Fed cuts may not come for a while but investors may have overreacted.
by Andre Janse van Vuuren and Kit Rees
Markets were catching their breath on Wednesday as traders assessed whether Tuesday’s selloff in US Treasuries and stocks was overblown.
Equity futures signaled a rebound for US stocks after Tuesday’s sharp decline in big tech, which saw the Nasdaq 100 log its worst day in weeks. Treasuries steadied across the curve, while the dollar rose for a second day. Europe’s Stoxx 600 rose 0.2%.
Markets were roiled on Tuesday after traders scrapped their bets on any interest-rate cut by the Federal Reserve until the second half of the year. Two sets of US data emphasized the risk that inflation remained sticky amid a strong performing economy.
“We see a further selloff in rates as self-defeating,” Mohit Kumar, chief European strategist at Jefferies, wrote in a note. “We are in a territory where higher rates should be negative for risky assets. A fall in risky assets would in turn drive up the demand for safe haven assets and also put pressure on the Fed, preventing a large selloff.”
Despite Wednesday’s calmer session, analysts warned that concerns over price pressures and uncertainty about the policies of a new US administration would keep markets volatile.
“These first trading days have been a good overview of what could happen this year,” said Mabrouk Chetouane, head of global market strategy at Natixis Investment Managers. “Inflation, tariffs, Trump, growth, monetary policy — all these concerns could bring uncertainty.”
In Asia, equities headed for their biggest one-day drop in more than two weeks. China’s benchmark stock index briefly tumbled to the lowest since September as investors remained fearful of an anticipated hike in US tariffs.
US crude climbed above $75 a barrel for the first time in almost three months after an industry report pointed to another decline in American inventories. Bitcoin traded below $100,000.
- Eurozone PPI, consumer confidence, Wednesday
- US ADP employment, Fed minutes, consumer credit, Wednesday
- Fed’s Christopher Waller speaks, Wednesday
- China CPI, PPI, Thursday
- Eurozone retail sales, Thursday
- US state funeral and national day of mourning for former President Jimmy Carter is a federal holiday, Thursday
- Fed’s Patrick Harker, Thomas Barkin, Jeff Schmid and Michelle Bowman speak, Thursday
- Japan household spending, leading index, Friday
- US jobs report, consumer sentiment, Friday
Some of the main moves in markets:
Stocks
- The Stoxx Europe 600 rose 0.2% as of 9:16 a.m. London time
- S&P 500 futures rose 0.3%
- Nasdaq 100 futures rose 0.3%
- Futures on the Dow Jones Industrial Average rose 0.2%
- The MSCI Asia Pacific Index fell 0.6%
- The MSCI Emerging Markets Index fell 0.7%
Currencies
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro fell 0.2% to $1.0323
- The Japanese yen was little changed at 158.09 per dollar
- The offshore yuan fell 0.1% to 7.3500 per dollar
- The British pound fell 0.2% to $1.2447
Cryptocurrencies
- Bitcoin fell 0.5% to $95,986.04
- Ether rose 0.2% to $3,369.16
Bonds
- The yield on 10-year Treasuries declined one basis point to 4.67%
- Germany’s 10-year yield advanced three basis points to 2.52%
- Britain’s 10-year yield declined two basis points to 4.66%
Commodities
- Brent crude rose 1% to $77.82 a barrel
- Spot gold rose 0.2% to $2,654.12 an ounce
This story was produced with the assistance of Bloomberg Automation.