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Focus remains on bond yields and earnings

Uncertainty ahead of the upcoming elections and further rising yields in the bond market weighed heavily on the US stock markets on Wednesday. In particular, the interest-sensitive technology stocks came under pressure. Meanwhile, US economic activity remains stable and the labour market robust, according to the Federal Reserve’s Beige Book. 

Date
Auteur
Alessandro Fezzi, LGT Research Content & Publications
Temps de lecture
5 minutes

USA Interest Rates
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On Wall Street, further rising yields in the bond market due to dwindling expectations of interest rate cuts in the US and the approaching elections led to losses in the middle of the week. In particular, interest-sensitive technology stocks came under pressure. The Dow Jones Industrial fell by almost 1% to close at 42,514.95 points. The market-wide S&P 500 lost 0.9% and closed at 5797.42 points. On the technology exchange Nasdaq, the indices fell by around 1.5%. On the bond market, the yield on ten-year US government bonds rose to 4.24%. Among the technology stocks, the heavily weighted shares of chipmaker Nvidia stopped their recent record run and fell by almost 3%. Apple's shares lost more than 2%. Some market participants are optimistic that the AI platform Apple Intelligence could soon drastically increase iPhone deliveries, said expert Ming-Chi Kuo of TF International Securities. However, Apple's recent order cuts suggest that this optimistic expectation may not be met in the short term.

Fed Beige Book: economic activity sees little change, labour market strength continues

The Federal Reserve's Beige Book, released on Wednesday, indicated that US economic activity remained largely unchanged since early September, with only two districts reporting modest growth. Despite this stability, the labour market continued to show strength, with most districts experiencing slight or modest employment gains and low worker turnover. Consumer spending was mixed, with a shift towards less expensive alternatives, while inflation moderated as firms struggled to pass on higher input costs, compressing profit margins.

Asia stocks fall as rising yields dent tech - South Korea avoids technical recession 

Asia-Pacific markets mostly fell Thursday after US stocks dropped overnight, with the Dow Jones Industrial Average posting its worst day in more than a month. Japan’s Nikkei 225 reversed losses to gain 0.1%, but the Topix lost 0.2%. Australia’s S&P/ASX 200 climbed 0.3%, also reversing losses. Hong Kong’s Hang Seng index was 0.6% down, while mainland China’s CSI 300 saw a larger loss of 0.9%. South Korea narrowly avoided a technical recession as its GDP grew by 0.1% in the third quarter, following a 0.2% contraction in the second quarter, according to data released on Thursday. However, this growth fell short of forecasts of 0.5%. Year-on-year, the economy expanded by 1.5%, also missing the expected 2% growth. Following the GDP announcement, South Korea's Kospi index fell 0.15%, while the Kosdaq dropped 0.65%.

ECB’s Lagarde cautions on further easing

European Central Bank President Christine Lagarde emphasised the need for caution in future interest rate reductions, highlighting the importance of incoming data on Wednesday. Traders have intensified expectations for larger cuts following warnings from policymakers about falling short of the 2% inflation target. The ECB recently reduced its key rate by 25 basis points to 3.25%, with discussions ongoing about potential further cuts, including a significant 50 basis point reduction at the next meeting in December.

Bank of Canada cuts rates by 50 basis points

The Bank of Canada reduced its benchmark interest rate by 50 basis points to 3.75% on Wednesday, marking its first significant cut in over four years. The central bank, which has lowered rates four times since June, cited a return to low inflation, with September's rate falling to 1.6%. Governor Tiff Macklem indicated that this move aims to boost demand and economic growth, which have been sluggish despite previous cuts. Economists predict the possibility of another substantial rate cut in December.

Gold prices climb amid political, rate concerns

Gold rose 0.3% to USD 2724.70 per ounce in Asian trade on Thursday, recovering from a decline earlier this week. The yellow metal remains supported by safe haven demand due to uncertainties surrounding the US presidential election and Middle Eastern tensions. Despite midweek losses, gold is still trading higher for the week, with futures also up 0.3% to USD 2737.15 per ounce. Other precious metals, including platinum and silver, also posted gains on Thursday.

Corporate and economic calendar

Corporate news in focus: Quarterly figures from Anglo American, Beiersdorf, Danone, Honeywell, S&P Global, Symrise, Unilever, Union Pacific, and United Parcel Service.

Economic data in focus: German Purchasing Managers' Index (09:30), euro-area Purchasing Managers' Index (10:00), UK Purchasing Managers' Index (10:30), Bundesbank monthly report (12:00), US weekly initial jobless claims (14:30), US S&P Global Manufacturing PMI (15:45).
 

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.

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