Market Watch: Stocks Downturn as Central Banks Prepare for Rate Decisions; Oil Prices Surge

Amidst a flurry of anticipated policy decisions from the US, UK, and Japan central banks, global equities are displaying a more cautious stance, with traders opting for a prudent approach. This week holds significant weight, as it brings forth pivotal decisions from major central banks. Notably, Societe Generale SA, a Paris-based lender, faced a considerable setback, with its strategic plan falling short of investor expectations. This led to a more than 7% decline, making it a substantial drag on Europe’s Stoxx 600 Index. The technology sector mirrored this sentiment, experiencing significant declines in Nvidia Corp. and Meta Platforms Inc., both registering drops of over 3.5% in the US on Friday. Meanwhile, futures for US equities maintained a steady position.

Asian Markets Witness Broad-Based Declines, with Oil Prices on the Rise

Across Asian markets, indices exhibited widespread declines, with Hong Kong's Hang Seng Index experiencing a dip of up to 1.6%. Similarly, China's CSI 300 Index briefly touched its lowest point for the year before rebounding. Traders found solace in data released last week, which indicated signs of stabilization.

The oil market is currently bordering on “panic and paranoia” for any bearish outlook, according to Vandana Hari, founder of Vanda Insights. Speaking on Bloomberg Television, she emphasized that the market is largely swayed by factors confirming a bullish bias, especially in light of the hedge funds' wagers.

US Treasury Yields and the Dollar's Performance

US Treasury yields registered a modest uptick, with the two-year rate, often indicative of policy shifts, surpassing the 5% threshold. Simultaneously, the greenback experienced a weakening trend against most G-10 peers.

US Economy's Resilience and Projections for Interest Rates

In the US, inflation expectations dropped to their lowest levels in over two years, signaling heightened consumer optimism about the economic outlook. An unexpected expansion was observed in a measure of New York state factory activity, pointing to an increase in new orders.

Economists surveyed by Bloomberg News are of the opinion that the robust US economy will prompt the Federal Reserve to consider one more interest-rate hike this year. Additionally, the peak level of interest rates is expected to be sustained for a more extended period into the next year compared to previous projections.

Client Sentiment and Outlook for the US Economy

On a separate note, a majority of Morgan Stanley clients anticipate a US recession in 2024. They also foresee a more challenging outlook for stocks in comparison to the current year. Notably, higher interest rates have sparked increased interest in bonds, particularly in investment-grade credit.

Chevron's Production Resumption and Impact on Natural Gas Prices

Meanwhile, Chevron Corp. resumed full production at a liquefied natural gas export facility in Australia following a recent fault. This development comes even as union members continue strikes at the site, somewhat alleviating pressure on natural gas prices.

Key Events and Economic Indicators to Watch Out For

The week ahead holds several key events and economic indicators to monitor:

• Apple is set to release the latest operating system for the iPhone, iOS 17, on Monday.

• The Reserve Bank of Australia will issue the minutes of September’s policy meeting on Tuesday.

• The OECD will release an interim economic outlook report on the global economy on Tuesday.

• Eurozone CPI data is scheduled for release on Tuesday.

• The Bloomberg Future of Finance Conference will be held in Frankfurt, featuring speakers including German Finance Minister Christian Lindner on Tuesday.

• ECB Executive Board member Frank Elderson is scheduled to speak on Tuesday.

• Bank of Canada Deputy Governor Sharon Kozicki will address on Tuesday.

• Japan trade data will be released on Wednesday.

• China's loan prime rates will be announced on Wednesday.

• UK CPI figures will be published on Wednesday.

• The Federal Reserve policy meeting will be followed by Chair Jerome Powell’s news conference on Wednesday.

• The Bank of Canada will issue a summary of September’s policy meeting on Wednesday.

• The Bank of England will hold its policy meeting on Thursday.

• ECB Executive Board member Isabel Schnabel will chair a panel on Thursday.

• ECB chief economist Philip Lane is scheduled to speak on Thursday.

• Japan will release CPI data and PMI figures on Friday.

• The Bank of Japan will announce its rate decision on Friday.

• Australia PMI data is set to be released on Friday.

• China’s Bund Summit will take place on Friday.

• Eurozone S&P Global Eurozone PMIs will be published on Friday.

• UK S&P Global / CIPS UK Manufacturing PMI data will be released on Friday.

• ECB Vice President Luis de Guindos is scheduled to speak on Friday.

• US S&P Global Manufacturing PMI data will be announced on Friday.

Market Movements and Indices Performance

• The Stoxx Europe 600 fell by 0.4% as of 8:14 a.m. London time.

• S&P 500 futures showed little change.

• Nasdaq 100 futures exhibited minimal movement.

• Futures for the Dow Jones Industrial Average were little changed.

• The MSCI Asia Pacific Index fell by 0.5%.

• The MSCI Emerging Markets Index experienced a 0.7% drop.

Currency Market:

• The Bloomberg Dollar Spot Index showed minimal change.

• The euro remained relatively stable at $1.0659.

• The Japanese yen saw a 0.1% increase, reaching 147.66 per dollar.

• The offshore yuan fell 0.2% to 7.2933 per dollar.

• The British pound was little changed at $1.2387.

Cryptocurrency Market:

• Bitcoin recorded an increase of 0.8%, reaching $26,663.4.

• Ether saw a 0.9% rise, reaching $1,631.62.

Bond Market:

• The yield on 10-year Treasuries increased by one basis point to 4.35%.

• Germany’s 10-year yield advanced two basis points to 2.69%.

• Britain’s 10-year yield advanced three basis points to 4.39%.

Commodity Market:

• Brent crude oil prices saw a 0.7% increase, reaching $94.62 per barrel.

• Spot gold prices recorded a 0.3% rise, reaching $1,928.85 per ounce.

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