Stocks Stumble Before US CPI, Yen Takes Off

US and European equity futures declined on Wednesday amid bond gains, as investors remained uncertain ahead of the US inflation data.  
 

Key Takeaways  

➔ Concerns over a slowdown in global growth emerged again, but oil prices remain below $70.  

➔ Lower oil prices, a weaker Chinese economy, and a stronger yen contribute to the weaker market sentiment.    

➔ Harris and Trump heatedly exchanged views on the economy and US-China relations, but there were no major market reactions.  

The yen strengthened on comments from a Bank of Japan official indicating that further interest rate hikes may be on the horizon. Asian stocks fell for the third straight session, with Japan and Hong Kong dragging down the region, while US stock futures fell 0.6%. Concerns over a global economic slowdown emerged again, oil prices remained below $70, and bond yields reached two-year lows before the US CPI data and the next week’s Fed meeting.  

Harris vs. Trump Presidential Debate: How it Impacted Markets  

During the last debate, Harris and Trump heatedly exchanged views on the economy and US-China relations, but there were no major market reactions. Bitcoin fell marginally as the odds of Harris winning the election increased on betting sites, while Trump’s support for the cryptocurrency industry had no impact on investor sentiment.  

“On markets today, there is a lot of uncertainty ahead of next week’s expected rate cut,”  

said Kieran Calder, head of equity research for Asia at Union Bancaire Privee in Singapore. He pointed to some reasons for the weaker sentiment, including lower oil prices, a weaker Chinese economy, and a stronger yen.  

Since December, the yen has strengthened to its highest point against the US dollar, erasing all the yearly losses since Bank of Japan official Junko Nakagawa's comments about future interest rates. The remarks from Nakagawa strengthened expectations of quicker rate action, helping the yen. In the US interest-rate market, traders speculate on at least one more rate cut from the Federal Reserve this year, but not before November 5th.  

“Given the market’s aggressive expectations for Fed rate cuts, a hotter reading should lead to downside volatility,” said Sameer Samana at Wells Fargo Investment Institute. “A cooler print has more two-way risk as it creates more room for the Fed to cut, but may also indicate the economy is slowing faster than anticipated.”  

Crude oil prices have plunged by nearly 20% in the past three months due to concerns over the slowing down of demand from key consumers such as the US and China. The major events to watch this week include:  

► US CPI, Wednesday  

► Japan PPI, Thursday  

► ECB rate decision, Thursday  

► US initial jobless claims, PPI, Thursday  

► Eurozone industrial production, Friday  

► Japan Industrial Production, Friday  

► University of Michigan consumer sentiment, Friday  

Main market movements include:  

Stocks:  

► S&P 500 futures down by 0.5%  

► Nikkei 225 futures down by 1.2%  

► Japan’s Topix down by 1.8%  

► Australia’s S&P/ASX 200 down by 0.4%  

► Hong Kong's Hang Seng down by 1.1%  

► Shanghai Composite down by 1%  

► Euro Stoxx 50 futures were little changed.  

Currencies:  

► Bloomberg Dollar Spot Index down by 0.2%  

► Euro (EUR) up 0.2% to $1.1046  

► Japanese yen (JPY) up by 0.8% to 141.26 per dollar  

►  Offshore Chinese yuan (CNH) up by 0.3% to 7.1158 per dollar  

► British pound (GBP) up by 0.1% to $1.3097  

Cryptocurrencies:  

► Bitcoin (BTC) down by 2.1% to $56,365.18  

► Ether (ETH) down by 2.1% to $2,328.1  

Bonds:  

► The yield on 10-year Treasuries down by three basis points to 3.62%  

► Japan’s 10-year yield down by 4.5 basis points to 0.845%  

► Australia’s 10-year yield down by five basis points to 3.85%  

Commodities:  

► WTI crude up by 1% to $66.42 per barrel  

► Spot gold up by 0.3% to $2,523. 45 per ounce  

Investors' overall mood is still bearish due to a slow growth in the Chinese economy and delayed policy easing by the US Federal Reserve. Traders expect a big rate cut later this year, especially before the CPI report, which is expected to reveal another month of low inflation.