Stocks Slide as Fed Rate-Cut Bets Pared Back: Markets Wrap

(Bloomberg) — Global stocks fell after Jerome Powell signaled the Federal Reserve was in no rush to cut interest rates, and unease built over the composition of President-elect Donald Trump’s cabinet.

Europe’s Stoxx 600 index slipped 0.3%, on track for its fourth weekly drop, with pharma sector among the biggest laggards, after Trump named a prominent vaccine skeptic to a top health-policy role. Vaccine makers Sanofi, GSK Plc and AstraZeneca Plc fell after the news. 

US equity futures pointed to a second day of declines on Wall Street, with contracts on the Nasdaq 100 down 0.9%. Drugmakers Moderna Inc., Novavax Inc. and BioNTech SE all slid in New York premarket trading. Domino’s Pizza Inc. was among the prominent gainers, after Berkshire Hathaway Inc. took a stake in the restaurant chain. 

The S&P has now ceded roughly one-third of the trough-to-peak gains notched after the US presidential election, as some of the optimism over corporate growth under Trump fades. There’s also realization that interest rates will fall less quickly than anticipated, with recent data showing still-elevated inflation pressures and Powell confirming the Fed may take its time easing policy.

“Equity markets seem to be adjusting to the new rate cut trajectory but it doesn’t seem to be a game changer,” said Mathieu Racheter, head of equity strategy at Julius Baer Group Ltd. “Some controversial cabinet announcements obviously do not help the market.”

Powell’s remarks have pushed odds on a December rate cut to less than 60% from roughly 80% a day earlier. Yields on two-year Treasuries steadied after jumping in the previous session in response. 

The higher-for-longer rates view is supportive for the dollar, however. The greenback stayed below two-year highs hit on Thursday, but is set for its seventh straight weekly gain. More clarity on the Fed’s path could emerge later Friday, as the US releases retail sales data and a host of Fed officials are set to speak.   

Another of the so-called Trump trades, Bitcoin, also gave up some gains. It hit a record $93,000 level earlier this week on hopes of crypto-friendly policies from the new US administration. 

“Much of the good news is already priced into Bitcoin. What the market needs now are concrete political steps from the Trump administration,” said Jochen Stanzl, Chief Market Analyst at CMC Markets. “Otherwise, as with many US equities, a cooling-off is overdue for this ‘Trump trade’ as well.” 

In Asia, MSCI’s regional index notched its first gain this week, while China’s CSI 300 Index dropped despite signs of resilience in the nation’s economy. In commodities, oil and gold headed for a weekly drop, weighed down by the stronger dollar.

Key events this week:

• US retail sales, Empire manufacturing, industrial production, Friday

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 fell 0.7% as of 8:19 a.m. London time
• S&P 500 futures fell 0.6%
• Nasdaq 100 futures fell 0.9%
• Futures on the Dow Jones Industrial Average fell 0.6%
• The MSCI Asia Pacific Index rose 0.3%
• The MSCI Emerging Markets Index rose 0.1%

Currencies

• The Bloomberg Dollar Spot Index fell 0.2%
• The euro rose 0.2% to $1.0556
• The Japanese yen rose 0.3% to 155.75 per dollar
• The offshore yuan rose 0.2% to 7.2379 per dollar
• The British pound was little changed at $1.2661

Cryptocurrencies

• Bitcoin fell 0.6% to $87,685.14
• Ether fell 2.6% to $3,038.95

Bonds

• The yield on 10-year Treasuries advanced one basis point to 4.45%
• Germany’s 10-year yield advanced one basis point to 2.35%
• Britain’s 10-year yield advanced two basis points to 4.50%

Commodities

• Brent crude fell 1.5% to $71.47 a barrel
• Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Winnie Hsu, Matthew Burgess and Richard Henderson.

©2024 Bloomberg L.P.