Government bonds climbed while stocks struggled for direction as investors weighed whether central banks would push economies into recession with ongoing inflation-fighting campaigns.
(Bloomberg) — Government bonds climbed while stocks struggled for direction as investors weighed whether central banks would push economies into recession with ongoing inflation-fighting campaigns.
The S&P 500 wavered after the gauge suffered its worst week since March, while yields on 10-year Treasury yields slipped toward 3.7%. Goldman Sachs Group Inc. joined list of brokers turning less bullish on Tesla Inc. shares after the electric-vehicle maker’s blistering rally this year. International Business Machines Corp. will buy software company Apptio for $4.6 billion. PacWest Bancorp sold a $3.5 billion asset-backed loan portfolio to Ares Management Corp., offloading more assets to boost liquidity amid concern about deposit outflows.
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Investors have been growing more anxious that central banks determined to extinguish inflation will keep pushing rates higher and risk breaking fragile economies. Bets that central banks would soon wind down aggressive rate hikes and even pivot to rate cuts have been sharply rebuffed by policymakers from the US to the Norway to the UK. Federal Reserve Chair Jerome Powell last week warned the US may need one or two more rate increases in 2023.
“As central banks remain hawkish on the back of persistent inflationary pressure, the likelihood of a soft landing is falling,” said Andrew McCaffery, global chief investment officer at Fidelity International, in a note published Monday. “Investors should be wary of taking on too much risk at this late stage of the cycle.”
Read: S&P 500 Is a Gift That Might Just Keep Giving: MLIV 2023 Update
Meanwhile, markets have absorbed the biggest threat to President Vladimir Putin’s almost quarter-century grip on power. Russian officials met key partners, including in China, a day after Yevgeny Prigozhin halted the advance of his Wagner mercenary group toward Moscow.
Oil turned higher, with traders alert to the risk that any prolonged turmoil in Russia could reverberate through global oil markets. The country’s war in Ukraine has already upended trade flows, with major consumers in Asia including China boosting imports of Russian energy.
“This weekend’s happenings make us realize is that it’s important to have geopolitical hedges in the portfolio, so we’ve always had commodities fulfill that role,” Trevor Greetham, head of multi asset at Royal London Asset Management Ltd, said in an interview with Bloomberg Television. “When there is suddenly a big military event, commodity prices can surge and you’ve got that protection.”
Gas traders braced for more market turbulence, with European gas already seeing the highest volatility since the invasion of Ukraine.
Key events this week:
- US new home sales, durable goods, Conference Board consumer confidence, Tuesday.
- US wholesale inventories, goods trade balance, Wednesday.
- Fed to unveil results of annual banking industry stress test, Wednesday.
- Policy panel with ECB’s Christine Lagarde, Fed Chair Jerome Powell, BOJ’s Kazuo Ueda and BOE’s Andrew Bailey speak, Wednesday.
- Eurozone economic confidence, consumer confidence, Thursday.
- US GDP, initial jobless claims, Thursday.
- Atlanta Fed President Rafael Bostic speaks, Thursday.
- China manufacturing PMI, non-manufacturing PMI, balance of payments, Friday.
- US personal income and spending, University of Michigan consumer sentiment, Friday.
Some of the main moves in markets:
Stocks
- The S&P 500 was little changed as of 9:30 a.m. New York time
- The Nasdaq 100 fell 0.1%
- The Dow Jones Industrial Average was little changed
- The Stoxx Europe 600 fell 0.1%
- The MSCI World index was little changed
Currencies
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro rose 0.2% to $1.0914
- The British pound was little changed at $1.2707
- The Japanese yen rose 0.3% to 143.34 per dollar
Cryptocurrencies
- Bitcoin rose 0.1% to $30,419.48
- Ether fell 0.4% to $1,886.37
Bonds
- The yield on 10-year Treasuries declined two basis points to 3.71%
- Germany’s 10-year yield declined three basis points to 2.33%
- Britain’s 10-year yield declined two basis points to 4.30%
Commodities
- West Texas Intermediate crude fell 0.4% to $68.88 a barrel
- Gold futures rose 0.4% to $1,937.60 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Allegra Catelli, Ksenia Galouchko, Jan-Patrick Barnert, Vildana Hajric, Carly Wanna and Emily Graffeo.
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