US futures waver as odds bets are in doubt: Markets over

(Bloomberg) – Markets struggled to determine direction on Tuesday as traders weighed the prospect of a slowing US rate hike against data suggesting tighter policy may be needed. for a longer time.

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Contracts on the S&P 500 fluctuated after the S&P 500’s third day of decline on Monday. A gauge of European stocks fell as the seven-week rally lost momentum. The dollar rose for a second day, signaling safe-haven demand.

The resilient US economy and steady inflation are countering optimism about reopening in China, with money market futures and economists suggesting the Fed will need to push interest rates to their highest level than previously expected.

Hannah Gooch Peters, global equity investment analyst at Sanlam UK, said in an interview with Bloomberg TV: “I think we’re still not over the volatility we’re about to see. “Inflation is still out of control.”

The S&P 500 is still on track to post its biggest fourth-quarter gain since 1999, but gains faltered in December after a stellar rally. The benchmark index has now traded lower for three consecutive days, with losses amounting to around 2% this month.

Bond yields took a pause, with 10-year Treasury yields little changed at 3.57%. Strong US services data on Monday fueled speculation about higher interest rates, pushing benchmark yields past 3.5%.

The swaps suggest that expectations for the Fed’s eventual rate will increase, with the market suggesting a peak above 5% in mid-2023. The current benchmark is between 3.75% and 3.75%. 4%.

Fed officials, currently in a blackout ahead of the meeting, have strongly suggested they will drop to the half-point mark at the December 13-14 meeting, after four consecutive 75 basis point increases. They also said they will likely need higher interest rates than they thought they would in September, when the median forecast sees them at 4.6% next year from the current target range of 3.75% to 4. %.

Meanwhile, Beijing announced it would eliminate Covid testing requirements for most public places in what was seen as an accelerated move towards withdrawing from the Covid Zero policy.

“Risk assets could enjoy some positive impetus from Asia, if developments continue to fuel optimism about China reopening in 2023,” strategists at Mizuho International Plc wrote in a note to clients.

Elsewhere, a majority of the 291 respondents to the latest MLIV Pulse survey said leveraged loans would be a canary in the coal mine to indicate that corporate credit quality is improving. should be worse.

About 28% of survey respondents expect default rates to rise significantly if US interest rates peak at or below 5%, which is when the market bets that the Fed will stop raising rates. Another 63% see defaults increasing if interest rates peak above 5%.

This week’s main events:

  • US Trade, Tuesday

  • EIA Crude Oil Inventory Report, Wednesday

  • Euro Area GDP, Wednesday

  • US MBA Mortgage Application, Wednesday

  • ECB President Christine Lagarde speaks on Thursday

  • US Initial Jobless Claims, Thursday

  • US PPI, wholesale inventories, University of Michigan consumer sentiment, Friday

Some key moves in the market:


  • Futures on the S&P 500 were little changed at 5:33 a.m. New York time

  • Nasdaq 100 futures were little changed

  • Futures on the Dow Jones Industrial Average fell 0.1%

  • Stoxx Europe 600 down 0.6%

  • The MSCI World Index fell 0.3%


  • Bloomberg Dollar Spot Index was little changed

  • The euro rose 0.1% to $1.0506

  • British Pound was little changed at $1.2178

  • The Japanese yen was little changed at 136.65 per dollar

electronic money

  • Bitcoin is little changed at $16,970.6

  • Ether drops 0.5% to $1,253.58


  • Yields on 10-year Treasury notes were little changed at 3.57%

  • German 10-year yield fell one basis point to 1.87%

  • UK 10-year yield little changed at 3.10%


  • West Texas Intermediate crude fell 1.4% to $75.82 per barrel

  • Gold futures rose 0.2 percent to $1,785.30 an ounce

This story was produced with assistance from Bloomberg Automation.

–With support from Allegra Catelli, Michael Msika and Tassia Sipahutar.

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