(Bloomberg) — A sell-off in Treasury bonds strengthened the dollar and left stocks mixed, as new signs of economic strength led traders to lower expectations for U.S. interest rate cuts.
Most read from Bloomberg
Stock futures in Australia and Hong Kong fell, while contracts for Japanese benchmarks advanced, helped by a weaker yen. US futures were slightly higher after the S&P 500 retreated from an intraday record to end the session on Thursday. Little changed.
Swap traders have further cut their bets on Federal Reserve rate cuts during the remaining two meetings of the year. A jump in U.S. Treasury yields on Thursday pushed a strong dollar index higher for a fourth session to levels not seen since early August. Australian and New Zealand yields rose in early Friday trading, tracking the moves.
The shift in forecasts reflected robust U.S. retail sales in September that exceeded expectations, illustrating the resilient consumer spending that continues to drive the economy. The data followed a jobs report and higher-than-estimated consumer inflation released earlier this month that only reinforced the view that the U.S. is nowhere near a recession.
“There is a narrow path to a Fed break in November, but that would require every notable economic report between now and then that points to a stronger than assumed US economy,” said Matthew Weller of Forex.com and City Index. “Regardless of what the Fed does in November, the projected interest rate path for 2025 and beyond is higher than it has been in weeks.”
In Asia, investors will be firmly focused on China, with third-quarter gross domestic product data expected to show the slowest pace of growth in six quarters. House prices, industrial production and retail sales data will also be released on Friday, providing further clarity for investors struggling with the economic stimulus measures unveiled in previous weeks that have roiled Chinese stocks.
Elsewhere in the region, headline inflation in Japan rose 2.5% as expected, leaving the yen little changed. The currency passed the psychological level of 150 per dollar on Thursday, bringing the risk of official intervention back into focus.
In corporate news, Taiwan Semiconductor Manufacturing Co.’s U.S.-listed shares reached a record high after the chipmaker beat quarterly expectations and raised its 2024 revenue growth target.
The bullish outlook spread to Nvidia Corp shares, which rose. Netflix Inc. shares also rose in late trading as subscriber numbers exceeded expectations. Travelers Cos. rose 9% on profits that tripled to $1.3 billion from a year earlier. Elevance Health Inc. plummeted 11% as the insurer lowered its annual outlook.
American economy
A series of stronger-than-estimated data points sent the U.S. version of Citigroup’s Economic Surprise Index to its highest since April. The meter measures the difference between actual publications and analysts’ expectations.
Retail sales figures released Thursday highlight the undeniable strength of the economy, said Ellen Zentner of Morgan Stanley Wealth Management. “Strong data will prompt Fed participants to cut again in November, but Chairman Jerome Powell is unlikely to deter him from continuing with steady quarter-point increments.”
LPL Research’s Jeff Roach says strong consumer spending in September suggests economic growth was solidly above trend in the previous quarter. Looking ahead, investors should be alert to any signs that the unemployed are finding it harder to earn a paycheck.
“Retail sales were well above expectations and continue to defy the weak economy theorem,” said Quincy Krosby of LPL Financial. “The implications for monetary policy revolve around whether the Fed is concerned that the economy’s renewed strength is fueling a rebound in inflation, although expectations remain for a 25 basis point cut at its next meeting take place.”
In commodities, gold climbed to a new record amid ongoing tensions in the Middle East, while the West Texas Intermediate, the US crude oil price, rose to trade around $71 per dollar.
Main events this week:
-
China’s GDP, Friday
-
The US housing market starts on Friday
-
The Fed’s Christopher Waller and Neel Kashkari will speak Friday
Some of the major moves in the markets:
Stocks
-
Futures on the S&P 500 were little changed at 8:34 a.m. Tokyo time
-
Nikkei 225 futures rose 0.4%
-
Hang Seng futures fell 0.3%
-
Australia’s S&P/ASX 200 fell 0.5%
Currencies
-
The Bloomberg Dollar Spot Index was little changed
-
The euro was little changed at $1.0826
-
The Japanese yen was little changed at 150.27 per dollar
-
The offshore yuan was little changed at 7.1385 per dollar
Cryptocurrencies
-
Bitcoin rose 0.6% to $67,348.77
-
Ether rose 0.2% to $2,603.45
Bonds
Raw materials
This story was produced with the help of Bloomberg Automation.
Most read from Bloomberg Businessweek
©2024 BloombergLP
