Stocks tumble as rate hike outlook dampens sentiment: Markets pull back


(Bloomberg) – Stocks opened the week lower amid growing concern over the impact of tighter monetary policy after strong labor market data bolstered expectations for interest rate hikes more aggressive from the Federal Reserve.

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Asian stocks tumbled, dragged down by tech stocks in Hong Kong, while US futures also fell. Chinese investors returned from a week-long hiatus, just after the United States extended restrictions on access to semiconductor technology, and as Covid cases rebounded ahead of a Congress expected to give a third term to Xi Jinping.

Bond yields climbed in Australia and New Zealand, following gains in US Treasury yields on Friday after labor figures solidified bets that the Fed will hike rates by 75 basis points for a fourth consecutive time on next month. Nearly 95% of S&P 500 companies fell and the Nasdaq 100 fell nearly 4%.

The dollar fluctuated against its Group of 10 counterparts as investors assessed central banks’ campaign to stifle inflation with higher borrowing costs. China set its benchmark yuan rate stronger than expected for a 28th day.

New York Fed Bank President John Williams said rates need to rise to around 4.5% over time, but the pace and ultimate peak of the tightening campaign will depend on how the government performs. economy. Several officials have recently delivered a decidedly hawkish message that price pressures remain high and that they will not be deterred from raising rates by financial market volatility.

All eyes will now be on this week’s US inflation data after a warmer-than-expected reading in August dampened hopes of an incipient slowdown. Moreover, the minutes of the Fed’s September meeting will give clues to the central bank’s tolerance for economic difficulties.

“The US CPI is the headline event risk and when we see expectations that the core CPI will rise 20 basis points to 6.5% from 6.3%, that will give even more fodder to the Fed to continue to tighten financial conditions,” Chris Weston, head of research at Pepperstone Group Ltd., wrote in a note. “Short sellers have it all – we have no central bank support.”

The markets are closed for a holiday in Japan. The US bond market is closed but the stock market will be open.

Key events this week:

  • Earnings this week include: JPMorgan Chase & Co., Citigroup Inc., Morgan Stanley, BlackRock, Delta Air Lines, Fast Retailing, Infosys, PepsiCo, TSMC, Tata Consultancy, UnitedHealth, US Bancorp, Walgreens Boots, Wells Fargo, Wipro

  • The Fed’s Lael Brainard and Charles Evans speak on Monday

  • World Economic Outlook and IMF Global Financial Stability Report, Tuesday

  • Fed’s Loretta Mester speaks on Tuesday

  • BOE’s Andrew Bailey speaks on Tuesday

  • FOMC Minutes for September Meeting, Wednesday

  • US PPI, mortgage applications, Wednesday

  • OPEC’s monthly oil market report, Wednesday

  • The Fed’s Michelle Bowman and Neel Kashkari talk

  • ECB’s Christine Lagarde speaks

  • US CPI, first jobless claims, Thursday

  • G-20 finance ministers and central bankers meet on Thursday

  • China CPI, PPI, trade, Friday

  • U.S. Retail Sales, Business Inventories, University of Michigan Consumer Sentiment, Friday

  • BOE emergency bond buying set to end on Friday

Some of the major movements in the markets:

Shares

  • S&P 500 futures fell 0.3% at 10:57 a.m. Tokyo time. The S&P 500 fell 2.8% on Friday

  • Nasdaq 100 futures fell 0.3%. The Nasdaq 100 fell 3.9% on Friday.

  • The S&P ASX index fell 1.5%

  • The Hang Seng index fell 2%

  • The Shanghai Composite Index was little changed

Currencies

  • The Bloomberg Dollar Spot Index was little changed

  • The euro was little changed at $0.9749

  • The Japanese yen was little changed at 145.37 per dollar

  • The offshore yuan rose 0.2% to 7.1186 per dollar

  • The British pound rose 0.2% to hit $1.1105

Cryptocurrencies

  • Bitcoin rose 0.1% to $19,510.05

  • Ether rose 0.8% to $1,331.97

Obligations

Goods

(An earlier version of this story has been corrected to show that the US bond market is closed but the stock market will be open.)

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