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(Bloomberg) — U.S. stock futures fell and U.S. Treasuries firmed after Monday’s decline as traders speculated on the fate of U.S. interest rates.
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The S&P 500 index contract retreated, with the European stock index down 0.7%. This was led by the real estate and utilities sectors, which are typically affected when borrowing costs rise. The 10-year Treasury yield added 1 basis point to 4.21%, after rising 11 basis points earlier in the week.
Investors are dialing back expectations for Fed rate cuts after central bank officials signaled they want to cut rates at a more gradual pace. The inflationary impact of a potential Donald Trump presidential victory also weighs heavily, given that the tax cuts and trade tariffs he has promised could ultimately be accompanied by tax hikes.
“This clearly has to do with trading on Republican wins, and therefore policies that are much more inflationist than Democratic policies. We’re in a market that’s betting on Trump.” said Christopher Dembick, senior investment advisor at Pictet Asset Management. “Rising yields are starting to threaten the stock market.”
Bonds are selling everywhere as traders reconsider the Fed path
Gold rose, nearing record highs on Monday, driven by haven demand from traders focused on the Middle East conflict and the impending US vote.
Despite the increased risks, the current winning streak for U.S. stocks is among the best since 1928, according to data compiled by Sentiment Trader. If the S&P closes in a loss on Tuesday, it would be the first straight decline in about 30 sessions.
Citigroup strategists say exposure to the S&P 500 index is at a historic 10% decline.
strict requirements
DWS Europe Chief Investment Officer Vera Fehling said that although U.S. stocks are expensive, it is a good idea for investors to be underweight in an environment where the S&P 500 index has reached 47 all-time highs since January of this year. He said it was a tough request.
“If we had said then, ‘Things are looking pretty tough,’ we would have underperformed by a lot,” she added. “It’s hard to explain how U.S. stocks could end the year with such a significant underweight.”
European stocks look cheap in comparison. So far, about 47% of MSCI European companies have reported lower-than-expected results, while only 27% have exceeded expectations, according to data compiled by Bloomberg Intelligence. L’Oréal is scheduled to report earnings later today, and analysts are keeping an eye on the impact of China’s economic downturn on its stock price.
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Company highlights:
Germany’s SAP rose as much as 5.6% after delivering gains in several key indicators in the third quarter and boosting some elements of its full-year outlook.
Shares of Hyundai Motor India fell on its Mumbai debut on Tuesday after the company raised $3.3 billion in the country’s largest-ever initial public offering. The IPOs of Tokyo Metro Co., Ltd. and Horizon Robotics Co., Ltd. responded to strong demand.
This week’s main events:
ECB’s Christine Lagarde will be interviewed on Bloomberg TV on Tuesday
BOE’s Andrew Bailey, ECB’s Klaas Nott and Robert Holzmann speak at the Bloomberg Global Regulation Forum in New York on Tuesday
Philadelphia Fed President Patrick Harker speaks on Tuesday
Canadian interest rate decision Wednesday
Eurozone consumer confidence Wednesday
US used home sales Wednesday
Boeing, Tesla and Deutsche Bank earnings results Wednesday
Fed Beige Book, Wednesday
U.S. new home sales, unemployment 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
The main movements in the market are:
stock
As of 6:17 a.m. New York time, S&P 500 futures were down 0.5%.
Nasdaq 100 futures fell 0.6%
Dow Jones Industrial Average futures fell 0.5%
Stoxx European 600 drops 0.7%
MSCI World Index falls 0.2%
currency
Bloomberg Dollar Spot Index little changed
The euro was almost unchanged at $1.0818.
The British pound was almost unchanged at $1.2980.
The Japanese yen remained almost unchanged at 150.83 yen to the dollar.
cryptocurrency
Bitcoin fell 1.2% to $66,887.98.
Ether fell 1.9% to $2,622.97.
bond
The 10-year government bond yield was almost unchanged at 4.20%.
Germany’s 10-year bond yield rose 4 basis points to 2.32%.
The UK 10-year bond yield rose 3 basis points to 4.17%.
merchandise
West Texas Intermediate crude rose 0.8% to $71.12 a barrel.
Spot gold rose 0.5% to $2,734.67 an ounce.
This article was produced in partnership with Bloomberg Automation.
–With assistance from Jason Scott, Winnie Hsu, Abhishek Vishnoi, and Aya Wagatsuma.
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