(Bloomberg) – Global equities fell on Monday, showing more cautious sentiment after Wall Street’s strong second-quarter rally lost momentum late last week.
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Chemicals and construction companies accelerated declines in Europe, while telecom stocks outperformed. Among the largest single companies, Sartorius AG slumped 15% after issuing a higher-than-expected profit warning. In Asia, disappointed hopes for further economic stimulus led to a downward trend for Chinese technology companies.
Wall Street’s rally has now erased more than a year of Fed-inflicted losses as stocks, volatility and the dollar shrugged off the impact of ten rate hikes. However, as interest rates become more uncertain, traders are vacillating between the lure of the rally and concerns that it has exhausted and the market is overbought.
Despite the pressure of a $4.2 trillion option expiration late last week, the S&P 500 index posted gains for a fifth straight session and is now higher than the day the Federal Reserve announced its campaign started.
At its last meeting last week, the Fed left interest rates unchanged but warned of further tightening. In the past, pausing rate hikes for three months after such a series of rate hikes has caused stock prices to rise.
US stock and bond markets are closed on Monday for a holiday.
Read more: Wall Street rally wipes out a year of Fed-related losses
Meanwhile, Chinese tech companies fell, with Alibaba Group Holding Ltd, JD.com Inc. and Baidu Inc. all falling more than 3%, dragging the Hang Seng Tech Index down as much as 2.9%.
Reports on Friday’s meeting of China’s State Council, chaired by Premier Li Qiang, were sparse on possible stimulus measures or when. The lack of tangible evidence of support is adding to worries about a slowing economy and unsettling investors who buoyed Chinese stocks last week on hopes of a comprehensive package.
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Looking ahead, Fed Chair Jerome Powell will present his mid-year report to Congress on Wednesday. This week’s speakers include Federal Reserve Bank of St. Louis President James Bullard and his New York and Chicago counterparts.
The S&P 500 Index posted its mildest reaction in two years on FOMC day. Though it was the first of 11 meetings where policymakers kept rates on hold, they also raised forecasts for higher borrowing costs from 5.6% in 2023, meaning two more quarter-point rate hikes or one half-point hike implied before the end of the year.
“As risks have now shifted towards higher terminal interest rates, optimistic growth expectations must be challenged,” Seema Shah, principal asset management’s chief global strategist, wrote in a note. “Market sentiment appears vulnerable.”
Important events this week:
US holiday Juneteenth, Monday
Chinese lending rates, Tuesday
US housing construction begins on Tuesday
James Bullard, President of the Federal Reserve Bank of St. Louis, speaks Tuesday
New York Fed President John Williams speaks on Tuesday
Federal Reserve Chairman Jerome Powell delivers his semi-annual testimony before Congress on Wednesday before the House Financial Services Committee
Federal Reserve Bank of Chicago President Austan Goolsbee speaks Wednesday
Eurozone Consumer Confidence, Thursday
Collective bargaining decisions in the UK, Switzerland, Indonesia, Norway, Mexico, the Philippines and Turkey, Thursday
US Conference Board leading index, Initial Jobless Claims, Current Account, Existing Home Sales, Thursday
Federal Reserve Chairman Jerome Powell delivers his semi-annual testimony before Congress on Thursday before the Senate Banking Committee
Loretta Mester of the Cleveland Fed speaks Thursday
Eurozone S&P Global Eurozone Manufacturing PMI, S&P Global Eurozone Services PMI, Friday
Japanese CPI, Friday
UK S&P Global/CIPS UK Manufacturing PMI, Friday
US S&P Global Manufacturing PMI, Friday
James Bullard, President of the Federal Reserve Bank of St. Louis, speaks Friday
Some of the key movements in the markets:
Shares
The Stoxx Europe 600 was down 0.6% at 9:50am London time
S&P 500 futures were little changed
Nasdaq 100 futures were little changed
Futures on the Dow Jones Industrial Average hardly changed
The MSCI Asia Pacific Index fell 0.6%
The MSCI Emerging Markets Index fell 0.7%
currencies
The Bloomberg Dollar Spot Index is little changed
The euro was little changed at $1.0929
The Japanese yen was little changed at 141.76 per dollar
The offshore yuan fell 0.4% to 7.1572 per dollar
The British pound was little changed at $1.2813
cryptocurrencies
Bitcoin fell 0.2% to $26,406.77
Ether fell 0.5% to $1,721.52
Bind
The 10-year government bond yield was little changed at 3.76%
The yield on 10-year German government bonds has hardly changed at 2.48%.
The 10-year UK government bond yield rose three basis points to 4.44%
raw materials
This story was created with the support of Bloomberg Automation.
– With support from Sagarika Jaisinghani, Denitsa Tsekova, Richard Henderson and Michael Msika.
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