Stocks and yields slip with Ukraine, fed in view: Markets Wrap

by Andre Janse van Vuuren 

US stock futures slipped and US Treasuries rose to kick off a week that will be shaped by the extent of progress toward a peace deal for Ukraine and signals from the Federal Reserve on interest rates. 

Contracts for the S&P 500 fell 0.2% after closing last week near an all-time high. European stocks edged lower, with Ukrainian President Volodymyr Zelenskiy and his allies arriving in Washington to find out what US President Donald Trump committed to at his summit with Vladimir Putin. Cryptocurrencies retreated. 

Traders are also staying cautious ahead of the Federal Reserve’s annual retreat at Jackson Hole later this week, with Chairman Jerome Powell’s speech keenly watched for guidance on a September interest-rate cut.  

Investor expectations for monetary easing next month fluctuated in recent days, pricing in more than a quarter-point cut at one point, amid mixed signals on inflation and the strength of US consumers. 

Under a scenario where the Fed begins cutting later this year, combined with resilient corporate earnings, “the S&P 500 is likely to maintain its medium-term uptrend,” noted Linh Tran, market analyst at XS.com. “Nevertheless, caution is warranted in the face of unexpected political shocks, the risk of renewed trade tensions, and historically stretched valuations.” 

Treasuries’ Monday gains were concentrated at the longer end of the curve, diverging from August’s steepening. The two-year yield slipped one basis point to 3.74%, while the 10-year yield fell two basis points to 4.29%. Money markets are pricing in around an 80% likelihood of a quarter-point cut next month and at least one more by the end of the year. 

“Close focus for many falls on moves in bond markets, and notably on the slope of the yield curves,” wrote Chris Weston, head of research at Pepperstone Group in Melbourne. “Powell’s guidance at Jackson Hole will therefore be important in showing how he balances the focus on inflation versus growth and labor markets.”  

A retreat in major cryptocurrencies pushed the market’s total capitalization under $4 billion after it scaled record peaks last week. 

Bitcoin fell as much as 2.2% to about $115,000 while Ether, the second-largest token, at one point shed more than 4% to dip below $4,300, according to data compiled by Bloomberg. The combined value of all cryptocurrencies sank to $3.9 trillion, according to CoinMarketCap. 

Corporate News: 

• Vestas Wind Systems A/S shares soared on Monday after guidance issued by US government agencies on tax credits for clean energy projects was deemed by analysts to be far less onerous than feared. 
• Dayforce Inc. rallies 22% as the human resources software provider is in talks to be taken private by buyout firm Thoma Bravo, with a potential deal that could be announced in the coming weeks. 
• Novo Nordisk A/S shares advanced after the drugmaker’s blockbuster weight-loss drug Wegovy received US approval to treat a serious form of liver disease, beating rival Eli Lilly & Co. to the US market. 
• Advent International offered to buy U-blox Holding AG, a Swiss maker of positioning chips, in a deal valued at about 1.05 billion Swiss francs ($1.3 billion). 
• A group of investors that includes billionaire Ron Burkle is close to a deal to take members’ club Soho House & Co. private, according to the Wall Street Journal. 

Some of the main moves in markets:  

Stocks 

• The Stoxx Europe 600 fell 0.2% as of 10:53 a.m. London time 
• S&P 500 futures fell 0.2% 
• Nasdaq 100 futures fell 0.2% 
• Futures on the Dow Jones Industrial Average fell 0.1% 
• The MSCI Asia Pacific Index was little changed 
• The MSCI Emerging Markets Index was little changed 

Currencies 

• The Bloomberg Dollar Spot Index rose 0.1% 
• The euro fell 0.2% to $1.1674 
• The Japanese yen fell 0.2% to 147.46 per dollar 
• The offshore yuan was little changed at 7.1817 per dollar 
• The British pound was little changed at $1.3541 

Cryptocurrencies 

• Bitcoin fell 2.1% to $115,178.08 
• Ether fell 3.5% to $4,312.61 

Bonds 

• The yield on 10-year Treasuries declined two basis points to 4.29% 
• Germany’s 10-year yield declined three basis points to 2.75% 
• Britain’s 10-year yield declined one basis point to 4.68% 

Commodities 

• Brent crude rose 0.6% to $66.26 a barrel 
• Spot gold rose 0.4% to $3,347.96 an ounce 

This story was produced with the assistance of Bloomberg Automation. 

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