US futures slip as investors digest a rise in borrowing costs, while oil jumps as winter storms batter Texas

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Freezing weather in Texas has hit US oil production

US stock futures slipped on Thursday morning as investors weighed a rise in borrowing costs over recent days that could drag on equities markets.

Meanwhile, energy prices jumped as freezing weather continued to pummel Texas, knocking oil production by around 40%.

S&P 500 futures were 0.38% lower at around 6 a.m. ET on Thursday, after slipping 0.03% on Wednesday. Dow Jones futures were 0.23% lower after the index rose 0.29% the previous day, while Nasdaq futures were down 0.67% after the index fell 0.58%.

Yields on US bonds have risen sharply in recent days, raising borrowing costs. The yield on the 10-year Treasury note, which moves inversely to the price, was down 1.7 basis points to 1.282% on Thursday, having touched a one-year high of 1.33% on Tuesday.

James Orlando, senior economist at TD Securities, said the rise in bond yields reflected expectations of stronger growth and inflation, which makes bond-holders demand higher returns.

“There has been a lot of good news of late. Congress is expected to pass a near-$2 trillion fiscal package that will put money in the pockets of Americans,” he said. “Already over 55 million Americans have received a vaccine.”

“Our expectation that yields will move higher is based on our view that GDP will recover to pre-pandemic levels by mid-year and that core inflation will reach 2% by year-end.”

Some investors worry that stronger growth and inflation may cause the Federal Reserve to raise interest rates, which they say could choke off the recovery.

Yet Orlando said: “Though we are optimistic that the economy is on the right track, the Fed will only believe it when it sees it. As a result, we don’t expect it to ease off its monetary support anytime soon.”

Stocks slipped in Asia overnight, with China’s CSI 300 slipping 0.68% as traders returned from a public holiday. Hong Kong’s Hang Seng fell 1.58%.

Europe’s Stoxx 600 index was down 0.43% in morning trading. The UK’s FTSE 100 fell 0.77% after weak earnings from Barclays dragged banks lower.

WTI crude oil, the US benchmark, slipped slightly on Thursday morning but was nonetheless trading at around a 14-month high of $61.09 as winter storms continued to sweep across Texas.

Bloomberg reported that US oil production fell close to 40% as the weather stymied production. Brent crude, the international benchmark, was roughly flat at $64.33, its highest level since January 2020.

Bitcoin was up 0.45% to $51,554, having touched a record high of more than $52,600 on Wednesday evening.