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

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.