Stocks, Bonds Dip as Fed and Election Risks Weigh: Markets Wrap

(Bloomberg) — Treasuries steadied after Monday’s selloff, while stock futures dipped as traders speculated over the path of US interest rates.

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US futures retreated 0.2%, with the S&P 500 set for its first back-to-back drop in six weeks. Europe’s Stoxx 600 posted small moves. The yield on 10-year Treasuries added one basis point to 4.21% after yesterday’s 11 basis-point surge. The dollar was little changed.

Monday’s bond declines came as investors pared back their expectations for Fed rate cuts after central bank officials indicated a preference for reducing rates at a slower pace. In addition, traders are weighing the inflationary impact of a possible Donald Trump presidential win, given his promised tax cuts and trade tariffs could ultimately entail faster price growth and higher rates.

“This is very clearly linked to trading a victory of the Republicans — and therefore to an agenda which would be much more inflationist than that of the Democrats. We’re in a market that is betting on Trump,” said Christopher Dembik, senior investment adviser at Pictet Asset Management. “The rise in yields is starting to threaten equity markets.”

Bonds Are Selling Off Everywhere as Traders Rethink Fed Pathway

Gold rose — approaching Monday’s record high — with haven demand from traders paying attention to geopolitical risks, including conflict in the Middle East, and the US election. Oil fell after rising nearly 2% on Monday.

Pictet’s Dembik noted that the pressure on stocks from the bond market comes with Europe in the midst of a downbeat earnings season. So far about 47% of MSCI Europe companies reported results below expectations while only 27% delivered beyond, according to data compiled by Bloomberg Intelligence.

Corporate Highlights:

• Germany’s SAP rose as much as 5.6% after it delivered a beat on several key metrics in the third quarter and boosted some elements of its guidance for the full year.

• Hyundai Motor India Ltd. shares dropped in their Mumbai debut on Tuesday after the company raised $3.3 billion in the country’s largest-ever initial public offering. IPOs for Tokyo Metro Co. and Horizon Robotics Inc. were met with robust demand.

Key events this week:

• ECB’s Christine Lagarde is interviewed by Bloomberg Television, Tuesday

• BOE’s Andrew Bailey as well as ECB’s Klaas Knot and Robert Holzmann to speak at Bloomberg Global Regulatory Forum in New York, Tuesday

• Philadelphia Fed President Patrick Harker speaks, Tuesday

• Canada rate decision, Wednesday

• Eurozone consumer confidence, Wednesday

• US existing home sales, Wednesday

• Boeing, Tesla, Deutsche Bank earnings, Wednesday

• Fed’s Beige Book, Wednesday

• US new home sales, jobless claims, S&P Global Manufacturing and Services PMI, Thursday

• UPS, Barclays earnings, Thursday

• Fed’s Beth Hammack speaks, Thursday

• US durable goods, University of Michigan consumer sentiment, Friday

Story continues

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 fell 0.1% as of 8:50 a.m. London time

• S&P 500 futures fell 0.2%

• Nasdaq 100 futures fell 0.3%

• Futures on the Dow Jones Industrial Average fell 0.2%

• The MSCI Asia Pacific Index fell 1%

• The MSCI Emerging Markets Index fell 0.4%

Currencies

• The Bloomberg Dollar Spot Index fell 0.1%

• The euro rose 0.2% to $1.0834

• The Japanese yen was little changed at 150.97 per dollar

• The offshore yuan was little changed at 7.1334 per dollar

• The British pound rose 0.2% to $1.3007

Cryptocurrencies

• Bitcoin fell 0.3% to $67,493.66

• Ether fell 0.9% to $2,651.08

Bonds

• The yield on 10-year Treasuries advanced one basis point to 4.21%

• Germany’s 10-year yield advanced four basis points to 2.32%

• Britain’s 10-year yield advanced four basis points to 4.17%

Commodities

• Brent crude fell 0.8% to $73.73 a barrel

• Spot gold rose 0.5% to $2,734.17 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Jason Scott, Winnie Hsu, Abhishek Vishnoi and Aya Wagatsuma.

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