Global Stocks Dip With Central Banks in Focus

Global stocks slipped as investors moderated their expectations about how much central banks are likely to cut interest rates in the coming days.

In the U.S., futures for the S&P 500 dropped 0.2%. The contracts don’t necessarily predict moves after the market opens.

European stocks ticked down, with the Stoxx Europe 600 falling 0.4% in morning trade, with losses across most regional indexes. The German DAX fell 0.1% and France’s CAC 40 fell 0.4%.

Asian markets were muted Tuesday, with the Shanghai Composite down 0.1% and Japan’s Nikkei 225 up 0.4%. Hong Kong’s Hang Seng was flat.

Analysts expect the European Central Bank will cut 10 basis points from benchmark interest rates when it meets on Thursday. The Federal Reserve will meet next week, and is broadly expected to lower rates by 25 basis points.

As of mid-September, the market had been pricing in a 20-basis-points cut, as well as renewed quantitative easing, said Gareth Isaac, chief investment officer for EMEA fixed income at Invesco. But the eurozone’s economy isn’t in too bad a shape, he said, which may temper the amount or timing of QE that some on the ECB board will tolerate.

Unlike in the U.S., where investors seem fairly confident that an interest-rate cut is coming, European investors remain skeptical of how aggressive the ECB will be, said David Madden, a market analyst with CMC Markets.

But without reassurance of the ECB’s intentions, “it’s a bit of a wait and see,” he said. “Traders are just a bit hesitant.”

Figures released Tuesday showed the U.K. labor market was holding steady, reducing the likelihood for interest-rate cuts from the Bank of England unless the country leaves the European Union without a deal, said Ruth Gregory, a senior U.K. economist at Capital Economics. Wage growth rose to 4.0% for the first time since June 2008.

The yield on the 10-year Treasury edged down slightly to 1.627% Tuesday, from 1.632% Monday. In European bonds, the yield on the 10-year German bund rose to minus 0.578% from minus 0.585% Tuesday. Bond yields and prices move in opposite directions.

In commodities, Brent crude oil was up 0.4% at $62.86 a barrel. Oil investors were eyeing a Thursday meeting of the Organization of the Petroleum Exporting Countries and its allies for indications of their agreed production goals. Additionally, the chief executive of Saudi Arabia’s state-run oil company on Tuesday said it is ready for an initial public offering whenever shareholders decide.

Traditional haven metal gold fell 0.6%.

Later today, the U.S. Labor Department will release its July report on job openings and labor turnover. In June, there were 7.35 million unfilled jobs. Should that number remain high, it would indicate that the recent hiring slowdown is more a result of worker scarcity than companies being cautious.
Source: Dow Jones