Stocks Fall as Traders Brace for Volatility Risk: Markets Wrap

(Bloomberg) — Global equities began September on the back foot as investors prepared for what’s typically considered the most challenging month for stocks.

Europe’s Stoxx 600 fell 0.3% from Friday’s record high, with the automotive and consumer goods sectors particularly affected. This downturn followed data showing a fourth consecutive month of contraction in Chinese manufacturing activity, alongside a deepening slump in the country’s residential property market.

Similarly, mining giants such as Rio Tinto Plc and BHP Group Ltd. saw declines after iron ore prices dropped. In London, Rightmove Plc surged more than 20% after Rupert Murdoch’s REA Group Ltd. said it’s exploring a possible cash and share offer.

US equity futures softened after the S&P 500 came close to an all-time high on Friday. The dollar was steady, while cash Treasuries were closed for the US Labor Day holiday.

September has been a notably poor month for stocks over the past four years, while the dollar typically outperforms, 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 may continue, especially with the upcoming US jobs report on Friday, serving as a guide to how quick, or slow, the Fed will cut rates and as the US election campaign gets into full swing. Traders are pricing the Fed’s 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.”

Two days before Friday’s report, the government will issue figures on July job vacancies. The number of open positions, a measure of labor demand, is seen easing to a three-month low of 8.1 million — just above a more than three-year low.

Elsewhere, German Chancellor Olaf Scholz’s ruling coalition was punished in two regional elections on Sunday, with the far right clinching its first triumph in a state ballot since World War II. Still, political parties moved to block the Alternative for Germany from power in the eastern states of Thuringia and Saxony.

China Woes

In Asian markets, multiple rounds of stimulus have failed to revive growth in China, where a prolonged property market slump is curbing domestic demand in the world’s second-largest economy. 

“I think there’s a huge problem — by now everybody recognizes that,” Hao Ong, 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 steadied as traders weigh a planned production increase from OPEC+ next month against currently lower output in Libya, while mindful of economic headwinds in China.

oil steadiedKey events this week: 

• Eurozone HCOB manufacturing PMI, Monday
• UK S&P Global manufacturing PMI, Monday
• 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

• The Stoxx Europe 600 fell 0.3% as of 10:19 a.m. London time
• S&P 500 futures fell 0.2%
• Nasdaq 100 futures fell 0.3%
• Futures on the Dow Jones Industrial Average fell 0.1%
• The MSCI Asia Pacific Index fell 0.4%
• The MSCI Emerging Markets Index fell 0.3%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro rose 0.2% to $1.1066
• The Japanese yen fell 0.4% to 146.70 per dollar
• The offshore yuan fell 0.3% to 7.1118 per dollar
• The British pound was little changed at $1.3135

Cryptocurrencies

• Bitcoin fell 0.8% to $57,959.34
• Ether fell 1.5% to $2,464.32

Bonds

• The yield on 10-year Treasuries was little changed at 3.90%
• Germany’s 10-year yield advanced three basis points to 2.33%
• Britain’s 10-year yield advanced four basis points to 4.06%

Commodities

• Brent crude rose 0.3% to $77.16 a barrel
• Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Catherine Bosley.

©2024 Bloomberg L.P.