Stocks Fall With Doubts Over Fed Pause in Focus: Markets Wrap

(Bloomberg) — Stocks declined as fresh doubts emerged on whether the Federal Reserve has finished tightening policy. The dollar advanced.

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An Asian equity benchmark was set to snap a four-day winning streak as major indexes traded lower. South Korea’s Kospi Index fell over 3% after jumping by the most since 2020 on Monday following a renewed ban on short-selling. Contracts for European and US stocks also slipped.

“Following the stellar rallies across the region yesterday, indexes are giving back some of their gains, with a recovery in bond yields and a firmer US dollar to start the week,” said Jun Rong Yeap, a market analyst at IG Asia Pte.

Traders are now predicting the Fed will lean against the recent easing in financial conditions by saying it will keep its options open on policy. Minneapolis Fed President Neel Kashkari said it’s too soon to declare victory over inflation, despite positive signs that price pressures are easing, and a host of Fed officials — including Chair Jerome Powell — are due to speak over the next few days.

Investors will be parsing results by major companies later Tuesday as the earnings season continues.

UBS Group AG posted a net loss of $785 million in the third quarter, its first quarterly loss in almost six years, as the ongoing absorption of Credit Suisse weighed on the Swiss lender’s performance. Meanwhile, Aramco reported a better-than-expected operating profit and kept its payout to the Saudi government and investors at $29.4 billion.

Treasuries steadied after yields rose across the curve on Monday. Ten-year yields jumped eight basis points as sentiment was dented by a heavy slate of corporate debt sales and traders readied for a series of auctions beginning Tuesday. The dollar gained against all of its Group-of-10 peers.

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“We’re in a trading range probably for the next month or so until we get clear indications on what inflation’s going to really do, core inflation, and what the Fed’s going to do,” Max Wasserman, founder and senior portfolio manager at Miramar Capital, told Bloomberg Television.

Swaps are pricing in more than 100 basis points of rate cuts by the Fed by the end of 2024 from an expected peak rate of 5.37%. On Monday, investors also waded through the Senior Loan Officer Opinion Survey — known as SLOOS — which showed tighter standards and weaker demand persist at US banks.

Australian stocks fell after the central bank hiked its key rate. The nation’s currency unexpectedly declined on speculation that the rate increase might be the final move in the current cycle, disappointing traders who had expected policy makers to maintain a tightening bias.

“The RBA has lagged the magnitude of the global hiking cycle with core inflation pressures remaining elevated,” said Tapas Strickland, head of market economics at National Australia Bank Ltd.

Meanwhile, China reported a deeper-than-expected decline in exports for October that highlighted continued slowdown in global trade and its own fragile economic recovery. The offshore yuan was little changed after the figures were released.

Elsewhere, oil edged lower as an uncertain demand outlook and fresh doubts whether the Fed has finished tightening outweighed Saudi Arabia and Russia’s extension of supply cuts.

Key events this week:

• China forex reserves, Tuesday

• Eurozone PPI, Tuesday

• US trade, Tuesday

• UBS earnings, Tuesday

• Kansas City Fed President Jeff Schmid and his 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 his 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 her Atlanta counterpart Raphael Bostic speak, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures fell 0.3% as of 6:28 a.m. London time. The S&P 500 rose 0.2%

• Nasdaq 100 futures fell 0.2%. The Nasdaq 100 rose 0.4%

• Japan’s Topix fell 1.2%

• Australia’s S&P/ASX 200 fell 0.3%

• Hong Kong’s Hang Seng fell 1.2%

• The Shanghai Composite rose 0.2%

• Euro Stoxx 50 futures fell 0.4%

Currencies

• The Bloomberg Dollar Spot Index rose 0.2%

• The euro fell 0.1% to $1.0706

• The Japanese yen fell 0.2% to 150.36 per dollar

• The offshore yuan was little changed at 7.2865 per dollar

• The Australian dollar fell 0.9% to $0.6431

• The British pound fell 0.1% to $1.2326

Cryptocurrencies

• Bitcoin fell 0.3% to $34,908.47

• Ether was little changed at $1,892.18

Bonds

• The yield on 10-year Treasuries was little changed at 4.64%

• Japan’s 10-year yield was little changed at 0.875%

• Australia’s 10-year yield declined three basis points to 4.69%

Commodities

• West Texas Intermediate crude fell 0.6% to $80.30 a barrel

• Spot gold fell 0.3% to $1,971.68 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Chiranjivi Chakraborty.

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