Stock market retreats as dollar rises again: Market Wrap

(Bloomberg) — Stock markets fell on Tuesday and the dollar resumed its rise as investors priced in high interest rates for an extended period of time. The selling of government bonds has stopped.

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U.S. stock futures fell, looking to reverse Monday’s modest gains. European stocks have fallen for a fourth straight day, and the MSCI All Country World Index, one of the most broad-based measures of global equities, is on track to match its longest losing streak in a decade.

Yields on U.S. and European government bonds fell after hitting 10-year highs. The Bloomberg Dollar Index extended its gains after closing at its lowest level since December. Crude oil prices have fallen as demand has declined due to the strong dollar.

The threat of tighter policy has undone some of this year’s biggest gains in skyrocketing tech stocks. These growth companies are valued for their long-term prospects, but become less attractive when future earnings are discounted at higher rates. This is reflected in an increase in short positions in the tech-heavy Nasdaq 100 index.

“Weak but positive growth is keeping recession at bay on both sides of the Atlantic, and central banks will not be able to ease financial conditions between now and the end of the year,” said Nadège Dufosse, global head of multi-asset funds at Candium. said. “Positive surprises are now largely priced in and there appears to be little scope for further gains in equity markets, suggesting some caution against risk assets.”

According to Citigroup strategists, the Nasdaq 100 is now $8.1 billion in unilateral net short positions, and all long positions have been eliminated.

Short positions are building up in Nasdaq futures, according to Citi strategists.

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JPMorgan Chase Chairman and CEO Jamie Dimon believes U.S. interest rates could reach 7%, a worst-case scenario that could catch consumers and businesses off guard. showed that. Meanwhile, traders were keeping an eye on the month-end deadline after warnings that the U.S. government shutdown would negatively impact the country’s credit rating from Moody’s Investors Service.

A flurry of Fed speakers over the past week have delivered strong messages that if the economy is stronger than expected, the Fed will keep policy tight for a long time. Minneapolis Fed President Neel Kashkari said he expects the U.S. central bank will need to raise interest rates again this year.

Data on U.S. consumer confidence and manufacturing activity expected later on Tuesday could provide further clues about the outlook for the economy and monetary policy.

In Asia, real estate concerns continued to weigh on the Chinese market. Hong Kong’s Hang Seng index fell to levels last seen in November, and mainland indicators also edged lower, reflecting the gloomy mood across the region.

A gauge of Chinese real estate developers fell further on Monday, its steepest decline in nine months, amid new signs of turmoil in the sector. China Evergrande Group defaulted on debt payments and former executives were detained. The move raised concerns about the sector’s debt mountain and added to fears that global growth could stall as the economic engine of the world’s second-largest economy stalls.

This week’s main events:

• U.S. New Home Sales, Conference Board Consumer Confidence, Tuesday

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

• China’s industrial profits Wednesday

• US Durable Goods Wednesday

• Eurozone economic confidence, consumer confidence, Thursday

• U.S. new jobless claims, GDP, Thursday

• On Thursday, Federal Reserve Chairman Jerome Powell will meet with educators at a town hall, while Richmond Fed President Tom Barkin and Chicago Fed President Austan Goolsby will speak.

• Eurozone CPI, Friday

• Japan’s unemployment rate, industrial production, retail sales, Tokyo CPI, Friday

• US Consumer Expenditures, Wholesale Inventories, University of Michigan Consumer Sentiment, Friday

• ECB President Christine Lagarde speaks on Friday

• New York Fed President John Williams speaks on Friday

The main movements in the market are:

stock

• As of 7:23 a.m. New York time, S&P 500 futures were down 0.4%.

• Nasdaq 100 futures fell 0.5%

• Dow Jones Industrial Average futures fell 0.4%.

• Stoxx European 600 drops 0.4%

• MSCI World Index falls 0.2%

currency

• Bloomberg Dollar Spot Index rose 0.1%

• The euro was almost unchanged at $1.0600.

• The British pound fell 0.2% to $1.2187.

• The Japanese yen remains unchanged at 1 dollar = 148.88 yen.

cryptocurrency

• Bitcoin fell 0.3% to $26,216.55.

• Ether rose 0.1% to $1,588.28

bond

• The 10-year Treasury yield fell 4 basis points to 4.49%.

• Germany’s 10-year bond yield fell 2 basis points to 2.77%.

• UK 10-year bond yields fell 3 basis points to 4.29%.

merchandise

• West Texas Intermediate crude oil fell 0.7% to $89.06 a barrel.

• Gold futures fell 0.4% to $1,929.20 an ounce.

This article was produced in partnership with Bloomberg Automation.

–With assistance from Richard Henderson.

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