MSCI’s global equities gauge fell yesterday with Wall Street weighing and US Treasury yields falling on economic concerns after manufacturing data and ahead of the jobs report, which is expected to impact how fast the Federal Reserve cuts rates.
Oil prices sank on expectations of an imminent deal to resolve a dispute that has halted Libyan production and exports following a UN brokered meeting between rival factions, pushing Brent prices to their lowest in 2024,
Wall Street indexes extended losses after data showed that US manufacturing edged up last month from an eight-month low in July amid some improvement in employment, but the overall trend continued to point to subdued factory activity.
Investors are also waiting for Friday’s August US jobs report, which is expected to help determine whether the Fed cuts rates by 25 basis points or 50 on September 18.
“Investors are wondering are we heading into a recession quicker than was thought or does the Fed have this under control with rate cuts going forward,” said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut, adding that the manufacturing data “certainly didn’t help.”
Adding to volatility was the fact that many investors were back from summer vacations and a long weekend as US markets were closed for the Labor Day holiday on Monday.
“People haven’t been able to express their nervousness because they haven’t been in the office. Now they’re back at work and it all comes to a head on the first day of trading,” said Pavlik.
On Wall Street, at 11:06 a.m. the Dow Jones Industrial Average fell 440.93 points, or 1.06 per cent, to 41,122.35, the S&P 500 lost 80.30 points, or 1.42pc, to 5,568.10 and the Nasdaq Composite lost 399.30 points, or 2.25pc, to 17,315.10.
MSCI’s gauge of stocks across the globe fell 9.80 points, or 1.18pc, to 823.21 while Europe’s STOXX 600 index fell 1pc.
In currencies, the dollar hovered near a two-week high against the euro as traders braced for a data-heavy week, including Friday’s US payrolls report.
Economists are looking for a 160,000 increase in US non-farm payrolls (NFP) and a dip in the unemployment rate to 4.2pc.
July’s jobs data showed the unemployment rate jumped to a near three-year high of 4.3pc amid a significant slowdown in hiring. The data, along with a wind-down of yen carry trades, had prompted a global markets selloff and investors have doubled the rate cuts they expect from the US Federal Reserve this year.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, gained 0.16pc at 101.82.
The euro was down 0.3pc at $1.1038 but against the Japanese yen, the dollar weakened 0.84pc to 145.67.
The yen strengthened on media reports that cited the Bank of Japan governor reiterating in a document submitted to a government panel yesterday that the bank would keep raising interest rates if the economy and inflation performed as currently expected.
US Treasury yields were mostly lower, with the benchmark 10-year note on track to snap a five-session streak of gains, after the soft manufacturing sector data.
The yield on benchmark US 10-year notes fell 7 basis points to 3.841pc, from 3.911pc late on Friday while the 30-year bond yield fell 6.6 basis points to 4.1301pc.
The 2-year note yield, which typically moves in step with interest rate expectations, fell 5.8 basis points to 3.8693pc, from 3.927pc late on Friday.
US crude lost 4.13pc to $70.51 a barrel and Brent fell to $73.95 per barrel, down 4.59pc on the day.
Gold prices eased to their lowest in more than a week pressured by a firm dollar, while investors awaited economic data that could determine the size of US rate cuts.
Spot gold lost 0.85pc to $2,478.17 an ounce. US gold futures fell 0.7pc to $2,476.30 an ounce.
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