(Bloomberg) — Global stocks fell to a two-year low, while U.S. index futures struggled to find direction, amid concern that aggressive policies by global central banks will trigger a recession and a contraction in earnings.
December contracts on the S&P 500 Index were little changed, while similar futures on the Nasdaq 100 fell 0.3%. Automaker Tesla fell 4% in premarket trading in New York after deliveries in the third quarter fell short of expectations. Oil jumped on signs that the OPEC+ alliance could opt for a production cut. In European trading, shares of Credit Suisse Group AG hit a record low as traders continued to speculate on its future.
World markets remain nervous about the possible impact of monetary tightening on the economy after central banks, including the Federal Reserve, reiterated their determination to contain runaway inflation. US stocks ended the previous quarter with a third straight quarter of losses for the first time since 2009 after the Federal Reserve made a huge third hike last month. Traders now await US jobs data later this week to gauge the path of the economy and Fed policy.
“The Fed is actively trying to tighten financial conditions and weaker equity markets is one way to get there,” said Colin Asher, senior economist at Mizuho Bank Ltd. in London. “Because inflation is so high, central banks will be wary of declaring victory for the time being.”
Inflation fears were further stoked by a renewed rise in oil prices, with West Texas Intermediate crude trading above $83 a barrel on signs the OPEC+ alliance was considering cutting output by more than $1. million barrels a day when it meets this week.
In Europe, stocks fell as the region’s energy crisis threatened to escalate further. The pound and UK government bonds initially rose after Chancellor of the Exchequer Kwasi Kwarteng withdrew a proposal to abolish the 45% top tax rate, before giving up some of those gains.
The other big focus was Switzerland’s Credit Suisse Group AG, which slumped more than 11% as speculation grew about the company’s future and its need for fresh capital. The cost of insuring against exposure to the company rose to a record high as investors shrugged off efforts by Chief Executive Ulrich Koerner to calm the market.
Concerns are also growing that tightening central bank policy risks tipping the global economy into recession and hurting corporate profits. Electric vehicle maker Tesla offered a reminder of those risks, falling after third-quarter deliveries fell short of expectations. Shares of other electric vehicle makers were also pressured by fears that supply chain growls would slow their efforts to ramp up production.
Investors also waited to see how Brazil-linked assets would fare after the country’s presidential election headed to a runoff on Oct. 30. An early indication came from the Lyxor MSCI Brazil ETF in Paris, which jumped to the highest since July 7.
Treasuries rose, paring the rise in yields seen in late trading on Friday. The 10-year rate lost almost 5 basis points.
Investors are now awaiting this week’s US jobs data for more clues about the Fed’s rate hike trajectory. The central banks of Australia and New Zealand, seen as benchmarks for their market peers, are expected to developed countries extend their tightening cycles and raise rates by 25 basis points and 50 basis points, respectively, according to Bloomberg Economics.
The Australian and New Zealand dollars strengthened 0.6% and 0.9% against the dollar, respectively.
Key events this week:
- US Construction Spending, ISM Manufacturing, Light Vehicle Sales, Monday
- Fed’s Raphael Bostic and John Williams speak at events Monday
- Eurozone and EU finance ministers meet on Monday
- Eurozone PPI Tuesday
- US Factory Orders Durable Goods Tuesday
- Fed’s John Williams, Lorie Logan, Loretta Mester and Mary Daly speak at events Tuesday
- Eurozone services PMI, Wednesday
- OPEC+ meeting starts on Wednesday
- Fed’s Raphael Bostic speaks, Wednesday
- Eurozone retail sales, Thursday
- Initial jobless claims in the US, Thursday
- Fed’s Charles Evans, Lisa Cook and Loretta Mester speak at events Thursday
- US Unemployment, Wholesale Inventories, Non-Farm Payrolls, Friday
- BOE Lieutenant Governor Dave Ramsden speaks at an event on Friday
- Fed’s John Williams speaks at an event on Friday
Key Market Moves:
- S&P 500 futures were little changed at 6:15 am New York time.
- Nasdaq 100 futures fell 0.3%
- Dow Jones Industrial Average futures rose 0.3%
- The Stoxx Europe 600 fell 0.8%
- MSCI World Index fell 0.3%
- The Bloomberg Dollar Spot Index rose 0.1%
- The euro fell 0.4% to $0.9764
- The British pound rose 0.2% to $1.1187
- The Japanese yen fell 0.3% to 145.15 per dollar
- Bitcoin fell 0.5% to $19,134.92
- Ether fell 1% to $1,290.22
- The 10-year Treasury bond yield fell five basis points to 3.78%
- Germany’s 10-year yield was little changed at 2.11%
- Britain’s 10-year yield fell two basis points to 4.08%
- West Texas Intermediate crude rose 4.3% to $82.92 a barrel.
- Gold futures little changed