US stock futures were mixed on Wednesday, as Treasury yields hovered above the critical 4% threshold, causing investor unease over an impending antitrust inquiry into Google’s parent company, Alphabet Inc.
Futures for the S&P 500 and Nasdaq 100 each dipped approximately 0.2%. Alphabet’s shares experienced a 1% decline in premarket trading after news broke that the US Justice Department might petition a federal judge to mandate the sale of parts of Google’s business. This potential action could represent the most significant effort to regulate a major tech entity since a past attempt to dismantle Microsoft Corp. nearly twenty years ago.
While concerns regarding increased scrutiny on Big Tech have lingered, the possibility of an actual breakup is dampening market sentiment, according to Kevin Thozet, an investment committee member at French asset management firm Carmignac. Nevertheless, he suggested that the long-term impact may be less severe, as dissecting Google’s business segments could actually benefit investor returns.
In the premarket session, Boeing Co. saw a 1.5% drop, following the collapse of negotiations aimed at resolving a month-long strike involving its workers. Across the Atlantic, the Stoxx 600 index in Europe rose 0.2%, largely buoyed by speculation that the Chinese government plans to announce additional economic stimulus measures during an upcoming news briefing this weekend.
As the day progresses, investors are focusing on the minutes from the Federal Reserve’s last meeting, which will be released later today, along with crucial US inflation data scheduled for tomorrow. The yield on ten-year Treasury bonds remained firmly above the 4% mark, nearing its highest level since the end of July, a spike prompted by recently diminished expectations for interest rate cuts. Yields have surged more than 20 basis points this month alone.
Thozet is among those predicting that the Federal Reserve will slow the pace of rate cuts following last month’s substantial 50 basis-point decrease. He remarked that “the probability of a recession is decreasing, while the likelihood of a ‘no landing’ scenario is gaining traction.”
Internationally, central banks are adopting a more dovish stance. According to a recent statement from Francois Villeroy de Galhau, a member of the European Central Bank’s governing council, a rate cut is highly likely in the upcoming week. Similarly, New Zealand’s central bank recently cut rates by half a percentage point, accelerating its easing agenda, while India’s central bank has opened the door for its first rate cut in four years.
During morning trading, the Bloomberg dollar index climbed for the eighth consecutive day, marking its longest bull run since 2022 as traders recalibrate their expectations regarding US monetary easing. In contrast, the New Zealand dollar fell to its lowest level in seven weeks.
In oil markets, Brent crude futures dipped below $77 per barrel amid ongoing diplomatic talks between US President Joe Biden and Israeli Prime Minister Benjamin Netanyahu. The discussions are part of broader efforts to influence Israel’s responses to recent military actions involving Iran.
Investor sentiment remains on edge due to ongoing geopolitical tensions and potential Chinese economic policies, though the strong performance of the US economy continues to lend support to equities. Emmanuel Cau, who leads European equity strategy at Barclays, emphasized a focus on growth prospects and inflation trends, expressing optimism about what he calls the “soft landing” narrative.
Key events on the financial calendar this week include:
- Release of the Federal Reserve meeting minutes today
- Speeches by various Fed officials also scheduled for today
- US Consumer Price Index (CPI) and initial jobless claims reports due tomorrow
- Earnings season kicks off with JPMorgan and Wells Fargo reporting on Friday
- Further economic indicators, including the Producer Price Index (PPI) and University of Michigan consumer sentiment, are expected on Friday
Here’s a brief summary of notable market movements:
U.S. Stocks
– The Stoxx Europe 600 climbed 0.2% as of noon in London.
– S&P 500 futures showed little change.
– Futures for the Nasdaq 100 remained largely steady.
– Contracts on the Dow Jones Industrial Average remained stable.
– The MSCI Asia Pacific Index slipped 0.3%, while the MSCI Emerging Markets Index dropped by 0.5%.
Currency Trends
– The Bloomberg Dollar Spot Index appreciated by 0.1%.
– The euro edged down to $1.0966.
– The Japanese yen fell 0.3% to 148.58 per dollar.
– Other major currencies largely held steady.
Cryptocurrency Market
– Bitcoin prices decreased by 0.4%, settling at $62,111.6.
– Ether saw a minor drop of 0.3%, priced at $2,434.37.
Bond Yields
– The yield on ten-year Treasuries rose by one basis point to 4.02%.
– In Europe, rates fluctuated slightly, with Germany’s yield at 2.23% and the UK at 4.17%.
Commodity Prices
– Brent crude slipped 0.7% to $76.64 a barrel.
– Spot gold remained relatively unchanged.
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