Stock Futures Signal Modest Recovery in US, Europe: Markets Wrap

(Bloomberg) — European and US equity markets were poised for a modest recovery Monday, after a selloff triggered by cooling US jobs data that also sent Asia’s benchmark stock index to a three-week low. 

Futures for the Standard & Poor’s 500 Index and Euro Stoxx 50 Index both advanced after the underlying gauges slid Friday following the weaker-than-forecast US payrolls numbers. The data left economists and traders at odds as to how aggressively the Federal Reserve will cut interest rates.

Shares in Asia caught up with Friday’s global losses with equities from Taiwan to Australia sliding on fears that global growth is slowing. Japan’s Nikkei 225 Stock Average dropped for a fifth day, while iron ore sank below $90 a ton for the first time since 2022. 

While a September Fed rate cut is essentially a done deal, “the question of course is how many and what size the cuts will be later on,” Louis Kuijs, Asia-Pacific chief economist at S&P Global in Hong Kong, said in an interview on Bloomberg Television “There are lots of risks across the global economy,” which matters to the Fed, he said.

Even though the Fed has all but committed to reducing rates from their highest in more than two decades this month, investors have been scrutinizing economic data for clues as to the scope and pace of the reductions. Adding to headwinds is a technology sector rout. In a prelude to US easing, the European Central Bank is forecast to cut its benchmark rate when it meets Thursday. 

September is proving a volatile month for markets with stocks and commodities both sliding amid concern about waning global growth. Wall Street’s fear gauge — the Cboe Volatility Index — closed at its highest in a month on Friday, after US nonfarm payrolls rose less than forecast. 

Risk-off sentiment in Asia sent the MSCI Asia Pacific Index down as much as 1.8% with chipmakers Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co. among the biggest drags. Japan’s Nikkei 225 Stock Average slid as much as 3.1% before trimming losses. 

China’s CSI 300 Index slid for a second day, taking its drop from this year’s high in May to more than 13%. A further decline would take the benchmark to the lowest level since early 2019, suggesting years of policy efforts to revive the economy and prop up share prices have proved futile.   

Former People’s Bank of China Governor Yi Gang said his nation should focus on ending deflation, in a rare admission by a prominent figure in China that falling prices are threatening the country’s growth outlook.

Treasuries and the yen both dropped Monday as haven demand waned. The US two-year yield climbed four basis points to 3.69% after sliding 10 basis points on Friday. The yen slipped 0.5% to 142.99 per dollar after surging 2.7% last week.

Iron ore slid below $90 a ton as a slump in demand in biggest buyer China drove losses. Futures have fallen by more than a third this year with pressure ramping up as flagging steel. Oil rose from its lowest close since 2021 after a deep weekly loss pushed futures near levels regarded as oversold.

Traders will be keeping a close eye on US inflation data this week as worries mount the Fed has been too slow to cut rates as recession risks grow. Treasury Secretary Janet Yellen at the weekend sought to temper fears, seeing no “red lights flashing” for the financial system. Fed Governor Christopher Waller said he was “open-minded” about the potential for a bigger rate cut. 

“The August US nonfarm payrolls report came in softer than we expected, but not by enough to change our baseline view on the Fed — especially because recent spending and income data suggest continued momentum in the economy,” Seth Carpenter, chief global economist at Morgan Stanley, wrote in a note.

Some key events this week: 

• China trade, Tuesday
• China’s National People’s Congress standing committee meeting begins, Tuesday
• Germany CPI, Tuesday
• UK jobless claims, unemployment, Tuesday
• Harris-Trump debate, Tuesday
• BOJ board member Nakagawa Junko speaks, Wednesday
• UK industrial production, Wednesday
• US CPI, Wednesday
• Japan PPI, Thursday
• BOJ board member Naoki Tamura speaks, Thursday
• Eurozone ECB rate decision, Thursday
• US initial jobless claims, PPI, Thursday
• Eurozone industrial production, Friday
• France CPI, Friday
• ECB Governing Council member Olli Rehn speaks, Friday
• US University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.3% as of 2:52 p.m. Tokyo time
• Nikkei 225 futures (OSE) fell 0.7%
• Japan’s Topix fell 0.9%
• Australia’s S&P/ASX 200 fell 0.3%
• Hong Kong’s Hang Seng fell 2%
• The Shanghai Composite fell 1.2%
• Euro Stoxx 50 futures rose 0.5%

Currencies

• The Bloomberg Dollar Spot Index rose 0.1%
• The euro fell 0.1% to $1.1071
• The Japanese yen fell 0.4% to 142.86 per dollar
• The offshore yuan fell 0.2% to 7.1112 per dollar

Cryptocurrencies

• Bitcoin rose 0.5% to $54,637.44
• Ether rose 0.5% to $2,287.02

Bonds

• The yield on 10-year Treasuries advanced three basis points to 3.74%
• Japan’s 10-year yield advanced five basis points to 0.890%
• Australia’s 10-year yield advanced seven basis points to 3.95%

Commodities

• West Texas Intermediate crude rose 0.9% to $68.28 a barrel
• Spot gold fell 0.4% to $2,488.48 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Georgina McKay.

©2024 Bloomberg L.P.