Dollar Wobbles, Stocks Rise Defying Weak Sentiment: Markets Wrap

(Bloomberg) — Equities erased losses after a weak European opening, and the dollar gave up its gains, as traders took advantage of light positioning amid conflicting headlines fueling volatility.

Most Read from Bloomberg

Risk sentiment remained impaired as US corporate performance showed signs of faltering and China throttled rumors of a more lenient Covid policy. Treasury yields climbed across the curve in a bear-flattening move. Futures on the S&P 500 and Nasdaq 100 indexes added at least 0.2% each after dropping earlier. European stocks rose, led by travel shares. Chinese technology stocks in Hong Kong gained from progress in efforts to prevent their US delisting.

After sparking a global-market rally last week, speculation about China’s reopening received a reality check when authorities said the nation will “unswervingly” adhere to current policy. That — and muted trade data from the world’s second-biggest economy — added to worries over the world economy already under pressure from signs of slowing US corporate performance. Investors now turn their attention to US inflation figures due Thursday for their next catalyst.

Two-year Treasuries led a selloff in bonds as the undercurrent of global sentiment continued to be dictated by Federal Reserve policy. The two- and 30-year curve flattened by 3 basis points to 44 on Monday.

Europe’s equity benchmark, the Stoxx 600, rose for a second successive day and traded above its 100-day moving average.

Oil fell as traders fretted that China’s Zero Covid policy will delay an economic recovery and undercut demand. West Texas Intermediate futures shed almost 1%, falling toward the $91-per-barrel mark.

US data Friday — showing strong hiring and wage increases along with higher unemployment — offered a mixed picture for Fed officials debating how long to extend their campaign to curb elevated inflation.

“Over the next three to four months, dollar will continue to keep moving higher,” Mahjabeen Zaman, head of FX research at Australia & New Zealand Banking Group Ltd., said on Bloomberg Television. “That’s really consistent with the recent FOMC Fed meeting we had where they said they’re going to slow the pace but push on peak rates.”

Meanwhile, investor confidence remained on the edge after Apple Inc. said it expected to produce at least three million fewer iPhone 14 handsets than originally anticipated this year, according to people familiar with its plans. Of the 430 companies in the S&P 500 that have reported quarterly earnings so far, almost a quarter have missed estimates.

Markets will watch the latest US inflation reading on Thursday after the core consumer price index rose more than forecast to a 40-year high in September. Even if prices begin to moderate, the CPI is far above the Fed’s comfort zone.

Key events this week:

Fed officials Susan Collins, Loretta Mester and Tom Barkin speak at events, Monday
Euro zone retail sales, Tuesday
US midterm elections, Tuesday
EIA oil inventory report, Wednesday
China aggregate financing, PPI, CPI, money supply, new yuan loans, Wednesday
US wholesale inventories, MBA mortgage applications, Wednesday
Fed officials John Williams, Tom Barkin speak at events, Wednesday
US CPI, US initial jobless claims, Thursday
Fed officials Lorie Logan, Esther George, Loretta Mester speak at events, Thursday
US University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

The Stoxx Europe 600 rose 0.2% as of 8:43 a.m. London time
Futures on the S&P 500 rose 0.2%
Futures on the Nasdaq 100 rose 0.3%
Futures on the Dow Jones Industrial Average rose 0.1%
The MSCI Asia Pacific Index rose 1.4%
The MSCI Emerging Markets Index rose 1.3%

Currencies

The Bloomberg Dollar Spot Index was little changed
The euro rose 0.2% to $0.9978
The Japanese yen fell 0.2% to 146.98 per dollar
The offshore yuan fell 0.7% to 7.2338 per dollar
The British pound rose 0.1% to $1.1395

Cryptocurrencies

Bitcoin fell 2.2% to $20,668.66
Ether fell 2.4% to $1,566.09

Bonds

The yield on 10-year Treasuries advanced two basis points to 4.18%
Germany’s 10-year yield advanced four basis points to 2.33%
Britain’s 10-year yield advanced five basis points to 3.58%

Commodities

Brent crude fell 0.6% to $97.99 a barrel
Spot gold fell 0.5% to $1,673.67 an ounce

–With assistance from Michael G. Wilson and Tassia Sipahutar.