Market decline

Futures market down at opening of trade in August

After major US indices had their best month since 2020 in July, US stock futures started the new month with a slight decline.

S&P 500 futures fell 0.3% on Monday, while Dow Jones Average futures fell 0.1%. Technology-focused Nasdaq-100 contracts fell 0.2%.

Premarket trading saw a 4.8% rise in Boeing shares after the company said it avoided a strike at three military production sites and overcame a regulatory hurdle to resume delivery of its 787 Dreamliner.

The past few weeks have seen a dramatic rise in the value of US stocks and government bonds, helped by encouraging earnings reports and the possibility that the Fed may not need to raise interest rates as much. quickly than expected.

Last week, the authorities authorized a 0.75 percentage point hike in interest rates. However, government bonds rallied along with equities, expecting rate hikes to be less dramatic going forward.

Bond and equity markets have “re-evaluated” fairly quickly, according to the chief investment officer of British investment firm Brooks Macdonald, Edward Park.

Mr Park observed that investors could take a break after the S&P 500 ended July with a 9.1% gain on Friday, as Monday’s decline in equity futures showed. He said traders were in a “wait and watch” mentality until Friday’s jobs data. The Wall Street Journal’s survey of economists predicts the US economy added 250,000 jobs in July, up from 372,000 in June.

Fed funds futures, which traders use to speculate on the future path of interest rates, reflected investor expectations for a less aggressive Fed. According to CME Group, the likelihood of the Federal Reserve raising its main interest rate by 0.5 percentage points in September rose to around 71% on Monday morning, from just 44% last week. They also point to a 0.75 percentage point gain less than a week ago.

Some profitable trades this year have been disrupted by recent financial market volatility caused by fluctuating expectations for central bank policies for the rest of the year. For example, the US dollar, which was on an extended uptrend in 2022, fell for a fourth consecutive session on Monday, losing 0.3% against the WSJ Dollar Index.

At the same time, the yen strengthened further, gaining 0.7% against the dollar. Betting against the Japanese currency has been a popular Wall Street move this year, but the recent appreciation of the yen has put that strategy to the test.

The yield on 10-year U.S. Treasuries fell from 2.6426% to 2.659% at the close of Friday trading. Since closing at 3.482% in June, the yield on the benchmark note has fallen sharply.

On the other hand, the yield on the two-year Treasury note was 2.903%, down from 2.897% on Friday, keeping the yield curve inverted. When this happens, investors generally see it as a warning sign that a recession is imminent. As a result, short-term Treasury rates are trading higher than long-term yields.

U.S.-traded shares of Alibaba rose 1.6% in pre-market trading on the NYSE after the company said it would try to maintain its listing on the stock exchange. On Friday, the SEC included Alibaba among Chinese companies threatened with delisting from U.S. markets if its auditors cannot be audited by spring 2024.

After Global Payments announced it would acquire EVO Payments in an all-cash transaction for $34 per share, EVO Payments stock jumped 20% in premarket trading to hit 32.87 $. Growth in international money transfers was 6.1%.

Companies such as Diamondback Energy, Pinterest and Activision Blizzard will release their quarterly results Monday evening after the market closes, giving investors more time to digest the data.

Brent oil fell 1.2% to $102.68 a barrel in the energy market.

The global Stoxx Europe 600 index rose 0.2%. After announcing a 62% increase in quarterly profits, global banking giant HSBC Holdings saw its London-traded shares rise 6.9%.

Despite news that China’s industrial activity unexpectedly contracted in July, most Asian indices rose. The Nikkei 225 gained 0.7% in Japan, while the Shanghai Composite gained 0.2%.