Stocks Hover as Traders Brace for Swings: Markets Wrap

(Bloomberg) — Global equities hovered near record highs on Monday as investors prepared for what’s typically considered the most challenging month for stocks.

Europe’s Stoxx 600 index pared most losses from earlier in the session after closing at an all-time high on Friday. Volkswagen AG rose 1.3% after the automaker said it’s considering unprecedented factory closures in Germany, while Rightmove Plc surged 27% in London on the back of takeover interest from Rupert Murdoch’s REA Group Ltd.

US equity futures were little changed. The dollar edged higher after its worst month this year, while cash Treasuries were closed for the US Labor Day holiday. Mexican stocks gained while Brazilian assets retreated.

Historically, September has been a particularly poor month for stocks over the past four years, according to data compiled by Bloomberg. Wall Street’s fear gauge – the Cboe Volatility Index, or VIX – has risen each September since 2021.

The trend could persist, especially with the upcoming US jobs report on Friday, which will provide crucial insights into how quickly or slowly the Federal Reserve might cut rates and as the US election campaign gets into full swing. Traders are pricing the US easing cycle will begin this month, with a roughly one-in-four chance of a 50 basis-point cut, according to data compiled by Bloomberg.

“I think the market is pretty well versed with what it thinks is going to happen — there will be some kind of cut,” Fiona Boal, global head of equities at S&P Dow Jones Indices, told Bloomberg Television. “As we move through autumn, we will see the VIX move more to thinking about the markets, thinking about political issues.”

JPMorgan Chase & Co. strategists cautioned that the equity market rally could stall even if the Fed initiates a rate cut. Any policy easing would be in response to slowing growth, while the seasonal trend for September would be another impediment, the team led by Mislav Matejka wrote in a note.

“We are not out of the woods yet,” Matejka said, reiterating his preference for defensive sectors against the backdrop of a pullback in bond yields. “Sentiment and positioning indicators look far from attractive, political and geopolitical uncertainty is elevated, and seasonals are more challenging.”

Jobs data potentially pointing to a very gradual cooling down of the US labor market could lead traders to adjust their expectations for rate cuts to the benefit of the dollar, according to to Valentin Marinov, head of G-10 FX strategy at Credit Agricole CIB.

“The markets may be leaning too dovish into the September Fed meeting,” Marinov told Bloomberg Television. “The dollar could recoup some ground once the markets realized that the Fed will move more cautiously.” 

A gauge for Asian stocks retreated on the back of heightened concerns about the health of the economy in China, where a prolonged property market slump is curbing domestic demand.

“I think there’s a huge problem — by now everybody recognizes that,” Hao Hong, chief economist at Grow Investment Group, told Bloomberg’s David Ingles and Yvonne Man in an interview. “The government needs to do substantially more.”

In commodities, oil fluctuated between small gains and losses as traders weigh a planned production increase from OPEC+ next month, economic headwinds in China and lower output in Libya.

Key events this week: 

• US markets closed for Labor Day holiday, Monday
• South Korea CPI, Tuesday
• Switzerland GDP, CPI, Tuesday
• South Africa GDP, Tuesday
• US construction spending, ISM Manufacturing index, Tuesday
• Mexico unemployment, Tuesday
• Brazil GDP, Tuesday
• Chile rate decision, Tuesday
• Australia GDP, Wednesday
• China Caixin services PMI, Wednesday
• Bloomberg CEO Forum in Jakarta, Wednesday
• Eurozone HCOB services PMI, PPI, Wednesday
• Poland rate decision, Wednesday
• Fed’s Beige Book, Wednesday
• Canada rate decision, Wednesday
• South Korea GDP, Thursday
• Malaysia rate decision, Thursday
• Philippines CPI, Thursday
• Taiwan CPI, Thursday
• Thailand CPI, Thursday
• Eurozone retail sales, Thursday
• Germany factory orders, Thursday
• US initial jobless claims, ADP employment, ISM services index, Thursday
• Eurozone GDP, Friday
• US nonfarm payrolls, Friday
• Canada unemployment, Friday
• Chile CPI, Friday
• Colombia CPI, Friday

Some of the main moves in markets: 

Stocks

• S&P 500 futures were little changed as of 3:49 p.m. New York time
• Futures on the Dow Jones Industrial Average were little changed
• The MSCI World Index was little changed
• Nasdaq 100 futures rose 0.1%
• The MSCI Asia Pacific Index fell 0.4%
• The MSCI Emerging Markets Index fell 0.3%
• Mexico’s S&P/BMV IPC rose 0.9%
• The Ibovespa Index fell 0.9%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro surged 0.2%, more than any closing gain since Aug. 23
• The British pound rose 0.2% to $1.3147
• The Japanese yen weakened 0.5%,falling for the fourth straight day, the longest losing streak since June 21
• The offshore yuan slipped 0.4%, more than any closing loss since Aug. 15
• The Mexican peso fell 0.4% to 19.8002
• The Brazilian real weakened 0.1% to 5.613 per dollar

Cryptocurrencies

• Bitcoin was little changed at $58,433.79
• Ether surged 0.8%

Bonds

• The yield on 10-year Treasuries was little changed at 3.90%
• Germany’s 10-year yield advanced four basis points to 2.34%
• Britain’s 10-year yield advanced four basis points to 4.05%

Commodities

• West Texas Intermediate crude rose 0.7% to $74.04 a barrel
• Spot gold fell 0.2% to $2,499.51 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Catherine Bosley, Sagarika Jaisinghani and Sebastian Boyd.

(Corrects spelling of Hao Hong’s name)

©2024 Bloomberg L.P.