Shifting Fed Views Boost Yields, Weigh on Stocks: Markets Wrap

By Pune Media On Oct 23, 2024 14

(Bloomberg) — Bonds extended declines and stocks traded mixed as the prospect of less aggressive Federal Reserve interest-rate cuts continued to weigh on markets.

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US futures pointed to a small drop at the Wall Street open and Europe’s Stoxx 600 benchmark was little changed at the start of a busy earnings day. In the US, traders will be watching for surprises in results from Tesla Inc., Boeing Co., Coca-Cola Co. and others after downbeat news from some key American companies on Tuesday.

Ten-year Treasuries dropped, lifting the yield two basis points after topping 4.2% for the first time since July earlier this week. Yields on Japan’s 40-year notes reached the highest in 16 years.

The broader risk-off tone comes as investors pare back bets on rapid policy easing, on signs that the US economy remains robust and concerns about wider fiscal deficits after the presidential election. Most Fed officials speaking earlier this week signaled they favor a slower tempo of rate reductions.

Bank of America Corp. Chief Executive Officer Brian Moynihan was among the latest to join the monetary policy debate, urging Fed policymakers to be measured in the magnitude of interest-rate reductions.

The International Monetary Fund lowered its global growth forecast for next year and warned of accelerating risks from wars to trade protectionism, even as it credited central banks for taming inflation without sending nations into recession.

Chinese Outliers

In Asia, an index tracking equities in the region was flat, amid declines in Japan and gains in South Korea. Hong Kong and mainland Chinese shares were outliers, rising after a top government-linked think tank called on authorities to issue 2 trillion yuan ($281 billion) of special government bonds to help create a market stabilization fund.

“Asia is mostly on its back foot,” said Vishnu Varathan, Asia head of economics and strategy for Mizuho Bank. “USD is dominating against a backdrop of Fed speak suggesting more gradual cuts, IMF revisions suggesting relative US exceptionalism holding up, and the absence of follow-through bulls in China.”

Oil fell as a US industry group signaled a rise in nationwide crude inventories, and the Biden administration renewed efforts to secure a cease-fire in the Middle East. Gold was steady after climbing to a fresh record.

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Options traders, meanwhile, are increasing bets that Bitcoin will reach $80,000 by the end of November no matter who wins the US election.

Corporate Highlights:

Jio Financial Services Ltd., controlled by billionaire Mukesh Ambani, has held talks with Allianz SE to set up an insurance partnership in India as the German firm seeks to scrap two existing joint ventures in the country, according to people familiar with the matter.
Tokyo Metro Co.’s shares rose as much as 47% in their debut, after the company raised 348.6 billion yen ($2.3 billion) in the country’s largest initial public offering since mobile carrier SoftBank Corp. listed in 2018.
China Resources Beverage Holdings Co. gained 14%, showing strong response to one of the city’s biggest initial public offerings this year.

Key events this week:

Canada rate decision, Wednesday
Eurozone consumer confidence, Wednesday
US existing home sales, Wednesday
Boeing, Tesla, Deutsche Bank earnings, Wednesday
Fed’s Beige Book, Wednesday
US new home sales, jobless claims, S&P Global Manufacturing and Services PMI, Thursday
UPS, Barclays earnings, Thursday
Fed’s Beth Hammack speaks, Thursday
US durable goods, University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

The Stoxx Europe 600 was little changed as of 8:05 a.m. London time
S&P 500 futures were little changed
Nasdaq 100 futures fell 0.2%
Futures on the Dow Jones Industrial Average fell 0.3%
The MSCI Asia Pacific Index fell 0.2%
The MSCI Emerging Markets Index rose 0.3%

Currencies

The Bloomberg Dollar Spot Index rose 0.2%
The euro fell 0.1% to $1.0787
The Japanese yen fell 0.8% to 152.35 per dollar
The offshore yuan fell 0.1% to 7.1432 per dollar
The British pound fell 0.1% to $1.2965

Cryptocurrencies

Bitcoin fell 0.9% to $66,918.98
Ether fell 0.8% to $2,612.78

Bonds

The yield on 10-year Treasuries advanced two basis points to 4.23%
Germany’s 10-year yield declined one basis point to 2.30%
Britain’s 10-year yield was little changed at 4.17%

Commodities

This story was produced with the assistance of Bloomberg Automation.