Market Wrap: Stocks Plummet as Doubts on Fed Rate-Cut Arise

(Bloomberg) — Stocks Decline and Dollar Rises as Minneapolis Fed President Neel Kashkari Dampens Hopes of Speedy Interest Rate Cuts from US Central Bank

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S&P 500 Futures Shed More Than 0.3%, Indicating the US Equity Benchmark Will Snap a Six-Day Winning Streak, While Europe’s Stoxx 600 Index Posted a Similar Loss. West Texas Intermediate Crude Drops Below $80 a Barrel for the First Time in More Than Two Months. The Dollar Strengthens.

In an interview on Fox News on Monday, Kashkari states that it is too soon to declare victory over inflation, adding that while there have been three months of promising data on inflation, it is not enough.

“The Kashkari comment has injected a sense of reality back into the market, which had gotten carried away thinking that policy easing was just around the corner,” says Stuart Cole, Head Macro Economist at brokerage Equiti Capital.

Meanwhile, bond markets rallied, led by the UK, as Bank of England Chief Economist Huw Pill hints at rate cuts potentially happening by mid-2024, and German industrial output figures suggest an upcoming recession. Two-year gilt yields fall 10 basis points to 4.6%, and the rate on 10-year Treasuries slides five basis points to 4.59%.

“Pill has gone against the narrative of the BOE message last week. That is clearly better news for bonds,” adds Cole.

Read More: Israeli Shekel Recoups Most War Losses With Central Bank Support

In European markets, oil producers drag down equity benchmarks, with Shell Plc and BP Plc declining more than 1%.

UBS Group AG reports stronger-than-expected client inflows in its wealth-management business, leading to a 3.7% increase in their stock. Watches of Switzerland Group Plc, the top UK Rolex retailer, expects to more than double sales and profits by 2028, resulting in a 10% jump in their stock.

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In Asian markets, South Korea’s Kospi Index loses 2.3% after a short-selling ban triggers a rally on Monday. Australia resumes policy tightening, raising its inflation forecast, indicating that central banks may not be done hiking interest rates.

Key Events This Week:

• China Forex Reserves, Tuesday

• Eurozone PPI, Tuesday

• US Trade, Tuesday

• UBS Earnings, Tuesday

• Kansas City Fed President Jeff Schmid and Dallas counterpart Lorie Logan Speak, Tuesday

• Eurozone Retail Sales, Wednesday

• Germany CPI, Wednesday

• BOE Governor Andrew Bailey Speaks, Wednesday

• US Wholesale Inventories, Wednesday

• New York Fed President John Williams Speaks, Wednesday

• Bank of Japan Issues October Summary of Opinions, Thursday

• BOE Chief Economist Huw Pill Speaks on the Economy, Thursday

• US Initial Jobless Claims, Thursday

• Fed Chair Jerome Powell Participates in Panel on Monetary Policy Challenges at the IMF’s Annual Research Conference in Washington, Thursday

• Atlanta Fed President Raphael Bostic and Richmond counterpart Tom Barkin Speak, Thursday

• UK Industrial Production, GDP, Friday

• ECB President Christine Lagarde Participates in Fireside Chat, Friday

• US University of Michigan Consumer Sentiment, Friday

• Dallas Fed President Lorie Logan and Atlanta counterpart Raphael Bostic Speak, Friday

Some of the Main Moves in Markets:

Stocks

• The Stoxx Europe 600 Falls 0.3% as of 11:49 a.m. London Time

• S&P 500 Futures Fall 0.4%

• Nasdaq 100 Futures Fall 0.3%

• Futures on the Dow Jones Industrial Average Fall 0.4%

• The MSCI Asia Pacific Index Falls 1.4%

• The MSCI Emerging Markets Index Falls 0.9%

Currencies

• The Bloomberg Dollar Spot Index Rises 0.4%

• The Euro Falls 0.5% to $1.0669

• The Japanese Yen Falls 0.2% to 150.40 per Dollar

• The Offshore Yuan Falls 0.1% to 7.2902 per Dollar

• The British Pound Falls 0.5% to $1.2280

Cryptocurrencies

• Bitcoin Falls 1% to $34,685.51

• Ether Falls 0.9% to $1,876.35

Bonds

• The Yield on 10-Year Treasuries Declines Three Basis Points to 4.61%

• Germany’s 10-Year Yield Declines Five Basis Points to 2.69%

• Britain’s 10-Year Yield Declines Seven Basis Points to 4.30%

Commodities

• Brent Crude Falls 1.6% to $83.80 a Barrel

• Spot Gold Falls 0.7% to $1,964.37 an Ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Chiranjivi Chakraborty and Tassia Sipahutar.

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