Traders are almost fully pricing Fed cuts for next three meetings
by Andre Janse van Vuuren and Julien Ponthus
An early advance in S&P 500 futures fizzled after Nvidia Corp. was hit by a Chinese antitrust ruling, dampening optimism ahead of a widely expected Federal Reserve interest-rate cut this week.
Contracts for the US benchmark were little changed after rising as much as 0.2%. Nvidia slipped 2.7% in premarket trading after Chinese regulators said in a preliminary ruling that the chipmaker had violated anti-monopoly laws. European stocks gained 0.3%, led by luxury shares. The MSCI Asia Pacific index briefly topped its February 2021 peak.
French bonds underperformed in Europe after Fitch Ratings cut the nation’s rating in the wake of political turmoil. The pound led major currencies higher against the dollar. Treasuries were little changed, with the 10-year yield at 4.06%.
The key question this week is whether the Fed will push back against market wagers on a string of cuts extending into next year when officials gather on Wednesday. Traders are almost fully pricing reductions at each of the next three meetings, betting the Fed will lean toward supporting a softening job market even as inflation remains above target.
The Nvidia announcement landed as US and Chinese officials entered a second day of trade talks in Madrid. Still, some traders view Monday’s mild risk-off reaction as just a blip on the path for stocks to extend their rallies.
“At this moment of the cycle, bad news just doesn’t stick,” said David Kruk, head of trading at La Financiere de l’Echiquier. “We’re about to enter a cycle of rate cuts with strong EPS growth, that’s a really great cocktail.”
The Fed won’t be the only major central bank in focus. Policy decisions from the Bank of Canada on Wednesday, the Bank of England on Thursday, and the Bank of Japan at week’s end will round out a packed calendar for half of the world’s 10 most-traded currencies.
Options traders aren’t betting on volatility to resurface this week, even with Friday’s $5 trillion triple-witching expiration looming as well. Instead, the spotlight will also rest on upcoming employment data for hints on how fast and deep the Fed will have to cut.
Options markets are pricing in a 0.78% move for the US nonfarm payrolls report Oct. 3 and 0.72% for Wednesday’s Fed rate decision, according to Citigroup Inc.
“The week ahead for risk could be a bumpy ride, especially if the Fed deliver a message that lands hawkish,” said Michael Brown, research strategist at Pepperstone Group Ltd. “I still see the path of least resistance as leading higher, with economic and earnings growth solid, calmer tones prevailing on trade, and a looser monetary stance helping to juice things along.”
Corporate News:
- China ruled that Nvidia Corp. violated anti-monopoly laws with a high-profile 2020 deal, ratcheting up the pressure on Washington during sensitive trade negotiations.
- Orsted A/S plans to sell new shares at a 67% discount as the offshore wind developer works to rebuild investor confidence after a bet on the US market went wrong.
- Banco Sabadell SA’s chairman called on rival BBVA SA to significantly increase its offer if it wants it to be considered, less than a week after rejecting a $18 billion takeover bid the board said was too low.
- Swiss lawmakers will on Monday vote on a second attempt to delay new rules for bank capital quality which are set to lift UBS Group AG’s capital requirements by some $3 billion.
- ANZ Group Holdings Ltd. will pay a A$240 million ($160 million) fine after admitting misconduct across its institutional and retail divisions, the culmination of a months-long investigation by the corporate watchdog into one of the country’s biggest lenders.
- Singapore’s GIC Pte is in talks to sell its stake in US landlord Yes! Communities Inc. to Brookfield Asset Management in what could be one of the biggest exits for the sovereign wealth fund in years, according to a person with knowledge of the matter.
This is a modal window.
The media could not be loaded, either because the server or network failed or because the format is not supported.
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 5:51 a.m. New York time
- Nasdaq 100 futures were little changed
- Futures on the Dow Jones Industrial Average rose 0.2%
- The Stoxx Europe 600 rose 0.3%
- The MSCI World Index was little changed
Currencies
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro rose 0.1% to $1.1746
- The British pound rose 0.3% to $1.3591
- The Japanese yen rose 0.2% to 147.40 per dollar
Cryptocurrencies
- Bitcoin fell 0.8% to $114,911.01
- Ether fell 2.1% to $4,522.91
Bonds
- The yield on 10-year Treasuries was little changed at 4.06%
- Germany’s 10-year yield declined two basis points to 2.69%
- Britain’s 10-year yield declined three basis points to 4.65%
Commodities
- West Texas Intermediate crude rose 0.4% to $62.97 a barrel
- Spot gold fell 0.1% to $3,638.35 an ounce
This story was produced with the assistance of Bloomberg Automation.
Copyright Bloomberg News
