 1.1% as the ructions in bond markets made investors increasingly wary about tech companies, whose valuations are typically sensitive to interest rate movements. Gold price futures advanced 2.2% to US$3,592 an ounce.

The yield on 30-year UK gilts hit their highest level since 1998, ending the session up 5 basis points at 5.69% and eclipsing the peak in 2022 during the bond selloff during Liz Truss’s short period as British prime minister – albeit rising at a much slower pace.

The kiwi dollar climbed to 43.79 British pence at 7am in Auckland from 43.51 pence yesterday.

“Coming back from a long weekend, US investors were in no mood to support the bond market, seeing red across European markets, a surge in forthcoming corporate debt sales and wondering whether bond supply will need to pick up down the track if tariffs are eventually deemed illegal by the Supreme Court,” Bank of New Zealand senior markets strategist Jason Wong said in a note. “The backdrop of higher bond yields and strategists highlighting that September is seasonally the worst month of the year for equities, made for a cautious start for September trading in US equity markets.”

Kraft-Heinz dropped 7.4%, leading declines on the S&P500, as the food giant outlined plans to unwind the megamerger in 2015 and split the company up, with North American groceries in one arm and sauces, spreads and seasonings in another. The spin-out is expected to be completed in the second half of next year.

Go public

Meanwhile, the IPO market got an injection with Swedish buy now, pay later firm Klarna filing papers with the US Securities and Exchange Commission seeking to raise as much as US$1.46 billion, valuing the company at about US$14 billion. The Commonwealth Bank of Australia stands to benefit from a Klarna IPO with a 5.5% stake.

In other deals, artificial intelligence firm Anthropic raised US$13 billion, valuing the startup at US$183 billion, three times its valuation in March when it raised US$3.5 billion. The capital raising was led by investment firm ICONIQ.

The downbeat tone is set to continue in the antipodes, with Australian futures pointing to a 0.6% decline when the S&P/ASX 200 index opens, while the kiwi dollar fell to 58.60 US cents from 58.85 cents yesterday.

Australia’s June quarter gross domestic product data today are expected to show a 0.5% expansion in the Lucky Country’s economy, accelerating from a 0.2% pace of growth in the March period.

Meanwhile, RBA governor Michele Bullock is scheduled to deliver a speech titled ‘Technology and the future of central banking at the RBA’.

The kiwi decreased to 89.93 Australian cents from 90.02 cents yesterday.

Milk prices fell in the latest Global Dairy Trade event, with the GDT price index down 4.3% with an average winning price at US$4,043 a tonne. Whole milk powder prices dropped 5.3% to US$3,809.

Local data today include the ANZ New Zealand commodity price index, while NZX-listed companies shedding rights to their dividends today include Vital Healthcare Property Trust, Mercury NZ and the Global Marlin, Barramundi and Kingfisher investment firms.

Reporting by Paul McBeth. Image from Kutan Ural on Unsplash.