Stocks lose momentum as global rally takes a breather: Market Summary

(Bloomberg) — European and U.S. stock futures fell slightly on Wednesday after U.S. stocks hit fresh highs, as investors adjusted their portfolios on expectations that the Federal Reserve will soon start cutting interest rates.

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The MSCI Asia Pacific Index, which measures the region’s benchmarks, was dragged down by Japanese stocks, offsetting some early gains after the U.S. warned its allies to adopt stricter trade rules in response to its crackdown on China. Hong Kong and mainland Chinese stocks were volatile as traders waited for more details from the third plenary session.

While optimism that the Fed will soon cut rates and signs of resilience in the U.S. retail market have supported some risk-taking sentiment, concerns about geopolitical and trade risks have grown in recent sessions as the prospect of a Donald Trump presidency has grown.

“We have a complex matrix of drivers,” said Vishnu Bharathan, head of economics and strategy at Mizuho Bank Ltd. in Singapore. “Imminent Fed easing would be good for small cap and technology rotation, but Trump 2.0 adds to the uncertainty around geopolitics and trade.”

Risk sentiment led to a rotation into smaller U.S. stocks. The Russell 2000 index rose 12% in the five sessions through Tuesday, its best performance since April 2020. Sector rotation continued in Asia, with health care the best performer on the regional equity index, while technology was the worst performer.

“The bullish momentum in Japan and Australia markets appears well-protected as expectations of further cuts and supportive data build on the optimism surrounding the record-breaking run,” said Hebe Chen, analyst at IG Markets Ltd. “However, it is important to note that Trump’s remarks on Taiwan are likely to create a disturbing noise that will cast a long-tail shadow over the stability of the region, putting Taiwan, China and South Korea, the most directly affected markets, at risk.”

Treasury yields were little changed Wednesday after falling Tuesday. The dollar was steady.

New Zealand yields edged up along with the kiwi after mixed inflation data clouded the outlook for a rate cut. Singapore’s exports fell more than expected in June as electronics shipments weakened, suggesting challenges ahead for the trade-dependent economy.

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Traders await Indonesia’s monetary policy decision. Markets in India and Pakistan are closed.

In the corporate sector, ASML Holding NV’s orders beat expectations as the artificial intelligence boom drove demand for the Dutch company’s advanced chipmaking machines. Shares of Tokyo Electron Ltd. fell the most in three months after Bloomberg reported that the U.S. was discussing using its most severe trade restrictions to curb China’s access to advanced semiconductor technology.

By commodity, gold rose about 2% on Tuesday to hit a record high of $2,469.66 an ounce before setting another record, while West Texas Intermediate crude fell for a fourth straight day.

Key events this week:

• Eurozone CPI, Wednesday

• U.S. housing starts, industrial production, Wednesday

• Fed Beige Book, Wednesday

• Federal Reserve Chairman Thomas Barkin speaks Wednesday

• ECB interest rate decision, Thursday

• U.S. New Jobless Claims, Philadelphia Fed Manufacturing, Conference Board LEI, Thursday

• The Federal Reserve’s Mary Daly, Lorie Logan and Michelle Bowman will speak Thursday.

• Federal Reserve Board members John Williams and Raphael Bostic speak Friday

Some of the key market moves:

stock

• As of 6:28 a.m. London time, S&P 500 futures were down 0.2%.

• Japan’s Topix rose 0.3%.

• Australia’s S&P/ASX 200 rose 1%.

• Hong Kong’s Hang Seng Index fell 0.1%.

• The Shanghai Composite Index fell 0.6%.

• Euro Stoxx 50 futures fell 0.1%.

• Nasdaq 100 futures fell 0.4%.

• Australia’s S&P/ASX 200 rose 1%.

call

• The Bloomberg Dollar Spot Index was little changed.

• The euro was little changed at $1.0903.

• The Japanese yen rose 0.1% to 158.18 per dollar.

• The overseas yuan was virtually unchanged at 7.2860 won per dollar.

• The Australian dollar was little changed at $0.6738.

• The British pound was little changed at $1.2969.

Cryptocurrency

• Bitcoin rose 1.9% to $65,945.41.

• Ether rose 2.1% to $3,512.69.

bond

• The 10-year Treasury yield rose 1 basis point to 4.17%.

• Japan’s 10-year yield was unchanged at 1.025%.

• The Australian 10-year yield was little changed at 4.24%.

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This article was created with the assistance of Bloomberg Automation.

–With assistance from Richard Henderson.

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