U.S. Futures, Dollar Dip as Europe Stocks Advance: Markets Wrap

Stocks

• Futures on the S&P 500 Index decreased 0.2% as of 7:26 a.m. New York time.
• The Stoxx Europe 600 Index rose 0.4%.
• The U.K.’s FTSE 100 Index advanced 0.7%.
• Germany’s DAX Index increased 0.2%.
• The MSCI Asia Pacific Index fell 0.1%.

Currencies

• The Bloomberg Dollar Spot Index decreased 0.1%.
• The euro increased 0.3%.
• The British pound decreased 0.2%.
• The Japanese yen increased 0.5%.
• The Swiss franc gained 0.7%.

Bonds

• The yield on 10-year Treasuries dipped two basis points.
• Germany’s 10-year yield rose one basis point.
• Britain’s 10-year yield decreased two basis points.

Commodities

• West Texas Intermediate crude increased 1.8% to $59.17 a barrel.
• Brent crude increased 2.3% to $65.04 a barrel.
• Gold rose 0.4% to $1,499.96 an ounce.

 

A split mood emerged across major markets on Thursday, with U.S. equity futures dropping and European stocks rising as investors processed a slew of fresh policy decisions following the Federal Reserve rate cut. The euro strengthened versus the dollar.

Contracts on the three main U.S. equity indexes all dropped. The Europe Stoxx 600 pushed higher, led by banks, as a new round of TLTRO loans kicked in. Treasuries advanced steady while European government bonds slipped. Shares fell in Hong Kong and edged up in Shanghai. China’s yuan dropped as traders weighed the odds of the People’s Bank of China lowering borrowing costs.

The yen jumped the most in three weeks after the BOJ left its policy settings unchanged while noting rising risks. Together with Japan’s currency, the Swiss franc led Group-of-10 currency gains following monetary-policy decisions by their respective central banks. The pound edged lower after the Bank of England stayed pat on rates.

Mass Downgrades

The OECD lowered its growth forecasts for most major economies

Source: Organisation for Economic Cooperation and Development

Thursday’s slate of monetary policy decisions, hot on the heels of the Fed cut, comes just as the OECD cut its world growth forecast to just 2.9% from 3.2% as intensifying trade conflicts take a toll on confidence and investment. But not all policy makers followed the Fed — in Switzerland and Taiwan they opted to keep rates unchanged, while in Norway officials surprised traders with a rate hike.

The BOJ failed to follow the Fed and European Central Bank in easing policy, saying it will “reexamine” growth and price developments.

“Strains to the macro backdrop should ease in the coming months as other central banks (ECB, BoJ) edge toward renewed monetary easing,” Simon Ballard, a macro strategist at First Abu Dhabi Bank, wrote in a note. New dovish pressures may also come from “a particularly disorderly Brexit, further oil market disruptions or a sharp decline in market liquidity,” he said.

Fed Stays on Hold Until End of 2020, Says Fitch Rating’s McCormack

Traders will look for signs that last week’s show of goodwill between the U.S. and China is gaining momentum as trade deputies meet Thursday and Friday in Washington ahead of higher-level meetings in mid-October. The geopolitical situation in the Middle East remains in turmoil after Saudi Arabia blamed Iran for last Saturday’s attack on its oil installations, an event which is helping inflame tension between America and the Islamic Republic.

Elsewhere, oil held gains amid contrasting reports about whether Saudi Arabia asked Iraq for crude to supply its domestic refineries. Gold advanced and Australia’s dollar slumped after the unemployment rate rose.

These are some key events to keep an eye on this week:

• Friday is quadruple witching day for U.S. markets. When the quarterly expiration of futures and options on indexes and stocks occurs on the same day, surging volatility and trading can follow.