US equity futures edged lower as investors assessed prospects for aggressive Federal Reserve monetary tightening, while a dollar gauge climbed to a record for a third day.
(Bloomberg) — US equity futures edged lower as investors assessed prospects for aggressive Federal Reserve monetary tightening, while a dollar gauge climbed to a record for a third day.
Contracts on the S&P 500 and Nasdaq 100 slipped less than 0.4% before the market hears from a slew of Fed speakers. Europe’s Stoxx 600 Index fell, with retailers leading the declines as JPMorgan Chase & Co. analysts said the cost of living crisis facing consumers “has only just begun.”
Oil erased a decline after Russian President Vladimir Putin underlined that his country won’t supply oil and fuel if price caps on the country’s exports are introduced.
Bets on another 75 basis points Fed interest-rate hike to tackle high inflation have spurred a selloff in Treasuries, while traders are bracing for a European Central Bank rates decision due on Thursday, with the potential for a similar-size move.
Aside from tightening monetary settings and an apparently unstoppable dollar, markets are also contending with a debilitating energy crisis in Europe and Covid lockdowns in China. Concerns are growing about the outlook for company earnings and a rebound seen in equity markets since mid-June is fading.
“At this point, we see no positive triggers to keep the rally going, while there are rising risks moving into autumn amid a gloomier economic backdrop,” Amundi SA Chief Investment Officer Vincent Mortier and his deputy, Matteo Germano, wrote in a note. “To cope with this environment, we believe investors should adjust their asset allocation stances.”
European policymakers are pulling together proposals to bring to a meeting of energy ministers in Brussels on Friday where emergency interventions will be hammered out to address the region’s energy crisis. European natural gas prices dropped.
In the UK, borrowing costs are set to tumble by the most since the 2016 Brexit referendum after Bank of England officials said the government’s proposed energy-price cap may curb soaring inflation, potentially reducing the urgency of interest-rate hikes. Two-year yields slid to a one-week low, while the pound dropped close to the lowest level since 1985.
With global stocks on pace for their worst run since the European debt crisis a decade ago, Goldman Sachs Group Inc. strategists are among those warning that more selling is possible. The MSCI All Country World Index is in its longest losing stretch since 2011 and rapidly erasing the latest bounce that a Goldman team led by Peter Oppenheimer described as a “bear market rally.”
“We expect further weakness and bumpy markets before a decisive trough is established,” the strategists wrote.
Bitcoin flirted with a test of lows for the year and gold futures steadied.
What to watch this week:
- Apple event due to feature new iPhones, watches, Wednesday
- Bank of England Governor Andrew Bailey at Treasury Committee, Wednesday
- Fed’s Beige Book of regional economic activity, Wednesday
- Cleveland Fed President Loretta Mester due to speak, Wednesday
- European Central Bank rate decision, Thursday
- Fed Chair Jerome Powell due to speak, Thursday
- Chicago Fed President Charles Evans and his Minneapolis counterpart Neel Kashkari due to speak, Thursday
- EU energy ministers extraordinary meeting on emergency intervention in electricity markets, Friday
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Some of the main moves in markets:
Stocks
- Futures on the S&P 500 fell 0.4% as of 8:29 a.m. New York time
- Futures on the Nasdaq 100 fell 0.3%
- Futures on the Dow Jones Industrial Average fell 0.3%
- The Stoxx Europe 600 fell 1.1%
- The MSCI World index fell 0.5%
Currencies
- The Bloomberg Dollar Spot Index rose 0.4%
- The euro fell 0.1% to $0.9894
- The British pound fell 0.7% to $1.1434
- The Japanese yen fell 1.3% to 144.72 per dollar
Bonds
- The yield on 10-year Treasuries declined four basis points to 3.31%
- Germany’s 10-year yield declined seven basis points to 1.56%
- Britain’s 10-year yield declined 10 basis points to 3.00%
Commodities
- West Texas Intermediate crude fell 0.7% to $86.24 a barrel
- Gold futures were little changed
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