European stocks and US equity contracts fell amid rising bond yields, with investors concerned that strong inflation and hawkish monetary policy will further slow the global economy.
(Bloomberg) — European stocks and US equity contracts fell amid rising bond yields, with investors concerned that strong inflation and hawkish monetary policy will further slow the global economy.
Telecommunications companies were the biggest laggards in Europe’s Stoxx 600 index, while luxury stocks outperformed after sales surged at Birkin handbag maker Hermes International. S&P 500 and Nasdaq 100 futures were in retreat. Tesla Inc. fell more than 6% in premarket trading after the electric-vehicle maker reported sales that missed Wall Street estimates.
The yen weakened past the closely watched 150 per dollar level, marking a 32-year low and keeping investors on high alert for further intervention to support it. The move followed a surge in US Treasury yields to multi-year highs that widened the gap with Japanese equivalents. A Bloomberg gauge of dollar strength was steady.
Investors are closely monitoring events in the UK where Liz Truss’s chaotic premiership looked close to imploding after she fired a minister over a security breach, while many Conservative lawmakers now want her to resign immediately. The pound weakened and 10-year UK bond yields climbed.
A strong start to the third-quarter earnings season has bolstered sentiment toward equities. But investors are having to balance signs of corporate resilience against fears about the impact of persistent inflation, hawkish moves by the Federal Reserve and other central banks and threats to the economy.
“I think the market now is looking at 2023 and baking some kind of mild downturn into the price,” Hugh Gimber, global market strategist at JPMorgan Asset Management, said on Bloomberg Television. “The key is that inflation number coming down, because if it does, 5% for the Fed looks to me roughly as the right figure and then the market can have a clearer picture.”
Federal Reserve Bank of St. Louis President James Bullard said he expected the US central bank to end its “front-loading” of aggressive interest-rate hikes by early next year and shift to keeping policy sufficiently restrictive with small adjustments as inflation cools.
The Fed is expected to raise interest rates by 75 basis points at its Nov. 1-2 meeting — its fourth straight increase of that size — as central bankers seek to cool the hottest inflation in four decades.
Elsewhere in markets, oil advanced as Chinese officials debated easing some Covid rules, a policy that has weighed on its economy and energy demand. Gold was near a three-week low.
Key events this week:
- US existing home sales, initial jobless claims, Conference Board leading index, Thursday
- Euro area consumer confidence, Friday
Some of the main moves in markets:
Stocks
- The Stoxx Europe 600 fell 0.5% as of 10:12 a.m. London time
- Futures on the S&P 500 fell 0.4%
- Futures on the Nasdaq 100 fell 0.8%
- Futures on the Dow Jones Industrial Average were little changed
- The MSCI Asia Pacific Index fell 0.7%
- The MSCI Emerging Markets Index fell 0.5%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro rose 0.1% to $0.9786
- The Japanese yen was little changed at 149.87 per dollar
- The offshore yuan rose 0.2% to 7.2506 per dollar
- The British pound fell 0.3% to $1.1180
Cryptocurrencies
- Bitcoin fell 0.4% to $19,117.68
- Ether fell 0.3% to $1,290.56
Bonds
- The yield on 10-year Treasuries advanced one basis point to 4.15%
- Germany’s 10-year yield advanced four basis points to 2.42%
- Britain’s 10-year yield advanced three basis points to 3.91%
Commodities
- Brent crude rose 1% to $93.32 a barrel
- Spot gold rose 0.2% to $1,632.13 an ounce
–With assistance from Tassia Sipahutar, Brett Miller and Allegra Catelli.
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