Bitcoin jumps, stocks bounce as traders weigh US Treasury action

AFP | London

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Bitcoin bounced and global stocks clawed back some of their recent losses on Friday as investors assessed the US Treasury's efforts to push down long-term borrowing costs.

Bond yields were steady and oil prices stabilised near recent highs as the United States and Iran remained deadlocked over a deal to reopen the Strait of Hormuz.

That was enough to allow equities to bounce, after having largely fallen over the past week.

Bitcoin climbed almost 6% to about $77,000 and is up more than 20% this week -- to its highest levels since May -- as the US Treasury's surprise move to buy back more of its own bonds increased liquidity and added to investor's risk appetite. Gold rose as well.

The rally in the world's biggest cryptocurrency by market value was also spurred by US President Donald Trump urging lawmakers to pass crypto legislation aimed at encouraging its use, which has stalled in the Senate. "The turmoil in the debt markets continues despite efforts to calm feverish borrowing costs," said Susannah Streeter, chief investment strategist at Wealth Club. "Investors remain concerned about inflationary risks and the growing mountain of government borrowing, while at the same time, debt being issued by tech giants building out the AI revolution is offering stiff competition," she added.

The three main US indexes were all higher in early trading after having mostly fallen this week.

In Europe, London, Paris and Frankfurt all closed higher. For Paris, it was the first gain after nine successive declines.

US bond buy-back

Even with Friday's bounce, European stock indices "look set to post their worst weekly performance in nearly two months", said David Morrison, an analyst at Trade Nation.

The US Treasury bought its own bonds this week in an effort to push down borrowing costs after the 30-year yield surged to levels last seen in 2007, just before the global financial crisis.

European government bond yields are also at their highest levels in more than a decade.

Yields have risen on fears of inflation and as the United States reported this week that its federal debt stockpile had climbed to over $40 trillion.

The Treasury's buy-back briefly brought some relief from higher yields, but they soon resumed rising.

Traders will be closely watching next week's annual meeting of central bankers, economists and finance chiefs in Jackson Hole, hoping for some clarification on monetary policy.

Earlier in Asia, stocks rose with tech-rich Seoul helped higher by a rally in chipmakers.

Samsung jumped 3.9% after saying it spent a massive $80 billion to buy back its own shares, following weeks of turbulent trading. Hong Kong also rose, while Tokyo fell and Shanghai was flat.