Summary
- S. stocks plunge in early trading; European stocks rise
- Dollar index near flat
- Treasury yields fall
Global stocks were mixed on Tuesday, with Wall Street plunging and European shares rising, while Treasury yields slid as investors speculated whether the U.S. Federal Reserve may signal at a slower pace of tightening this week.
Investors were also mulling over Tuesday’s data showing U.S. job vacancies suddenly surged in September, indicating that demand for labor continues to be strong despite the Fed’s recent rate rises.
The Fed is expected to hike interest rates by 75 basis points on Wednesday, but investors will search for any signals the Fed may be looking at reducing the pace of rate hikes in the future.
Karl Schamotta, chief market strategist, at Corpay in Toronto, said:
“Markets are hoping (Fed Chair) Jerome Powell will step into his Santa costume early, signaling a slower and more gradual pace of rate hikes in the months ahead.”
Although last week’s ECB meeting was viewed by markets as containing dovish signals, ECB President Christine Lagarde said in an interview on Tuesday that the central bank must continue hiking interest rates to combat inflation, even if the possibility of a eurozone recession has increased.
The Bank of England (BoE) is also convening this week and is expected to implement a 75-bps hike as well. Traders then predict the BoE to slow down and hike rates by 50 bps next month. The S&P 500 was previously down 0.7% in choppy trading, with the index slashing early gains after economic data.
On its part, the S&P 500 (.SPX) shed 25.51 points, or 0.66%, to 3,846.47, the Dow Jones Industrial Average (.DJI) dropped 225.75 points, and the Nasdaq Composite (.IXIC) lost 77.98 points, or 0.71%, to 10,910.17. Notably, the pan-European STOXX 600 index (.STOXX) gained 0.50% and MSCI’s gauge of stocks across the globe (.MIWD00000PUS) rose 0.07%.
British energy giant BP (BP.L) earned $8.15 billion in third-quarter profit, more than twice what it made in the same period a year ago. Rivals Exxon Mobil (XOM.N), Shell (SHEL.L), and TotalEnergies (TTEF.PA) also posted large profits last week.
The yield on 10-year notes dropped 5 basis points to 4.027%, while the two-year yield, which normally moves in line with rate expectations, was unmoved at 4.501%. The two-year yield briefly went positive. In the currency market, the dollar index, which rates the U.S. currency against six rivals, was last slightly changed.
Buy Bitcoin NowIn that context, the Chinese yuan plunged to a near 15-year low against the dollar, before cutting its losses after the central bank set the official guidance rate on the weaker side of the key 7.2 per dollar level for the first time since 2008. The dollar previously shed 0.5% against the offshore yuan at 7.2979.
The Australian dollar was slightly changed at US$0.64. The Reserve Bank of Australia hiked rates by 25 bps for the second month in a row, but revised up its inflation outlook and said more rate increases would be required.
U.S. crude recently jumped 2.09% to $88.34 per barrel and Brent was at $94.59, a 1.92% rise on the day.
