(Bloomberg) — Stocks fell as traders geared up for a week of releases on political risks and inflation data that could guide bets on the outlook for global interest rates.
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Euro Stoxx 50 futures fell. Most Asian stock indexes fell, with Japanese shares outperforming Asia. The yen fell below 160 to the dollar, and foreign exchange chief Masato Kanda said authorities were ready to step in around the clock to help if needed.
The moves come as markets are in a critical phase of positioning for the second half of 2024 amid an uncertain outlook for central bank policy rates from New Zealand to Japan to the U.S. Inflation rates in Australia and Tokyo, as well as the Fed’s preferred consumer price index, may offer clues, but political risks loom large.
Investors will be closely watching the first debate between the British prime minister and the US president this week, while the first round of French parliamentary elections is due to take place this weekend.
“How the U.S. dollar performs going into the end of the month will be important in determining the direction of risk across the market,” said Bob Savage, head of market strategy and insights at BNY Mellon in New York. Political developments from the U.S. to France over the next few days “will determine the direction of fiscal risk.”
China’s Weakness
China’s yuan was little changed at 7.1201 to the dollar on Monday, after the country’s assets sold off again last week as policymakers showed no urgency in rolling out more stimulus measures.
The yuan’s fall is a sign of worsening sentiment toward the world’s second-largest economy, and bond markets are also rallying as investors seek safe havens. Benchmark yields have slid toward record lows amid mixed economic data and rising hopes for more stimulus.
“In the near term, we see the yuan coming under further downward pressure, particularly in the third quarter,” Becky Liu, head of China macro strategy at Standard Chartered Bank, said in an interview on Bloomberg Television.
The Federal Reserve’s preferred inflation gauge is expected to post its mildest monthly increase since late last year later this week, which could pave the way for regulators to start cutting interest rates.Yields on the 10-year Treasury note were steady in Asian markets.
U.S. stocks fell on Friday as traders and strategists began to question how long this year’s rally can last given changing views on central bank interest rate cuts and uncertainty surrounding European elections.
The S&P 500 likely recorded most of its gains this year as investors grow increasingly worried about the stock market’s expensive valuations, according to the latest Bloomberg Market Live Pulse survey released Monday.
The signs of anxiety are clear, with roughly half of survey respondents saying stocks will begin a correction of at least 10% this year.
“Ultimately, the ongoing policy mix of heavy fiscal spending and tight interest rate policy has unsustainably locked out many businesses and consumers,” Morgan Stanley strategist Michael Wilson wrote in a note. “Investors are recognizing this outcome and are buying up the few stocks of companies that are doing well in this environment at premium prices.”
In commodities, crude oil extended a day’s losses and neared $80 a barrel on a strengthening dollar and technical indicators suggesting the recent rally may be overdone. Gold was little changed after booking losses last week as investors scaled back hopes for a U.S. interest rate cut.
Major events this week:
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Bank of Japan releases summary of June policy meeting on Monday
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Singapore CPI, Monday
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Taiwan unemployment rate, industrial production on Monday
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Argentina unemployment rate, GDP on Monday
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Bank of Canada Governor Tiff Macklem speaks Monday
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San Francisco Federal Reserve President Mary Daly to speak Monday
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Fed Governor Christopher Waller to speak Monday
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Australian consumer confidence on Tuesday
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Malaysia CPI, Tuesday
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Canadian CPI, Tuesday
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Spanish GDP on Tuesday
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U.S. Conference Board Consumer Sentiment Index, Tuesday
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Fed President Lisa Cook and Michelle Bowman to speak Tuesday
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Australian Consumer Price Index, Wednesday
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British Chancellor Rishi Sunak and Labour leader Keir Starmer will debate on Wednesday
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The Bank of Finland’s third international monetary policy meeting begins on Wednesday
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RBA Deputy Governor Andrew Hauser speaks on Thursday
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Japan retail sales, Thursday
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Philippines interest rate decision Thursday
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China industrial profits Thursday
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Eurozone economic confidence, consumer confidence on Thursday
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BOE to release financial stability report on Thursday
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Swedish interest rate decision on Thursday
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Turkey interest rate decision Thursday
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U.S. durable goods, jobless claims, GDP, wholesale inventories on Thursday
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Mexico unemployment, trade, interest rate decisions on Thursday
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Japan Tokyo Consumer Price Index, unemployment rate, industrial production, Friday
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UK GDP on Friday
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French Consumer Price Index, Friday
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Italian Consumer Price Index, Friday
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Spanish Consumer Price Index, Friday
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Czech Republic GDP on Friday
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US PCE Inflation, Spending and Income, University of Michigan Consumer Confidence, Friday
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Richmond Fed President Thomas Barkin to speak Friday
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Brazil’s unemployment rate on Friday
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Chile’s industrial production, unemployment on Friday
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Colombia unemployment rate, interest rate decision on Friday
Some of the key market developments:
stock
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S&P 500 futures were little changed as of 6:39 a.m. London time.
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Nasdaq 100 futures little changed
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Dow Jones Industrial Average futures fell 0.1%.
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The MSCI Asia Pacific Index fell 0.4%
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The MSCI Emerging Markets Index fell 0.6%.
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Nikkei 225 futures (OSE) rose 0.7%
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Japan’s TOPIX rises 0.9%
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Australia’s S&P/ASX 200 fell 0.7%
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Hong Kong’s Hang Seng Index fell 0.8%
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The Shanghai Composite Index fell 0.6%
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Euro Stoxx 50 futures fell 0.2%
currency
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The Bloomberg Dollar Spot Index was little changed.
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The euro was little changed at 1.0697 to the dollar
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The Japanese yen was almost unchanged at 159.79 yen to the dollar.
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The offshore yuan was little changed at 7.2895 per dollar.
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The British pound was little changed at 1.2647 to the dollar
Cryptocurrency
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Bitcoin falls 2% to $62,400.15
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Ether fell 2.2% to $3,357.01.
Bonds
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The yield on the 10-year Treasury note was little changed at 4.25%.
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German 10-year bund yields fell 2 basis points to 2.41%.
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UK 10-year government bond yields rose 3 basis points to 4.08%.
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Australian 10-year government bond yields were little changed at 4.21%
merchandise
This story was produced with assistance from Bloomberg Automation.
–With cooperation from Aya Wagatsuma
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