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Bond Selloff Pauses; Stocks Retreat for Fourth Day: Markets Wrap

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(Bloomberg) — A selloff in bonds paused and the dollar steadied, while shares in Europe retreated for a fourth day.

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The Stoxx 600 benchmark slipped 0.3% Tuesday and US equity futures declined, putting the MSCI All Country World Index, one of the broadest measures of global equities, on track to match its longest losing streak in the past decade.

Yields on Treasuries and European government debt stabilized after hitting decade highs as investors price in a protracted period of high interest rates. The Bloomberg dollar index was little changed after closing at its strongest level since December. Oil retreated as the impact of a rising dollar sapped demand.

“With weak but positive growth holding recession at bay on both sides of the Atlantic, central banks will not be able to ease financial conditions between now and the end of the year,” said Nadège Dufossé, global head of multi asset funds at Candriam. “With positive surprises now largely priced in, there seems to be little room for further appreciation in equity markets, suggesting a degree of caution on risky assets.”

Jamie Dimon, chairman and chief executive of JPMorgan Chase & Co., floated the idea US interest rates could reach 7%, a worst-case scenario that could catch consumers and businesses off-guard. Meanwhile, a warning that a US government shutdown would reflect poorly on America’s credit rating from Moody’s Investors Service kept traders focused on an end-of-month deadline.

Crude prices edged lower Tuesday, falling for a second session. Traders are increasingly concerned that rising oil prices risk fanning inflation, which will make it difficult for policymakers to reduce rates anytime soon. Hedge funds had boosted exposure to oil on bets tightening supplies will stoke demand.

Federal Reserve Bank of Minneapolis President Neel Kashkari said he expects US interest rates to increase again this year given the robust economy. Those sentiments echoed comments last week from Boston Fed President Susan Collins, who said further tightening “is certainly not off the table,” while Fed Governor Michelle Bowman signaled that more than one increase will probably be required.

In Asia, property concerns continued to weigh on Chinese markets. Hong Kong’s Hang Seng Index fell to levels last seen in November and mainland benchmarks inched lower, reflecting a dismal mood across the region.

A gauge of Chinese property developers slipped further after slumping by the most in nine months on Monday amid fresh signs of turmoil for the sector. China Evergrande Group missed a debt payment and former executives were detained. That added to fears about the sector’s debt pile and compounded concern that global growth will stall as the economic engine of the world’s second biggest economy sputters.

Key events this week:

  • US new home sales, Conference Board consumer confidence, Tuesday

  • ECB’s Philip Lane speaks on monetary policy, Tuesday

  • China industrial profits, Wednesday

  • US durable goods, Wednesday

  • Eurozone economic confidence, consumer confidence, Thursday

  • US initial jobless claims, GDP, Thursday

  • Fed Chair Jerome Powell town hall meeting with educators while Richmond Fed President Tom Barkin, Chicago Fed President Austan Goolsbee make speeches, Thursday

  • Eurozone CPI, Friday

  • Japan unemployment, industrial production, retail sales, Tokyo CPI, Friday

  • US consumer spending, wholesale inventories, University of Michigan consumer sentiment, Friday

  • ECB President Christine Lagarde speaks, Friday

  • New York Fed President John Williams speaks, Friday

Some of the main moves in markets:

Stocks

  • The Stoxx Europe 600 fell 0.3% as of 9:41 a.m. London time

  • S&P 500 futures fell 0.4%

  • Nasdaq 100 futures fell 0.5%

  • Futures on the Dow Jones Industrial Average fell 0.3%

  • The MSCI Asia Pacific Index fell 0.8%

  • The MSCI Emerging Markets Index fell 0.9%

Currencies

  • The Bloomberg Dollar Spot Index was little changed

  • The euro was little changed at $1.0597

  • The Japanese yen was little changed at 148.83 per dollar

  • The offshore yuan rose 0.1% to 7.3083 per dollar

  • The British pound fell 0.2% to $1.2188

Cryptocurrencies

  • Bitcoin was little changed at $26,266.04

  • Ether rose 0.2% to $1,589.9

Bonds

  • The yield on 10-year Treasuries declined one basis point to 4.52%

  • Germany’s 10-year yield declined one basis point to 2.79%

  • Britain’s 10-year yield declined two basis points to 4.30%

Commodities

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Richard Henderson.

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©2023 Bloomberg L.P.

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