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BLOOMBERG
A selloff in bonds paused and the dollar steadied, while shares in Europe retreated for a fourth day. The Stoxx 600 benchmark slipped 0.3% on Tuesday and US equity futures declined, putting the MSCI All Country World Index, one of the broadest measures of global equities, on track to match its longest losing streak in the past decade.
Yields on Treasuries and European government debt stabilised after hitting decade highs as investors price in a protracted period of high interest rates.
The Bloomberg dollar index was little changed after closing at its strongest level since December. Oil retreated as the impact of a rising dollar sapped demand.
“With weak but positive growth holding recession at bay on both sides of the Atlantic, central banks will not be able to ease financial conditions between now and the end of the year,” said Nadège Dufossé, global head of multi asset funds at Candriam.
“With positive surprises now largely priced in, there seems to be little room for further appreciation in equity markets, suggesting a degree of caution on risky assets.”
Jamie Dimon, chairman and chief executive of JPMorgan Chase & Co, floated the idea US interest rates could reach 7%, a worst-case scenario that could catch consumers and businesses off-guard. A warning that a US government shutdown would reflect poorly on America’s credit rating from Moody’s Investors Service kept traders focused on an end-of-month deadline. Crude prices edged lower on Tuesday, falling for a second session. Traders are increasingly concerned that rising oil prices risk fanning inflation, which will make it difficult for policymakers to reduce rates anytime soon.
Hedge funds had boosted exposure to oil on bets tightening supplies will stoke demand. Federal Reserve Bank of Minneapolis President Neel Kashkari said he expects US interest rates to increase again this year given the robust economy. Those sentiments echoed comments from Boston Fed President Susan Collins, who said further tightening “is certainly not off the table,” while Fed Governor Michelle Bowman signalled that more than one increase will probably be required.
In Asia, property concerns continued to weigh on Chinese markets. Hong Kong’s Hang Seng Index fell to levels last seen in November and mainland benchmarks inched lower, reflecting a dismal mood across the region.
A gauge of Chinese property developers slipped further after slumping by the most in nine months amid fresh signs of turmoil for the sector.