Market News

US stock-index futures and Treasuries fluctuated between gains and losses amid concern over a global economic slowdown.

Contracts on the S&P 500 and Nasdaq 100 gauges were little changed, while Europe’s Stoxx 600 climbed the most since June 24. The two- and 10-year US yield curve remained inverted as investors awaited the minutes of the Federal Reserve’s last meeting to gauge its policy priorities. The dollar rose for a fourth day.

While bargain hunters chasing technology stocks boosted US equity gauges on Tuesday, it only helped to mask a deepening slump in stocks linked to economic activity, such as energy, commodity and industrial names. A renewed spike in China’s COVID cases and a worsening gas crisis in Europe signaled that a worldwide slowdown is coming even as central banks tighten monetary policy to contain consumer prices.

“Markets are caught between two opposing forces and that’s the place we are going to be in for the next few months,” Diana Amoa, chief investment officer for long-biased strategies at Kirkoswald Asset Management, said on Bloomberg Television. “We go from trading lower growth to trading high inflation.”

The odds of a US recession in the next year are now 38 per cent, according to latest forecasts from Bloomberg Economics. Bond traders are penciling in a policy turnaround by the Federal Reserve, with current hawkishness giving way to interest-rate cuts in the middle of 2023.

In Europe, the equity benchmark jumped almost 1.4 per cent on Wednesday as the cheapest valuations in two years attracted traders betting on a strong start to the earnings-reporting season. Travel and leisure companies were the best-performing subgroup on the Stoxx 600.

Chinese technology shares fell in US premarket trading. JD.com Inc., Pinduoduo Inc. and Baidu Inc. lost at least 1.5 per cent each. 

Bonds traded choppily from Europe to the US. The 10-year Treasury yield was little changed at 2.81 per cent, while the two-year rate also traded at a similar level or slightly higher.

Oil steadied around US$100 a barrel, with Goldman Sachs Group Inc. arguing that losses driven by recession fears were overdone.

In China, Shanghai launched mass testing for COVID in nine districts after detecting cases the past two days, fueling concerns that the financial hub may once again find itself locked down in pursuit of COVID Zero. The Shanghai Composite Index slid the most since May 24.

What to watch this week:

• FOMC minutes, US PMIs, ISM services, JOLTS job openings, Wednesday
• EIA crude oil inventory report, Thursday
• Fed Governor Christopher Waller, St. Louis Fed President James Bullard, scheduled to speak, Thursday
• ECB account of its June policy meeting, Thursday
• US employment report for June, Friday

Some of the main moves in markets:

Stocks

• Futures on the S&P 500 were little changed as of 6:03 a.m. New York time
• Futures on the Nasdaq 100 were little changed
• Futures on the Dow Jones Industrial Average were little changed
• The Stoxx Europe 600 rose 1.4 per cent
• The MSCI World index was little changed

Currencies

• The Bloomberg Dollar Spot Index rose 0.2 per cent
• The euro fell 0.4 per cent to US$1.0224
• The British pound was little changed at US$1.1938
• The Japanese yen rose 0.4 per cent to 135.29 per dollar

Bonds

• The yield on 10-year Treasuries was little changed at 2.81 per cent
• Germany’s 10-year yield advanced five basis points to 1.23 per cent
• Britain’s 10-year yield advanced two basis points to 2.07 per cent

Commodities

• West Texas Intermediate crude rose 0.5 per cent to US$100 a barrel
• Gold futures were little changed