(Bloomberg) — U.S. stock futures fell and the dollar rose on renewed worries about longer-term higher U.S. interest rates, with all eyes on the Federal Reserve’s policy decision later on Wednesday.
Most read by Bloomberg
The risk-off sentiment prevailed amid a holiday-related easing of sessions in Asia, where many markets were closed. Japan’s Nikkei 225 index fell after posting its worst month since December 2022, and Australian shares also fell. The S&P 500 fell by the most since January after a key gauge of U.S. labor costs jumped, reinforcing speculation that officials will keep interest rates at two-decade highs for some time.
“Bank holidays in China and parts of Europe will weaken markets slightly and there is likely to be some degree of risk aversion in Asian trading today ahead of the FOMC decision,” said Kyle Rodda, senior market analyst at Capital.com. “If the Fed indicates a high probability of no rate cuts this year, or even the open possibility of another rate hike, that could intensify the sell-off in stocks.”
The dollar posted its best daily gain in more than two weeks, while the yen held steady. Two-year Treasury yields remained flat after reaching their highest level since November.
“The BoJ’s intervention on Monday was likely the first shot in a titanic battle between the macroeconomic forces supporting USDJPY’s inexorable rise and the determination of Japanese monetary officials,” said Tony Sycamore, market analyst at IG Australia. “This will likely leave the USD/JPY pair trapped in a battleground between 155 and 160 in the coming weeks.”
In the corporate world, shares of Japan’s Lasertec Corp rose as much as 14% after the semiconductor equipment maker reported strong order growth and better-than-consensus third-quarter earnings.
Elsewhere, gold prices stabilized after halting their decline from a record high reached in mid-April. Oil prices continued to fall as the possibility of a ceasefire in the Middle East eased tensions.
Federal Reserve officials are poised to keep interest rates steady for the sixth straight day and are signaling no plans to cut rates in the near future after higher-than-expected inflation.
The last time Fed Chairman Jerome Powell spoke, he pointed to the lack of further progress in reducing inflation and the continued strength of the labor market. Recent inflation signals – along with expectations of a robust jobs report on Friday – are unlikely to cause him to change his mind.
A collapse in consumer confidence also weighed heavily on US stocks – they experienced their worst month since September. Late this morning, Amazon.com Inc. reported strong sales for its cloud unit amid rising demand for artificial intelligence. Advanced Micro Devices Inc., the second-largest maker of computer processors, gave subdued sales guidance for the current period.
Important events this week:
-
Public holiday in much of Asia and Europe, Wednesday
-
Treasury Department Quarterly Refund Announcement, Wednesday
-
US ADP Employment Changes, JOLTS Job Vacancies, ISM Manufacturing, Wednesday
-
Federal Reserve interest rate decision, Wednesday
-
Eurozone S&P Global Manufacturing PMI, Thursday
-
U.S. factory orders, initial jobless claims, trading, Thursday
-
Apple earnings, Thursday
-
Unemployment in the Eurozone, Friday
-
US Unemployment, Non-Farm Payrolls, ISM Services, Friday
-
Chicago Fed President Austan Goolsbee speaks Friday
Some of the key moves in the markets:
Shares
-
S&P 500 futures were little changed at 6:50 a.m. London time
-
Hang Seng futures fell 1.1%
-
Japan’s Topix fell 0.4%
-
Australia’s S&P/ASX 200 fell 1.1%
-
Nasdaq 100 futures fell 0.3%
-
Australia’s S&P/ASX 200 fell 1.1%
Currencies
-
The Bloomberg Dollar Spot Index rose 0.1%
-
The euro fell 0.1% to $1.0655
-
The Japanese yen was little changed at 157.88 per dollar
-
The offshore yuan was little changed at 7.2496 per dollar
-
The Australian dollar was little changed at $0.6475
-
The British pound fell 0.1% to $1.2479
Cryptocurrencies
-
Bitcoin was little changed at $59,925.11
-
Ether rose 0.8% to $2,986.6
Tie up
-
The yield on 10-year government bonds remained little changed at 4.68%
-
Japan’s 10-year yield rose two basis points to 0.890%
-
Australia’s 10-year yield rose eight basis points to 4.50%
raw materials
This story was produced with support from Bloomberg Automation.
– With support from Rob Verdonck and Aya Wagatsuma.
Most read by Bloomberg Businessweek
©2024 Bloomberg LP