US index futures struggled for direction as investors digested the latest hawkish noises from the Federal Reserve amid mounting signs of a global economic slowdown.
(Bloomberg) — US index futures struggled for direction as investors digested the latest hawkish noises from the Federal Reserve amid mounting signs of a global economic slowdown.
Cntracts on the S&P 500 and Nasdaq 100 fluctuated in a tight range. The 10-year Treasury yield climbed about two basis points after data showed orders placed with US factories for core capital goods rose by more than expected in July, pointing to sustained demand for equipment despite higher interest rates and concerns about a weakening economy. The dollar resumed an advance against major peers.
Investors will pore over Fed Chair Jerome Powell’s speech at the Jackson Hole symposium on Friday for a sense of how hawkish the US central bank will be in the face of mounting economic challenges. A global rebound in equities from a June low has stalled ahead of the widely-anticipated event.
“Globally we haven’t seen a deceleration like this that has been so synchronized in many decades,” Frances Stacy, director of strategy at Optimal Capital Advisors LLC, said on Bloomberg Television. “I don’t want to be directional” in picking trades, she added.
The latest data showed economic activity weakening from the US to Europe and Asia, underlining the delicate task the Fed faces in hiking interest rates to bring down high inflation without sparking a recession. Still, Minneapolis Fed President Neel Kashkari said inflation is very high and the central bank must act to bring it under control.
The Fed “is probably going to use this weekend to reiterate the fact that rates have more room to climb because they really want to bring inflation down,” Kelvin Tay, Asia-Pacific chief investment officer at UBS Global Wealth Management, said on Bloomberg Television.
The Stoxx Europe 600 index swung between small gains and losses, with retailers under pressure after US peer Nordstrom Inc. trimmed its full-year outlook. Luxury-goods giant Richemont surged after selling a stake in its online business.
European bonds fell as traders raised wagers the European Central Bank will take bolder action to tame surging prices as the euro area struggles with record energy prices. Money markets are now fully pricing a percentage-point of policy tightening by the October meeting, which would take the deposit rate to 1%. Germany’s 10-year yield climbed 4.5 basis points to 1.36%, a two-month high.
Elsewhere, WTI crude oil drifted above $94 a barrel, bolstered by shrinking US stockpiles and possible OPEC+ output cuts. Tuesday’s Bitcoin rally proved short-lived, with the cryptocurrency heading back toward $21,000.
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What to watch this week:
- US GDP, initial jobless claims, Thursday
- Kansas City Fed hosts its annual economic policy symposium in Jackson Hole, Wyoming, Thursday
- ECB’s July minutes, Thursday
- Fed Chair Powell speaks at Jackson Hole, Friday
- US personal income, PCE deflator, University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
- Futures on the S&P 500 were little changed as of 8:40 a.m. New York time
- Futures on the Nasdaq 100 were little changed
- Futures on the Dow Jones Industrial Average were little changed
- The Stoxx Europe 600 was little changed
- The MSCI World index fell 0.2%
Currencies
- The Bloomberg Dollar Spot Index rose 0.3%
- The euro fell 0.5% to $0.9925
- The British pound fell 0.5% to $1.1771
- The Japanese yen was little changed at 136.87 per dollar
Bonds
- The yield on 10-year Treasuries advanced two basis points to 3.07%
- Germany’s 10-year yield advanced five basis points to 1.37%
- Britain’s 10-year yield advanced eight basis points to 2.66%
Commodities
- West Texas Intermediate crude rose 0.5% to $94.25 a barrel
- Gold futures fell 0.1% to $1,758.90 an ounce
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