Global Stocks Retreat After Wall Street Failed: Markets Wrapped

(Bloomberg) — Global stocks fell on Monday, adding more caution after Wall Street’s blistering rally in the second quarter ran out of steam last weekend.

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The pace of declines in chemical and construction companies in Europe, while telecom stocks outperformed. Among the largest companies moving people, Sartorius AG fell 15% after issuing a warning about larger-than-expected earnings. In Asia, disappointed hopes for more stimulus have pushed Chinese tech companies back.

The rally on Wall Street has now erased more than a year of losses inflicted by the Fed, as equities, volatility and the dollar shake off the impact of 10 interest rate hikes. But with increasing uncertainty about the path of prices, traders are oscillating between the temptation of a rally and fears that it has been exhausted and that the market has become overbought.

Despite the pressure of $4.2 trillion in options expiring last weekend, the S&P 500 capped a fifth consecutive week of gains and is now higher than it was the day the Fed launched its campaign.

At its latest meeting last week, the Fed kept interest rates unchanged but warned of further tightening ahead. In the past, a three-month pause in rate hikes after a series of such rate hikes boosted stock prices.

US stock and bond markets are closed on Monday for a holiday.

Read more: Wall Street rally wipes away a year of Fed-led losses

Meanwhile, Chinese tech companies have declined with Alibaba Group Holding Ltd and JD.com Inc. and Baidu Inc. By more than 3%, the Hang Seng Tech Index fell as much as 2.9%.

Reports covering China’s State Council meeting on Friday, chaired by Premier Li Qiang, were light on details about any potential stimulus or timing. The lack of tangible evidence of support adds to concerns about a slowing economy, unnerving investors who bid on Chinese stocks last week hoping for a package deal.

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Looking ahead, Federal Reserve Chairman Jerome Powell will present his semi-annual report to Congress on Wednesday. Speakers this week include St. Louis Federal Reserve President James Bullard and his counterparts in New York and Chicago.

The S&P 500 recorded its moderate reaction on FOMC Day two years ago. Although it was the first in 11 meetings where policymakers held interest rates, they also raised expectations for higher borrowing costs by 5.6% in 2023, which would mean a quarter-point or half-point increase in interest rates before the end of the year.

“Now that risks have shifted towards higher terminal rates, the optimistic growth outlook must be questioned,” Sima Shah, chief global strategist at Principal Asset Management, wrote in a note. “Market sentiment is starting to look weak.”

Main events this week:

• June US holiday, Monday

• China loan initial interest rates, tuesday

• Residences begin in the US, Tuesday

• Louis Federal Reserve Bank of St. Louis President James Bullard speaks, Tuesday

• New York Federal Reserve Bank President John Williams speaks on Tuesday

• Federal Reserve Chairman Jerome Powell delivers semi-annual congressional testimony before the House Financial Services Committee, Wednesday

• Chicago Federal Reserve President Austin Goolsby speaks Wednesday

• Eurozone Consumer Confidence, Thursday

• Price decisions in the UK, Switzerland, Indonesia, Norway, Mexico, the Philippines and Turkey on Thursday

• The leading indicator of the US Congressional Council, Initial Jobless Claims, Current Account, Existing Home Sales, Thursday

• Federal Reserve Chairman Jerome Powell delivers semi-annual congressional testimony before the Senate Banking Committee, Thursday

• Cleveland Federal Reserve’s Loretta Mester speaks Thursday

• Eurozone S&P Global Eurozone Manufacturing PMI, S&P Global Eurozone Services PMI, Friday

• Japanese CPI, Friday

• S&P Global / CIPS UK Manufacturing PMI, Friday

• Standard & Poor’s Global Manufacturing Index in the US, Friday

• Louis Federal Reserve Bank of St. Louis President James Bullard speaks on Friday

Some of the major movements in the markets:

Stores

• The Stoxx Europe 600 Index is down 0.6% as of 9:50 am London time.

• S&P 500 futures changed little

• Nasdaq 100 futures have changed little

• Futures contracts on the Dow Jones Industrial Average changed little

• The MSCI Asia Pacific Index fell 0.6%.

• The MSCI Emerging Markets Index fell 0.7%.

currencies

• The Bloomberg Spot Dollar Index has not changed

• The euro was little changed at $1.0929

• The Japanese yen was little changed at 141.76 per dollar

• The external yuan fell 0.4 percent to 7.1572 per dollar

• The British pound was little changed at $1.2813

Digital currencies

• Bitcoin fell 0.2% to $26,406.77

• Ether fell 0.5% to $1,721.52

bonds

• The yield on the 10-year Treasury note was little changed at 3.76%.

• Germany’s 10-year yield was little changed at 2.48%.

• The UK 10-year yield advanced three basis points to 4.44%.

goods

This story was produced with help from Bloomberg Automation.

– With assistance from Sagarika Jaisinghani, Denitsa Tsekova, Richard Henderson, and Michael Msika.

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