Stocks fall as doubts creep in about Fed rate cuts: Markets wrap

(Bloomberg) — Stocks fell and the dollar rose after comments from Minneapolis Federal Reserve Bank President Neel Kashkari dampened hopes for a quick cut in interest rates from the U.S. central bank.

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S&P 500 futures fell about 0.3%, indicating that the US stock index will snap a six-day winning streak, while the European STOXX 600 posted a similar loss. West Texas Intermediate crude fell below $80 a barrel for the first time in more than two months. The dollar strengthened.

In an interview on Fox News on Monday, Kashkari said it was too early to declare victory over inflation. He added that although there was promising data on inflation three months ago, it is not enough.

“Kashkari’s comment brought a sense of reality back to the market, which had gotten carried away thinking that monetary policy easing was just around the corner,” said Stuart Cole, chief macro economist at brokerage Equiti Capital.

Meanwhile, bond markets rose, led by the UK, as Bank of England chief economist Hugh Bell hinted that interest rate cuts could be on the table by mid-2024, and German industrial production figures suggest a recession is not far away. The yield on 10-year Treasury bonds fell seven basis points to 4.31%, and the interest rate on 10-year Treasury bonds fell two basis points to 4.62%.

“The pill is somewhat at odds with the narrative of the Bank of England’s letter last week. “This is clearly better news for bonds,” Cole added.

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Among individual stock movers, oil producers dragged European stock indexes lower, with Shell Plc and BP Plc shares falling more than 1%.

UBS Group AG added as much as 5% after reporting stronger-than-expected client flows in its wealth management business. Watches of Switzerland Group Plc, the UK’s largest retailer, jumped 10% after it said it expects to double sales and profits by 2028.

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Earlier, South Korea’s Kospi lost 2.3% after Monday’s rise triggered by a short-selling ban. Australia resumed policy tightening and raised its inflation forecasts, a sign that central banks are not necessarily done raising interest rates.

Main events this week:

• China’s foreign exchange reserves, Tuesday

• Eurozone producer price index, Tuesday

• US Trade, Tuesday

• UBS earnings on Tuesday

• Kansas City Fed President Jeff Schmid and his Dallas counterpart Lori Logan speak Tuesday

• Retail sales in the euro zone, Wednesday

• German Consumer Price Index, Wednesday

• Bank of England Governor Andrew Bailey speaks on Wednesday

• US wholesale inventories on Wednesday

• New York Fed President John Williams speaks on Wednesday

• The Bank of Japan releases its October sentiment summary on Thursday

• Bank of England chief economist Huw Bell talks about the economy on Thursday

• Initial unemployment claims in the US, Thursday

• Federal Reserve Chairman Jerome Powell participates in a panel on monetary policy challenges at the International Monetary Fund’s annual research conference in Washington, Thursday

• Atlanta Fed President Raphael Bostic and his Richmond counterpart Tom Barkin speak Thursday

• UK Industrial Production, GDP, Friday

• European Central Bank President Christine Lagarde participates in a side conversation on Friday

• Consumer confidence index from the University of Michigan, Friday

• Dallas Fed President Lori Logan and her Atlanta counterpart Rafael Bostic speak Friday

Some key movements in the markets:

Stores

• The Stoxx Europe 600 Index was down 0.3% as of 1:01pm London time

• S&P 500 futures fell 0.2%

• Nasdaq 100 futures were little changed

• Dow Jones Industrial Average futures fell 0.3%

• MSCI Asia Pacific Stock Index fell 1.4%

• MSCI Emerging Markets Index fell 0.9%

Currencies

• The Bloomberg Dollar Spot Index rose 0.4%.

• The euro fell 0.4 percent to $1.0678

• The Japanese yen fell 0.3 percent to 150.55 to the dollar

• The yuan in external transactions fell 0.1 percent to 7.2911 per dollar

• The British pound fell 0.4 percent to $1.2297

Digital currencies

• Bitcoin fell 0.7% to $34,768

• Ethereum fell 0.8% to $1,878.23

Bonds

• The yield on the 10-year Treasury note fell 2 basis points to 4.62%.

• The yield on 10-year German bonds fell by four basis points to 2.70%.

• The yield on British 10-year bonds fell seven basis points to 4.31%.

Goods

• Brent crude fell 2.1 percent to $83.36 a barrel

• Gold fell in spot transactions by 1 percent to $1,959.17 per ounce

This story was produced with assistance from Bloomberg Automation.

–With assistance from Chiranjeevi Chakraborty and Tasya Sibahutar.

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