(Bloomberg) — A global retreat from risk assets continued on Wednesday after fears about the US economy and a move away from big tech triggered a sharp decline in US stocks.
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Europe’s Stoxx 600 index dropped 1.1% in a volatile session, with technology stocks such as ASML Holding NV taking the biggest losses. Futures contracts for the S&P 500 pulled back 0.4% after the gauge suffered its worst day since the Aug. 5 market meltdown. Asian chipmakers tumbled, in step with Tuesday’s slump in Nvidia Corp., pulling a regional equity benchmark down more than 2%.
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Traders are bracing for further big swings as they await data for clues on whether the US economy is on the brink of a recession and how the Federal Reserve might approach monetary policy.
A US job openings report due on Wednesday is expected to show further cooling in the labor market, following yesterday’s data showing a fifth consecutive month of contraction in manufacturing activity. As the market’s focus shifts from inflation to concerns over economic growth, negative macro data is increasingly translating into pain for stocks and other risk assets.
For now, traders are anticipating the Federal Reserve will start easing policy in September and reduce rates by more than two full percentage points over the next 12 months — the steepest drop outside of a downturn since the 1980s. Payrolls data due on Friday is considered crucial in shaping the magnitude of the initial rate cut.
“A disappointing number will spook markets a little bit,” said Neil Birrell, chief investment officer at Premier Miton Investors. “There’s just a lack of certainty around. I’m not brave enough to say buy the dip on Wednesday when the numbers are out on Friday.”
Treasuries gained for a second day as traders added to bets on a jumbo cut from the Fed, with the yield on two-year notes down to 3.84%. The chance of a half-point reduction later this month has increased to about 30% from 20% last week, according to swaps.
In currencies, a dollar gauge snapped a five-day winning streak while the yen extended gains.
Oil sank even further after crashing to the lowest level this year. Brent futures fell to around $73 a barrel on growing concerns that fragile demand and restored supplies from OPEC+ will create a new glut. West Texas Intermediate dropped under $70 for the first time since early January.
Key events this week:
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Eurozone HCOB services PMI, PPI, Wednesday
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Canada rate decision, Wednesday
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US job openings, factory orders, Beige Book, Wednesday
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Eurozone retail sales, Thursday
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US initial jobless claims, ADP employment, ISM services index, Thursday
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Eurozone GDP, Friday
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US nonfarm payrolls, Friday
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Fed’s John Williams speaks, Friday
Some of the main moves in markets:
Stocks
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The Stoxx Europe 600 fell 1.1% as of 9:53 a.m. London time
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S&P 500 futures fell 0.4%
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Nasdaq 100 futures fell 0.6%
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Futures on the Dow Jones Industrial Average fell 0.2%
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The MSCI Asia Pacific Index fell 2.5%
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The MSCI Emerging Markets Index fell 1.6%
Currencies
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The Bloomberg Dollar Spot Index fell 0.1%
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The euro was little changed at $1.1054
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The Japanese yen rose 0.3% to 145.09 per dollar
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The offshore yuan was little changed at 7.1177 per dollar
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The British pound was little changed at $1.3121
Cryptocurrencies
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Bitcoin fell 2.6% to $56,716.51
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Ether fell 2.5% to $2,401.48
Bonds
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The yield on 10-year Treasuries declined two basis points to 3.81%
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Germany’s 10-year yield declined three basis points to 2.24%
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Britain’s 10-year yield declined three basis points to 3.96%
Commodities
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Brent crude fell 0.7% to $73.26 a barrel
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Spot gold fell 0.7% to $2,475.43 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Aline Oyamada.
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