World stock indexes slid on Tuesday, bringing a multi-day rally of record closing highs to a close as profit-taking and worries over ongoing inflation fueled a broad selloff.
The retreat came as a solid rise in producer prices last month deepened concerns over inflation and oil prices have soared to seven-year highs, driving up the U.S. retail gasoline cost to $3.42 a gallon, the highest in seven years. Meanwhile, U.S. Treasury yields edged lower.
After the U.S. Labor Department said producer prices increased solidly in October, investors heavily bought government-backed debt obligations. The data indicated that high inflation, which has become a bigger concern for investors than the COVID-19 crisis, could persist as supplies remain tight.
Wednesday’s CPI report will be scrutinized for clues regarding the extent to which producer prices are being passed along to the consumer, whose spending represents about 70% of the U.S. economy.
Oil prices rose to a two-week high on Tuesday after the United States lifted travel restrictions and other signs of a global post-pandemic recovery boosted the demand outlook, while supply remained tight.
U.S. crude was recently up 2.98% at $84.37 per barrel and Brent was at $84.92, up 1.79% on the day.
The pan-European STOXX 600 index lost 0.19% while MSCI’s gauge of stocks across the globe shed 0.30% after coming within a point of uncharted highs earlier in the session.
Global equities had hovered near all-time highs as investors weighed strong earnings, easing travel curbs and U.S. infrastructure spending against inflation risk that may lead to tighter monetary policy.
“Markets have risen fast and strong, there’s been a vigorous rebound but the catalyst provided by the third-quarter earnings season is coming to an end,” said Emmanuel Cau, head of European equity strategy at Barclays.
Cau noted that market positioning was far from extreme and that many investors remained prudent despite no imminent threat to the rally.
He argued it was “healthy” to see markets pause to digest upbeat corporate earnings and news that major central bankers were in no rush to raise interest rates.
Fears of a sudden tightening of monetary policy sparked a fixed-income selloff in October but government bond yields have since turned lower.
“Central bank pushback against early tightening supports a pro-risk stance,” JP Morgan analysts told clients in a note.
The Dow Jones Industrial Average fell 0.31% and the S&P 500 lost 0.35%. The Nasdaq Composite dropped 0.6%.
The yield on 10-year Treasury Inflation Protected Securities dipped as low as -1.21%, the lowest since early August, and the yield on 30-year TIPS touched a record low of -0.592%
The benchmark 10-year yield was down 6.3 basis points at 1.4341% in afternoon trading. The yield on the 30-year bond reached as low as 1.795%, the lowest since July, and was last down 6.6 basis points at 1.8218%.
Yields for both the U.S. and the euro zone benchmark are trading close to one-month lows.
“The headline inflation numbers we’re getting monthly, it’s no longer a phenomenon for investment professionals, now it’s hitting the mainstream,” said Kevin Flanagan, head of fixed income strategy for WisdomTree.
Market analysts awaited Wednesday’s U.S. consumer prices data. A stronger-than-expected reading would rekindle talk of the Federal Reserve raising interest rates sooner than expected.
The dollar index dipped 0.93% while the euro gained up 0.05% to $1.1592..
The Japanese yen strengthened 0.34% versus the greenback at 112.86 per dollar, while sterling was last trading at $1.3562, up 0.01% on the day. .
Oil prices rallied as the passage of the U.S. infrastructure bill and China’s export growth supported the outlook for energy demand.
Saudi Arabia’s state-owned producer, Aramco, also raised the official selling price for its crude.
Gold prices climbed to their highest level since early September in tandem with a softer dollar ahead of U.S. inflation data due out later in the week.
Spot gold added 0.4% to $1,830.67 an ounce.
(Reporting by Katanga Johnson in Washington; Editing by Richard Chang and Matthew Lewis)
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
