(Bloomberg) — Stocks traded ahead of a major inflation report amid concerns that the Federal Reserve waited too long to ease monetary policy. Bonds rose.
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Concerns about slowing growth in major economies have flared up again as oil trades fall below $70 and global bond yields retreat to two-year lows this week. Investors’ attention will turn to the US Consumer Price Index due later Wednesday – which is expected to post another month of moderate gains – and the Fed’s policy meeting next week.
“Downside volatility” is possible if Wednesday’s inflation numbers run high given market expectations for aggressive spending cuts, said Sameer Samana of the Wells Fargo Investment Institute. “A cooler print poses more two-way risks as it creates more room for the Fed to cut, but could also indicate that the economy is slowing faster than expected.”
Traders in the US interest rate options market are still betting on at least one Fed rate cut of 50 basis points this year – but probably not before the November 5 election.
Market reactions to Tuesday’s debate between Vice President Kamala Harris and former President Donald Trump were limited. Betting markets shifted in favor of Harris, a signal that many expect her candidacy to get a boost from Tuesday’s proceedings. Her chances of winning the election increased to 56% on the betting website PredictIt, compared to 53% before the debate.
The European stock benchmark was little changed, while S&P 500 futures fell 0.4%. Trump’s support for the crypto sector caused the price of Bitcoin to fall. The yield on the two-year Treasury benchmark fell four basis points to 3.56%.
The threat of far-reaching tariffs is becoming one of the biggest risks for the markets. While Trump as president imposed tariffs on more than $300 billion of Chinese goods and tried to stop countries from buying equipment from Huawei Technologies Co. to buy 5G networks, Harris’ position is less well known after she joined the ticket late.
“Historically, I would have said don’t waste too much time thinking about presidential elections,” said Ronald Temple, chief strategist at Lazard Asset Management. “But I think there are consequences because you’re talking about huge amounts of tariffs. At this point, the market is not promoting a global trade war.”
West Texas Intermediate crude recovered Wednesday after falling as much as 5% in the previous session. Crude oil has fallen by almost a fifth so far this quarter on concerns that slowing growth in the US and China, its top consumers, will shrink demand at a time of robust and growing supply.
Main events this week:
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US CPI, Wednesday
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Japanese PPI, Thursday
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ECB interest rate decision, Thursday
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US initial unemployment claims, PPI, Thursday
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hsu industrial production, friday
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Japan’s industrial production, Friday
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US consumer confidence, Michigan, Friday
Some of the major moves in the markets:
Stocks
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The Stoxx Europe 600 rose 0.1% as of 9:39 a.m. London time
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S&P 500 futures fell 0.4%
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Nasdaq 100 futures fell 0.4%
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Futures on the Dow Jones Industrial Average fell 0.4%
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The MSCI Asia Pacific Index fell 0.4%
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The MSCI Emerging Markets Index fell 0.3%
Currencies
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The Bloomberg Dollar Spot Index fell 0.2%
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The euro rose 0.2% to $1.1045
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The Japanese yen rose 0.6% to 141.53 per dollar
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The offshore yuan rose 0.3% to 7.1161 per dollar
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The British pound was little changed at $1.3084
Cryptocurrencies
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Bitcoin fell 1.9% to $56,475.62
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Ether fell 2% to $2,329.65
Bonds
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The yield on ten-year government bonds fell by three basis points to 3.61%
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The German ten-year yield fell by one basis point to 2.12%
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The British ten-year yield fell by five basis points to 3.77%
Raw materials
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Brent crude rose 1.7% to $70.39 per barrel
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Spot gold rose 0.3% to $2,523.63 an ounce
This story was produced with the help of Bloomberg Automation.
–With help from Masaki Kondo, Marcus Wong and Winnie Hsu.
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