Discover the power of Horizontal Integration in finance. Learn how companies leverage this strategy to enhance market reach, optimize resources, and drive sustainable growth in a competitive landscape.
Discover the power of Horizontal Integration in finance. Learn how companies leverage this strategy to enhance market reach, optimize resources, and drive sustainable growth in a competitive landscape.
(Bloomberg) — Stocks pulled back across the globe on Tuesday as traders awaited the Federal Reserve’s final interest-rate decision for 2024 and its monetary policy forecasts.
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Futures contracts for the Nasdaq 100 dropped 0.2% after the relentless rally in technology stocks pushed the gauge to a fresh all-time high on Monday. Europe’s Stoxx 600 fell 0.4% as weaker crude prices weighed on oil-related stocks. A key Asian gauge dropped 0.5% after erasing gains as concerns over China’s economy persist. S&P 500 futures dropped 0.3%.
As equity markets head into the final weeks of 2024, US stocks are set to significantly outperform their peers for the year as optimism about artificial intelligence and falling rates fuel investor confidence. Traders are now focusing on Wednesday’s Fed announcement, with Chair Jerome Powell widely expected to deliver a quarter-point of easing.
What happens in the following months remains less clear. While the US economy is resilient, the prospect of inflationary import tariffs threatened by the incoming administration of Donald Trump may give Fed officials pause about the pace of further moves.
Money markets are seeing an 80% chance of three cuts next year, compared to the small probability of a fourth reduction seen at the start of the month.
“There is also the Fed, which stirs some uncertainty,” said Alexandre Baradez, chief market analyst at IG in Paris. “My scenario is for a hawkish cut with a much more cautious narrative.”
Bank of America strategists cautioned that fund managers have been reducing cash holdings to a record low and pouring money into US stocks, triggering a metric that could be a signal to sell global equities. Cash as a percentage of total assets under management fell below 4%, a move that in the past has been followed by stock market losses.
Yields on US Treasuries advanced across the curve, with the 10-year note’s rising 4 basis points to 4.43%. The benchmark yield may climb to 6% as US fiscal woes worsen and Trump’s policies help keep inflation elevated, according to T. Rowe Price.
“Is a 6% 10‑year Treasury yield possible? Why not? But we can consider that when we move through 5%,” Arif Husain, chief investment officer of fixed-income, wrote in a report. “The transition period in US politics is an opportunity to position for increasing longer‑term Treasury yields and a steeper yield curve.”
Traders are also scaling back bets on Bank of England rate cuts after UK wage growth accelerated for the first time in more than year. The implied chance of three quarter-point cuts in 2025 fell to around 55%, down from 90% before the report. The pound erased a small loss while gilt yields rose.
Bloomberg’s dollar gauge was little changed. An index of Asian currencies fell to the lowest in more than two years amid pessimism over China’s economic outlook and expectations that Trump policies will drive gains in the greenback. The yen snapped a six-day losing streak after weakening beyond the 154 level versus the dollar overnight.
The yen’s rapid decline in the past week had strategists warning that further weakness may trigger verbal intervention from authorities and add pressure on the Bank of Japan to hike rates. Traders are pricing in a less than 20% chance of a rate hike in December, according to swaps market pricing.
Markets shrugged off news that Chinese leaders were planning to set an annual growth goal of about 5% for next year and raise the budget deficit, as reported by Reuters. The yuan was little changed in both onshore and overseas trading, while the equity benchmark moved in a narrow range.
Meanwhile, oil edged lower for a second day as concerns about China’s economy fueled demand concerns.
Key events this week:
US retail sales, Tuesday
UK CPI, Wednesday
Eurozone CPI, Wednesday
US rate decision, Wednesday
Japan rate decision, Thursday
UK BOE rate decision
US revised GDP, Thursday
Japan CPI, Friday
China loan prime rates, Friday
Eurozone consumer confidence, Friday
US personal income, spending & PCE inflation, Friday
Some of the main moves in markets:
Stocks
S&P 500 futures fell 0.3% as of 7:26 a.m. New York time
Nasdaq 100 futures fell 0.2%
Futures on the Dow Jones Industrial Average fell 0.3%
The Stoxx Europe 600 fell 0.4%
The MSCI World Index was little changed
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro fell 0.2% to $1.0491
The British pound rose 0.1% to $1.2698
The Japanese yen rose 0.2% to 153.87 per dollar
Cryptocurrencies
Bitcoin rose 0.6% to $106,685.9
Ether fell 1.2% to $3,999.85
Bonds
The yield on 10-year Treasuries advanced four basis points to 4.43%
Germany’s 10-year yield was little changed at 2.24%
Britain’s 10-year yield advanced eight basis points to 4.52%
Commodities
West Texas Intermediate crude fell 0.9% to $70.05 a barrel
Spot gold fell 0.4% to $2,642.66 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from James Hirai, Winnie Hsu, Ruth Carson, Michael Msika and Sagarika Jaisinghani.
