Stocks Decline Before Earnings, Central Bank Moves: Markets Wrap

(Bloomberg) — European stocks erased early gains and US equity futures slipped at the start of another busy week of earnings and key central bank decisions.

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Commodity shares dropped, while banks gained in Europe. US contracts declined after posting their best two-week rally since November 2020.

The dollar rose and the yen fell as traders positioned for another large interest-rate hike by the Federal Reserve this week, widening the policy divergence with the Bank of Japan. The euro and the pound also declined.

The yield on the 10-year Treasuries rose to 4.06% after surging by nine basis points on Friday. Yields on UK gilts also advanced ahead of what could be the Bank of England’s biggest interest-rate hike in more than 30 years.

Meanwhile, wheat soared after Russia pulled out of a grain-export deal.

Read: Treasuries Swept Up in Global Rout as Inflation Fears Resurface

Fed Chairman Jerome Powell “should be a bit less hawkish”at his press conference on Wednesday compared to after the last meeting, according to Yardeni Research. With the expectation that another 75 basis points is penciled in this week, “Powell will have to acknowledge that the federal funds rate is now further into restrictive territory and will be even more so come the FOMC’s December meeting,” it said in a note.

Economists surveyed by Bloomberg expect Fed officials will maintain its hawkish stance, laying the groundwork for interest rates reaching around 5% by March 2023, potentially leading to a US and global recession. A core gauge of US inflation accelerated in September, bolstering the case for more tightening.

Brazilian assets are set to weaken on Monday after Luiz Inacio Lula da Silva won the presidential election. The extent of the market drop will depend on whether President Jair Bolsonaro will concede as a contested election would likely trigger larger losses.

European natural gas fell after two days of gains as unseasonably warm weather reduces demand and eases concerns about shortages for the winter and oil edged lower as weak economic data from China fanned concerns about energy demand, but it was still set for the first monthly advance since May on OPEC+’s planned supply cuts.

Gold headed for its seventh straight month of declines, the longest losing streak since at least the late 1960s.

Key events this week:

Companies reporting earnings this week include: Moderna, Pfizer, Airbnb, AIG, Maersk, Barrick Gold, BMW, Bharti Airtel, BP, ConocoPhillips, Estee Lauder, Ferrari, ING, Intercontinental Exchange, KKR, Mitsui, Newmont, Petrobras, Qualcomm, Restaurant Brands, Saudi Arabian Oil, SoftBank, Sony, Starbucks, Toyota, Uber and Yum! Brands.
Eurozone CPI and GDP, Monday
Reserve Bank of Australia policy decision, Tuesday
US construction spending, ISM manufacturing index, Tuesday
EIA crude oil inventory report, Wednesday
Federal Reserve rate decision, Wednesday
US MBA mortgage applications, ADP employment, Wednesday
Bank of England rate decision, Thursday
US factory orders, durable goods, trade, initial jobless claims, ISM services index, Thursday
ECB President Christine Lagarde speaks, Thursday
US nonfarm payrolls, unemployment, Friday

Some of the main moves in markets:

Stocks

The Stoxx Europe 600 fell 0.2% as of 8:40 a.m. London time
Futures on the S&P 500 fell 0.6%
Futures on the Nasdaq 100 fell 0.8%
Futures on the Dow Jones Industrial Average fell 0.4%
The MSCI Asia Pacific Index fell 1.7%
The MSCI Emerging Markets Index fell 1.6%

Currencies

The Bloomberg Dollar Spot Index rose 0.4%
The euro fell 0.4% to $0.9921
The Japanese yen fell 0.4% to 148.24 per dollar
The offshore yuan fell 0.8% to 7.3242 per dollar
The British pound fell 0.5% to $1.1560

Cryptocurrencies

Bitcoin fell 1% to $20,479.31
Ether fell 0.8% to $1,581.73

Bonds

The yield on 10-year Treasuries advanced five basis points to 4.06%
Germany’s 10-year yield advanced five basis points to 2.15%
Britain’s 10-year yield advanced four basis points to 3.52%

Commodities

Brent crude fell 1.1% to $94.73 a barrel
Spot gold fell 0.5% to $1,636.35 an ounce

–With assistance from Tassia Sipahutar, Garfield Reynolds and Brett Miller.