Asian stocks are set for a cautious opening after the S&P 500 edged down to its lowest close since May, with trading dominated by bond market swings. Oil edged higher after sinking Monday as the next stages of the Israel-Hamas war remain clouded.
Futures point to gains in Japan shares while Australian stocks are set to slip. In the US, the S&P 500 fell for a fifth straight session — its longest slide this year. Still, it held above the key 4,200 mark, a technical support level. The Nasdaq 100 outperformed as investors awaited earnings from a handful of big techs, including Microsoft Corp. and Nvidia Corp., which both gained Monday.
Attention in Asia will likely be focused on China, after a series of arrests across industries and an investigation into Foxconn Technology Group, Apple Inc.’s most important partner. Traders are also closely watching the Shanghai Composite Index’s slide, which threatens to breach technical support.
Treasury 10-year yields slumped on Monday after hitting 5%, amid volatility fueled by expectations the Federal Reserve will keep rates elevated and the government will boost bond sales to cover widening deficits. The yield rose as much as 11 basis points to 5.02%, the highest since 2007, before erasing its increase and falling as low as 4.83%.
“With the peak level for the 10-year yield still anyone’s guess, the US equity market should remain under pressure since breadth and relative strength readings have yet to hit extremes,” said Sam Stovall, chief investment strategist at CFRA. “As a result, one thing is certain: October will add to its reputation as the most volatile month of the year.”
Some of the market’s most prominent bond bears are saying the historic rout in US Treasuries has gone too far. Billionaire investor Bill Ackman wrote in a social media post that he unwound his bet against US government bonds amid rising global risks. Bill Gross, co-founder of Pacific Investment Management Co., wrote that he’s buying short-dated interest-rate futures in anticipation of a recession by year-end.
The full impact of the most aggressive monetary-tightening campaign by global central banks in decades has yet to be felt and will remain a headwind for financial markets going into next year, according to JPMorgan Chase & Co.’s Marko Kolanovic.
High Bar
Oil edged higher in early Asia trading, following losses on Monday as Israel appeared to hold off on an immediate intensification of its war. There are growing calls inside the country to rethink the scope of a ground invasion of Gaza that had been expected any day. Gold was little changed.
Investors looking to the earnings season for a dose of good news are hanging their hopes on big tech.
The five biggest companies in the S&P 500 — Apple Inc., Microsoft, Alphabet Inc., Amazon.com Inc. and Nvidia Corp. — account for about a quarter of the benchmark’s market capitalization. Their earnings are projected to jump 34% from a year earlier on average, according to analyst estimates compiled by Bloomberg Intelligence.
Morgan Stanley’s Michael Wilson — among the most bearish voices on US stocks — said he “would not be surprised” to see further declines in the S&P 500 with “earnings expectations likely too high for the fourth quarter and 2024, and policy tightening likely to be felt from both a monetary and fiscal standpoint.”
Elsewhere, Bitcoin topped $31,000. Argentina’s dollar bonds were the worst performers in emerging markets as investors fret over a presidential runoff between the nation’s economy minister and a radical libertarian.
Corporate Highlights:
- Nvidia is using Arm Holdings Plc technology to develop chips that would challenge Intel Corp. processors in personal computers, potentially ratcheting up competition between the two semiconductor makers, according to people familiar with the situation.
- Chevron Corp. agreed to buy Hess Corp. for $53 billion, a deal aimed at boosting production growth as the US oil industry bets on an enduring future for fossil fuels.
- Reliance Industries Ltd., controlled by Asia’s richest tycoon Mukesh Ambani, is nearing a cash and stock deal to buy Walt Disney Co.’s India operations, according to people familiar with the matter.
- EngageSmart Inc., a business-to-business software company, has agreed to be acquired by Vista Equity Partners in an all-cash deal valued at about $4 billion.
- Roche Holding AG will pay $7.1 billion to acquire Telavant Holdings Inc., a developer of a promising therapy for treating inflammatory bowel disease.
- Walgreens Boots Alliance Inc. rose as JPMorgan Chase & Co. raised the drugstore chain rating to overweight.
- Pinterest Inc. climbed after Stifel raised its rating to buy, noting there’s room for growth outside the company’s domestic market.
- Okta Inc. tumbled after the identity verification company said that hackers used a stolen credential to access its support case management system.
- United Auto Workers union members at Stellantis NV’s lucrative truck plant in Sterling Heights, Michigan, walked off the job Monday morning, a surprise hit designed to extract further concessions in the sixth week of the strike against Detroit’s three biggest automakers.
Key events this week:
- Reserve Bank of Australia Governor Michele Bullock speaks at the Commonwealth Bank Annual Conference in Sydney, Tuesday
- Paris-based International Energy Agency releases its world energy outlook annual report, Tuesday
- Eurozone S&P Global Services PMI, S&P Global Manufacturing PMI, Tuesday
- Euro-area bank lending survey, Tuesday
- US S&P Global Manufacturing PMI, Tuesday
- Microsoft, Alphabet earnings, Tuesday
- Australia CPI, Wednesday
- Germany IFO business climate, Wednesday
- Canada rate decision, Wednesday
- US new home sales, Wednesday
- IBM, Meta earnings, Wednesday
- European Central Bank interest rate decision; President Christine Lagarde holds news conference, Thursday
- US wholesale inventories, GDP, US durable goods, initial jobless claims, pending home sales, Thursday
- Intel, Amazon earnings, Thursday
- China industrial profits, Friday
- Japan Tokyo CPI, Friday
- US PCE deflator, personal spending and income, University of Michigan consumer sentiment, Friday
- Exxon Mobil earnings, Friday
Some of the main moves in markets:
Stocks
- The S&P 500 fell 0.2%; S&P futures rose 0.2% as at 7:49 a.m. in Tokyo
- The Nasdaq 100 rose 0.3%; Nasdaq futures rose 0.2%
- Nikkei 225 futures rose 0.2%
- S&P/ASX 200 futures fell 0.2%
Currencies
- The euro was little changed at $1.0671
- The British pound was little changed at $1.2250
- The Japanese yen was little changed at 149.66 per dollar
Cryptocurrencies
- Bitcoin rose 5.1% to $33,153.27
- Ether rose 3% to $1,762.69
Bonds
- The yield on 10-year Treasuries declined seven basis points to 4.85%
- Australia’s 10-year yield fell seven basis points to 4.71%
Commodities
- West Texas Intermediate crude rose 0.6% to $85.97 a barrel
- Spot gold was little changed at $1,973.80 an ounce
This story was produced with the assistance of Bloomberg Automation.
