(Bloomberg) — Stocks fell in early trading as investors braced for more volatility in the wake of Monday’s historic sell-off.
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US stock futures pared gains and European shares sank into the red. Government bonds retreated, with 10-year yields heading for their first rise in almost two weeks. Traders curbed bets that the Federal Reserve would step in to support markets with early rate cuts.
Underscoring widespread market fears, investors are rushing to insure their portfolios against an extreme market crash. And Wall Street’s fear gauge, the VIX index, remains at its highest level in almost two years.
Japan remained the epicenter of volatility. The Topix index rose 9.3%, after falling 12% on Monday. According to JPMorgan Chase & Co. the unwinding of the carry trade in the yen is only about 50% complete.
“We don’t expect any lull in the coming days,” said Christopher Dembik, senior investment advisor at Pictet Asset Management. The unraveling of the yen’s carry trade will continue to trigger margin calls and losses, while a sustainable recovery in stocks depends on central bank action and big tech sector gains, he said. “I expect the month of August to be red.”
Still, the small moves indicated that some calm is returning to the markets. According to strategists at Goldman Sachs Group Inc. buying the S&P 500 after a 5% decline over the past forty years has generally been profitable.
“The violent market moves over the past few sessions provide a buying opportunity in our view,” said Mohit Kumar, chief economist for Europe at Jefferies International Ltd.
Among individual players in premarket trading, shares of Palantir Technologies Inc. rose. by as much as 13% after the company raised its annual guidance, citing continued demand for its artificial intelligence software.
On the commodity side, oil remained at a seven-month low as the halt in production at Libya’s largest oil field turned attention back to the Middle East. Gold held steady after entering the global crisis on Monday, before slumping as some traders cut positions to cover potential margin calls.
Main events this week:
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Chinese trading, currency reserves, Wednesday
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US consumer credit, Wednesday
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Germany industrial production, Thursday
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First unemployment claims in the US, Thursday
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The Fed’s Thomas Barkin will speak on Thursday
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China PPI, CPI, Friday
Some of the major moves in the markets:
Shares
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S&P 500 futures rose 0.6% as of 6:29 a.m. New York time
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Nasdaq 100 futures rose 0.7%
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Futures on the Dow Jones Industrial Average rose 0.3%
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The Stoxx Europe 600 had changed little
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The MSCI World Index rose 0.3%
Currencies
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The Bloomberg Dollar Spot Index rose 0.4%
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The euro fell 0.4% to $1.0910
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The British pound fell 0.6% to $1.2703
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The Japanese yen fell 0.5% to 144.86 per dollar
Cryptocurrencies
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Bitcoin rose 1.5% to $55,234.51
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Ether rose 1.1% to $2,464.95
Bonds
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The yield on ten-year government bonds rose by five basis points to 3.84%
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The German ten-year yield fell by three basis points to 2.16%
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The British ten-year yield rose by one basis point to 3.88%
Raw materials
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West Texas Intermediate crude rose 0.5% to $73.33 a barrel
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Spot gold rose 0.1% to $2,413.85 an ounce
This story was produced with the help of Bloomberg Automation.
–With help from Winnie Hsu, Aya Wagatsuma and Michael Msika.
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