US equity index futures recouped earlier losses to trade flat as investors weighed up how inflation and hawkish central bank policy will erode corporate earnings. Treasury yields pared an advance to multi-year highs.
(Bloomberg) — US equity index futures recouped earlier losses to trade flat as investors weighed up how inflation and hawkish central bank policy will erode corporate earnings. Treasury yields pared an advance to multi-year highs.
Contracts on the S&P 500 and Nasdaq 100 were little changed after having fallen as much as 1%. Meta Platforms Inc. dropped with other big tech names sensitive to rising rates. In Europe, the Stoxx 600 index fell for the fifth day, with energy and tech stocks underperforming. The dollar erased a gain that had taken it to the highest this month.
The mood remains fragile after a four-day losing streak wiped $1.6 trillion off the value of the S&P 500 Index. US inflation data, due Thursday, could seal the case for another 75 basis-point interest rate increase, should it come in higher than expected. Nor have Federal Reserve officials shown any inclination to pause their rate-hiking cycle in the near future.
Strategists are also bracing for weak profits against a drumbeat of warnings over the rising risk of a global recession. Big US banks kick off the third-quarter earnings season in earnest later this week.
“We have not seen the impact of tightening,” Michael Kelly, head of the multi-asset team at PineBridge Investments told Bloomberg TV. “That lies ahead and when we see that, it’s another leg down for risk assets.”
Yields on two-year Treasuries earlier hit the highest since 2007 while the 30-year yield surged to the highest since 2014.
Turmoil in UK bond markets eased Tuesday as the Bank of England was forced to expand its emergency measures to tackle what it called “fire-sale dynamics.” Ten-year UK government yields which had risen more than 50 basis points since Oct. 4, dropped five basis point to about 4.4%.
Meanwhile, Russian President Vladimir Putin threatened further missile attacks on Ukraine after hitting Kyiv and other cities in the most intense barrage of strikes since the first days of its invasion.
“It’s little wonder investors enter the week in a dreary mood, especially with headlines from Ukraine signaling a further escalation in geopolitical tensions,” Christopher Smart, chief global strategist at Barings, said in a note.
With world growth under pressure, US oil futures tumbled about 2%, giving up more of last week’s 17% rally.
Key events this week:
- Earnings this week include: JPMorgan Chase & Co., Citigroup Inc., Morgan Stanley, BlackRock Inc., Delta Air Lines Inc., UnitedHealth Group Inc., U.S. Bancorp, Wells Fargo & Co.
- IMF’s World Economic Outlook and Global Financial Stability Report, Tuesday
- Fed’s Loretta Mester speaks, Tuesday
- BOE’s Andrew Bailey speaks, Tuesday
- FOMC minutes for September meeting, Wednesday
- US PPI, mortgage applications, Wednesday
- OPEC Monthly Oil Market Report, Wednesday
- Fed’s Michelle Bowman and Neel Kashkari speak
- ECB’s Christine Lagarde speaks
- US CPI, initial jobless claims, Thursday
- G-20 finance ministers and central bankers meet, Thursday
- China CPI, PPI, trade, Friday
- US retail sales, business inventories, University of Michigan consumer sentiment, Friday
- BOE emergency bond buying is set to end, Friday
Some of the main moves in markets:
Stocks
- Futures on the S&P 500 were little changed as of 8:41 a.m. New York time
- Futures on the Nasdaq 100 fell 0.1%
- Futures on the Dow Jones Industrial Average were little changed
- The Stoxx Europe 600 fell 0.3%
- The MSCI World index fell 0.3%
Currencies
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro rose 0.3% to $0.9730
- The British pound rose 0.4% to $1.1100
- The Japanese yen was little changed at 145.60 per dollar
Cryptocurrencies
- Bitcoin fell 0.2% to $19,209.98
- Ether fell 1.2% to $1,290.98
Bonds
- The yield on 10-year Treasuries advanced three basis points to 3.91%
- Germany’s 10-year yield declined four basis points to 2.31%
- Britain’s 10-year yield declined four basis points to 4.43%
Commodities
- West Texas Intermediate crude fell 1% to $90.18 a barrel
- Gold futures rose 0.1% to $1,677.70 an ounce
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