Stocks lower ahead of Fed Chair Powell's speech

Stocks edged lower as investors awaited clues on the path of interest rates from a raft of central bank officials including Federal Reserve Chair Jerome Powell. 

Europe’s Stoxx 600 fell 0.1% and US equity futures traded little changed. The 10-year Treasury yields climbed by three basis points to 4.6%. West Texas Intermediate held at $77, near a three-year low. Marks & Spencer Group Plc soared 10% after profit surged and it reinstated a dividend.

Traders are trying to gauge how hard global central bankers will push back against the drop in government bond yields, which potentially hinders efforts to keep a handle on inflation. Up today are U.S. policymakers including Powell and New York Fed President John Williams, as well as Bank of England Governor Andrew Bailey and officials from the European Central Bank. 

“Fed speakers will attempt to jawbone and cool market expectations for rate cuts,” said Todd Schubert, Dubai-based senior fixed-income strategist at Bank of Singapore. “The market is underestimating the Fed’s resolve in bringing down inflation to 2% and we would not expect a sustained rally in risk assets until there is clearer evidence of a pronounced downward trajectory in inflation.”

Fed Bank of Minneapolis President Neel Kashkari said policymakers have yet to win the fight against inflation and they will consider more tightening if needed. His Chicago counterpart Austan Goolsbee said officials don’t want to “pre-commit” decisions on rates.

At the same time, if the Fed pivots its monetary policy and allows the economy to avoid a recession, global equities could be poised for a double-digit rally in 2024, according to HSBC Holdings Plc strategists.

Oil held near a three-month low as a forecast drop in US gasoline consumption added to a growing array of indicators suggesting the demand outlook is worsening. China, the world’s biggest importer, is also seeing dimming oil demand as winter approaches. 

“A drop in oil prices is due to concerns about a stagnant demand against a backdrop of uncertainty about the global economy,” said Rina Oshimo, senior strategist at Okasan Securities. “There’s a noticeable decline mainly in economically sensitive stocks such as trading companies, steel, and marine transportation.”

In Asia, Japan’s Topix underperformed its peers after Japanese bank shares dropped sharply, as falling bond yields tempered expectations for higher profitability and investors took profit from one of the top-performing sectors this year.

Beaten-down Chinese equities may have an opportunity for gains with the possible upcoming meeting between leaders of the US and China next week, according to the chief investment officer of Templeton Global Equity Investments.

Key events this week:

• Eurozone retail sales, Wednesday
• Germany CPI, Wednesday
• BOE Governor Andrew Bailey speaks, Wednesday
• New York Fed President John Williams speaks, Wednesday
• Bank of Japan issues October summary of opinions, Thursday
• BOE chief economist Huw Pill speaks on the economy, Thursday
• US initial jobless claims, Thursday
• Fed Chair Jerome Powell participates in panel on monetary policy challenges, Thursday
• Atlanta Fed President Raphael Bostic and his Richmond counterpart Tom Barkin speak, Thursday
• ECB President Christine Lagarde participates in fireside chat, Friday
• US University of Michigan consumer sentiment, Friday
• Dallas Fed President Lorie Logan and her Atlanta counterpart Raphael Bostic speak, Friday

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 fell 0.1% as of 9:06 a.m. London time
• S&P 500 futures were little changed
• Nasdaq 100 futures fell 0.1%
• Futures on the Dow Jones Industrial Average were little changed
• The MSCI Asia Pacific Index fell 0.6%
• The MSCI Emerging Markets Index fell 0.3%

Currencies

• The Bloomberg Dollar Spot Index rose 0.2%
• The euro fell 0.3% to $1.0672
• The Japanese yen fell 0.2% to 150.73 per dollar
• The offshore yuan was little changed at 7.2854 per dollar
• The British pound fell 0.3% to $1.2257

Cryptocurrencies

• Bitcoin fell 0.5% to $35,339.48
• Ether fell 0.7% to $1,880.24

Bonds

• The yield on 10-year Treasuries advanced three basis points to 4.59%
• Germany’s 10-year yield declined two basis points to 2.64%
• Britain’s 10-year yield declined two basis points to 4.25%

Commodities

• Brent crude rose 0.2% to $81.79 a barrel
• Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.