The Federal Reserve’s fast rate-hike path worried investors more than strong corporate earnings and China’s stimulus plans, which led to a decline in US stock-index futures.
After the market benchmark registered moderate gains Tuesday after a rise in retailer stocks, September contracts on the S&P 500 Index fell 0.3%. The Nasdaq 100 futures fell 0.5%, indicating that the decline in technology stocks will continue. Investors were looking for hints in the minutes of the Fed’s most recent policy meeting about how sensitive policy makers were to deteriorating economic data, which caused the dollar and Treasury yields to rise.
With inflation showing signs of peaking and four out of five corporations reporting earnings that met or exceeded projections, US stocks have risen. However, the prospect of a recession in the biggest economy in the world and ongoing rate hikes are dampening optimism. Meanwhile, there is growing anxiety that Fed rate-setters will continue to prioritise fighting inflation over promoting growth.
According to Carol Kong, a strategist at Commonwealth Bank of Australia Ltd., “we expect the FOMC minutes to have a hawkish tilt.” We wouldn’t be shocked if the minutes revealed that the FOMC had discussed raising interest rates by 100 basis points in July.
Asian equities increased earlier on Wednesday amid speculation that China may increase its stimulus measures to support its faltering economy. China’s Premier Li Keqiang instructed local officials from six important provinces, which together make up 40% of the country’s economy, to strengthen pro-growth policies following a string of dismal economic data caused by a property sector downturn and Covid controls.
When European trading began and attention shifted to the Fed and to UK inflation, which shot up to double digits for the first time in four decades, some of those market gains were given up. The Stoxx 600 index for Europe fluctuated little.
Thanks to Walmart Inc. and Home Depot Inc.’s earnings announcements, the S&P 500 had logged a little increase on Tuesday.
On Wednesday, the dollar made a slight increase. The 10-year yield increased by 6 basis points, and the two-year rate increased by 5 basis points, as Treasury prices decreased. At around 45 basis points, the difference between these two yields remained inverted.
With high inflation and tightening monetary policy, the oil price swung between gains and losses and was approaching a more than six-month low, reflecting continuing concerns about an uncertain economic future.
The indicator that gets the most attention in the second half is still inflation. Will it gradually start to decline or will it continue to be high, prompting the Fed to quickly raise rates? Participate in the MLIV Pulse poll to voice your opinion.
Observe the following significant occurrences this week:
- Wednesday’s Federal Reserve July minutes
- Wednesday: US retail sales, UK CPI
- Australia jobless rate, Thursday
- Initial unemployment claims, existing home sales in the US, and the Conference Board’s leading index for Thursday
- Esther George and Neel Kashkari, both of the Fed, talk at different events on Thursday
Several significant market changes include:
- As of 9:11 a.m. London time, the Stoxx Europe 600 had not changed significantly.
- S&P 500 futures decreased by 0.3%.
- The Nasdaq 100’s futures decreased by 0.5%.
- The Dow Jones Industrial Average futures decreased 0.2%.
- MSCI Asia Pacific increased by 0.4%.
- Rising by 0.2% was the MSCI Emerging Markets Index.
- By 0.2%, the Bloomberg Dollar Spot Index increased.
- At $1.0161, the euro had scarcely moved.
- Japanese yen decreased by 0.4% to 134.82 per dollar.
- The offshore yuan’s exchange rate remained stable at 6.7899 per dollar.
- The price of the British pound was unchanged at $1.2087.
- The 10-year Treasury yield increased by six basis points to 2.87%.
- The 10-year yield in Germany increased by seven basis points to 1.04%.
- The 10-year yield in Britain increased by 10 basis points to 2.22%.
- To $91.80 per barrel, Brent crude decreased by 0.6%.
- To $1,772.50 an ounce, spot gold decreased by 0.2%.