Following global sell-off, Wall Street opens lowerInvestors see Fed rate cut next month as a toss-upUS Treasury yields turn higher, dollar edges upUK markets whipped around by budget talk
NEW YORK/LONDON, Nov 14 (Reuters) – Equity indexes worldwide took a beating on Friday as a hawkish tone from Federal Reserve officials doused hopes for a December U.S. interest rate cut, while a still-messy data calendar and worries about an artificial intelligence bubble added to the angst.
Gold prices tumbled and U.S. Treasuries trading was choppy as investors sought safety after blue-chip bourses from Tokyo to Paris fell. In London, fresh concern about Britain’s upcoming budget added to pain across UK markets.
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Citing inflation worries and signs of relative stability in the labor market after two U.S. rate cuts this year, a growing number of Fed policymakers have signaled reticence on further easing.After 43 days of assessing Fed policy without official data due to a record-long U.S. government shutdown, traders were pricing in a 53% chance of a quarter-point December Fed cut. This was up slightly from Thursday but well below the 66.9% probability a week ago, according to CME Group’s FedWatch, opens new tab tool.
Investors have also been jittery about frothy valuations in heavyweight technology stocks against the backdrop of a boom in capital spending for AI.
“The two key supports for the market, the AI trade and the Fed cutting rates, have flipped on the margin where there’s more concerns around AI capex and the market is repricing lower the potential for a Fed rate cut,” said Keith Lerner, chief investment officer at Truist Advisory Services, noting that the selloff follows massive gains in stocks in late October.
“Where we had a couple of weeks ago, an everything rally, now you have an everything decline,” including small-cap stocks, he said. “The market is effectively saying that it’s more concerned about the growth side of the mandate and that the Fed could be making a mistake by waiting.”
Quarterly earnings from AI chip leader Nvidia (NVDA.O), opens new tab and a host of retailers in the week ahead could shed light on the state of the consumer and the AI market, Lerner added.As of 11:07 a.m. EST on Wall Street, the Dow Jones Industrial Average (.DJI), opens new tab fell 373.13 points, or 0.79%, to 47,084.09, the S&P 500 (.SPX), opens new tab dropped 10.26 points, or 0.15%, to 6,727.38 and the Nasdaq Composite (.IXIC), opens new tab rose 9.32 points, or 0.04%, to 22,879.67.MSCI’s gauge of stocks across the globe (.MIWD00000PUS), opens new tab fell 5.34 points, or 0.53%, to 994.82.The pan-European STOXX 600 (.STOXX), opens new tab index fell 1.27%, while Europe’s broad FTSEurofirst 300 index (.FTEU3), opens new tab fell 29.47 points, or 1.27%.MSCI’s broadest gauge of Asian shares outside of Japan (.MIAPJ0000PUS), opens new tab fell 1.5%, while Japan’s Nikkei slid 1.8% (.N225), opens new tab and South Korea (.KS11), opens new tab dropped 3.8%.Chinese shares (.CSI300), opens new tab fell 1.6% on news that October industrial output and retail sales slowed, missing analysts’ estimates and snuffing out a short-lived stock rally.
U.S. Treasury yields turned higher after an initial drop as the Wall Street selloff ushered investors into less-risky assets while they marked time for the reopened government to resume publishing economic indicators.
The benchmark U.S. 10-year note yield rose 0.8 basis points to 4.119% from 4.111% late on Thursday. The 30-year bond yield rose 2.6 basis points to 4.7279%.
The 2-year note yield, which typically moves in step with interest rate expectations for the Fed, rose 0.2 basis points to 3.591% from 3.589% late on Thursday.
In currencies, the Swiss franc pared gains after the global equities selloff sent investors to safe havens. The dollar was down 0.04% at 0.7925 Swiss franc .
Sterling weakened 0.37% to $1.314. British finance minister Rachel Reeves has no plans to raise income tax rates in this month’s budget due to improved fiscal forecasts, a source said.
The dollar index , which measures the greenback against a basket of currencies including the yen and the euro, rose 0.08% to 99.31, with the euro down 0.15% at $1.1613.
The dollar weakened 0.12% to 154.37 Japanese yen .
Oil prices climbed on supply fears after the Black Sea port of Novorossiisk halted oil exports following a Ukrainian drone attack on an oil depot in the major Russian energy hub.
U.S. crude rose 2.5% to $60.16 a barrel and Brent rose to $64.40 per barrel, up 2.21% on the day.
Gold prices dropped 2% on Friday on the broader market sell-off sparked by Fed officials’ hawkish remarks. Spot gold fell 2.06% to $4,084.52 an ounce. U.S. gold futures fell 2.78% to $4,070.30 an ounce.
Reporting by Sinéad Carew in New York, Dhara Ranasinghe and Iain Withers in London; Gregor Stuart Hunter in Singapore, Stella Qiu in Sydney; editing by Mark Heinrich, Louise Heavens and Richard Chang
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