Stocks retreated and the dollar rose after Federal Reserve policy dampened hopes for quick interest rate hikes by the US central bank.
Europe’s Stoxx 600 equity index opened about flat, and U.S. stock futures slipped about 0.2%, as it became clear that central banks will buckle against traders’ rate-cut bets. Financial stocks rose, led by UBS Group AG, which gained more than 4% as stronger-than-expected client inflows offset losses related to the absorption of Credit Suisse.
The dollar and Treasury yields rose for a second day after Minneapolis Fed President Neel Kashkari said it was too early to declare victory over inflation. He also said that overtightening monetary policy is preferable to doing too little.
Traders are waiting to see if that view is echoed in speeches this week by other Fed officials, including Chairman Jerome Powell, and could eventually scale back their bets on rate cuts starting in mid-2024.
“There are a number of risk factors that could prevent inflation from coming down in the nice, orderly way that people who expect a central bank pivot would like to see,” said Tom O’ Hara, portfolio manager at Janus Henderson Investors. . High oil prices and signs that China is increasing stimulus for its economy are potential inflationary risks, he added.
In a sign that central banks are not necessarily raising interest rates, Australia resumed policy tightening on Tuesday, and raised its inflation forecast.
Emerging market stocks and currencies broadly retreated in line with the firmer dollar and as a deeper-than-expected decline in Chinese exports highlighted a continued slowdown in global trade. South Korea’s Kospi Index lost more than 3% after Monday’s rally, which was triggered by short-selling.
Concerns about economic growth pushed oil prices lower, weighing on Saudi Arabia and Russia’s extension of supply cuts.
Main events this week:
- Chinese forex reserves, Tuesday
- Eurozone PPI, Tuesday
- US business, Tuesday
- UBS earnings, Tuesday
- Kansas City Fed President Jeff Schmid and his Dallas counterpart Lorie Logan are speaking Tuesday
- Eurozone retail sales, Wednesday
- Germany CPI, Wednesday
- BOE Governor Andrew Bailey speaks, Wednesday
- US wholesale inventories, Wednesday
- New York Fed President John Williams speaks, Wednesday
- Bank of Japan publishes October summary of opinions, Thursday
- BOE chief economist Huw Pill talks economy, Thursday
- US initial jobless claims, Thursday
- Fed President Jerome Powell participates in a panel on monetary policy challenges at the IMF’s annual research conference in Washington, on Thursday.
- Atlanta Fed President Raphael Bostic and his Richmond counterpart Tom Barkin are speaking on Thursday
- UK industrial production, GDP, Friday
- ECB president Christine Lagarde takes part in a fiery chat, on Friday
- American University of Michigan consumer sentiment, Friday
- Dallas Fed President Lorie Logan and her Atlanta counterpart Raphael Bostic speak on Friday
Some of the main moves in markets:
Shares
- The Stoxx Europe 600 was little changed at 8:16 am London time
- S&P 500 stocks fell 0.2%
- Nasdaq 100 futures fell 0.2%
- Futures on the Dow Jones Industrial Average fell 0.3%
- The MSCI Asia Pacific Index fell 1.4%
- The MSCI Emerging Markets Index fell 0.9%
Coins
- The Bloomberg Dollar Spot Index rose 0.3%
- The euro fell 0.2% to $1.0696
- The Japanese yen fell 0.3% to 150.48 per dollar
- The foreign yuan fell 0.1% to 7.2924 per dollar
- The British pound fell 0.2% to $1.2316
Cryptocurrencies
- Bitcoin fell 0.2% to $34,968.64
- Ether was little changed at $1,893.95
Obligations
- The yield on 10-year Treasuries was little changed at 4.64%
- Germany’s 10-year yield was little changed at 2.74%
- Britain’s 10-year yield fell three basis points to 4.35%
goods
- Brent crude fell 1.4% to $83.99 a barrel
- Spot gold fell 0.5% to $1,968.03 an ounce
This story was produced with the assistance of Bloomberg Automation.
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