Stocks waver as oil’s climb adds to rate concerns: Markets wrap

Stocks fluctuated as traders braced for a hawkish tone from major central banks responding to persistent inflation pressures in policy decisions this week. The rally in oil gathered pace, with Brent topping $95 a barrel for the first time since November.

Oil giants TotalEnergies SE, BP and Shell were the biggest contributors to gains in Europe’s Stoxx 600 benchmark. US equity futures were little changed, while Asian stocks posted small losses.

Crude has soared by about a third since mid-June as Saudi Arabia and Russia joined hands to constrain supplies and drive a rebound in prices. Oil’s advance sustains the pressure on central bankers around the world as they seek to cool rising prices. The Federal Reserve sets policy Wednesday, the Bank of England Thursday and the Bank of Japan Friday.

“The main story as we start the big central bank week has been the relentless rise in oil prices,” said Deutsche Bank AG macro strategist Jim Reid. “Given those fresh signs of inflationary pressures, investors moved to price in that interest rates would remain higher for longer into 2024.”

US Treasury yields climbed, while the dollar edged higher against most of its major peers.

With the Fed forecast to keep interest rates on hold this week, traders will be focused on the so-called dot plot summary of economic forecasts. The two main questions are whether policymakers will retain their projections for one more 25 basis-point hike by year-end, and how much easing they are penciling in for 2024. In June, they projected one percentage point of cuts.

“That’s probably too much, given where growth and inflation is for the US,” Joey Chew, head of Asia foreign-exchange research at HSBC Holdings, said about next year’s possible cuts on Bloomberg Television. Investors should expect the dollar to get a boost if the dot plots show less rate cuts projected for next year, she said.

Positive news from developers Country Garden Holdings and Sunac China Holdings failed to lift sentiment in Asia. Country Garden won bondholder approval on the last of a batch of eight local notes it sought to extend repayments, while Sunac secured creditors’ approval on its debt restructuring scheme.

BlackRock Investment Institute cut its rating for emerging-market equities to neutral from overweight, saying China’s struggling property sector remains a drag on growth, while policy stimulus isn’t as large as in the past, strategists including Jean Boivin and Wei Li wrote in a research note.

Key events this week:

• This week, Ukrainian President Volodymyr Zelenskiy is expected to meet with Joe Biden at the White House, attend United Nations General Assembly in New York
• OECD releases interim economic outlook report on the global economy, Tuesday
• Eurozone CPI (August final), Tuesday
• Bloomberg Future of Finance Conference in Frankfurt, with speakers to include German Finance Minister Christian Lindner, Tuesday
• US housing starts, Tuesday
• Japan trade, Wednesday
• China loan prime rates, Wednesday
• UK CPI, Wednesday
• Federal Reserve policy meeting followed by Fed Chair Jerome Powell’s news conference, Wednesday
• Bank of Canada issues summary of September’s policy meeting, Wednesday
• Eurozone consumer confidence, Thursday
• Bank of England policy meeting, Thursday
• US leading index, initial jobless claims, existing home sales, Thursday
• China’s Bund Summit, Friday
• Japan CPI, PMIs, Friday
• Bank of Japan rate decision, Friday
• Eurozone S&P Global Eurozone PMIs, Friday
• US S&P Global Manufacturing PMI, Friday

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 was little changed as of 8:25 a.m. London time
• S&P 500 futures were little changed
• Nasdaq 100 futures were little changed
• Futures on the Dow Jones Industrial Average were little changed
• The MSCI Asia Pacific Index fell 0.2%
• The MSCI Emerging Markets Index fell 0.1%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.0684
• The Japanese yen fell 0.1% to 147.81 per dollar
• The offshore yuan fell 0.1% to 7.3015 per dollar
• The British pound was unchanged at $1.2383

Cryptocurrencies

• Bitcoin rose 0.3% to $26 853.33
• Ether was little changed at $1,637.84

Bonds

• The yield on 10-year Treasuries advanced two basis points to 4.32%
• Germany’s 10-year yield was little changed at 2.71%
• Britain’s 10-year yield declined one basis point to 4.38%

Commodities

• Brent crude rose 0.5% to $94.92 a barrel
• Spot gold was little changed