Stocks Hover as Traders Brace for September Swings: Markets Wrap

By Investor Empires On Sep 2, 2024

(Bloomberg) — Global stocks rose to near record highs on Monday as investors braced for what is typically the most challenging month for equities.

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The pan-European STOXX 600 index pared most of its earlier losses after closing at a record high on Friday. Volkswagen AG rose 1.3% after the carmaker said it was considering an unprecedented shutdown of its German factories, while Rightmove Plc jumped 27% in London on takeover interest from Rupert Murdoch’s RIA Group.

U.S. stock futures were little changed. The dollar edged up after its worst month this year, while U.S. Treasuries were closed for the Labor Day holiday.

Historically, September has been a particularly bad month for stocks over the past four years, according to data compiled by Bloomberg. Wall Street’s fear gauge — the Cboe Volatility Index, or VIX — has risen every September since 2021.

That trend could continue, especially with Friday’s U.S. jobs report, which will provide crucial insights into how quickly or slowly the Federal Reserve will cut interest rates and as the U.S. election campaign heats up. Traders expect the U.S. monetary easing cycle to begin this month, with about a one-in-four chance of a 50 basis point rate cut, according to data compiled by Bloomberg.

“I think the market is very aware of what it thinks is going to happen — there will be some kind of a downgrade,” Fiona Boal, head of global equities at S&P Dow Jones Indices, told Bloomberg Television. “As we head into the fall, we’ll see the VIX move more into thinking about markets and thinking about political issues.”

JPMorgan Chase & Co. strategists warned that the stock market rally could stall even if the Federal Reserve cuts interest rates. The team, led by Mislav Matejka, wrote in a note that any policy easing would be in response to slowing growth, while September’s seasonal trend would be another drag.

“We are not out of the woods yet,” said Matejka, who favoured defensive sectors against the backdrop of falling bond yields. “Sentiment indicators are far from attractive, political and geopolitical uncertainty is high and seasonal factors are more challenging.”

Valentin Marinov, head of G10 FX strategy at Credit Agricole CIB, said that jobs data indicating a very gradual slowdown in the US labor market could prompt traders to adjust their expectations for a rate cut in favour of the dollar.

“Markets may be overly optimistic ahead of the Fed meeting in September,” Marinov told Bloomberg TV. “The dollar may regain some of its gains once markets realize the Fed will move more cautiously.”

Asian stocks fell on growing concerns over the health of China’s economy, where a persistent property slump has dampened domestic demand.

“I think there is a huge problem — and now everyone is aware of it,” Hao Ong, chief economist at Grow Investment Group, told Bloomberg’s David Engels and Yvonne Mann in an interview. “The government needs to do more.”

In commodities, oil prices fluctuated between small gains and losses as traders assessed OPEC+’s planned output increase next month, economic headwinds in China and lower output in Libya.

Main events this week:

US markets are closed for Labor Day holiday on Monday.
South Korea’s consumer price index, Tuesday
Switzerland GDP and CPI, Tuesday
South Africa GDP, Tuesday
U.S. Construction Spending, ISM Manufacturing Index, Tuesday
Unemployment in Mexico Tuesday
Brazil GDP, Tuesday
Chile interest rate decision, Tuesday
Australian GDP, Wednesday
China Services PMI, Wednesday
Bloomberg CEO Forum in Jakarta, Wednesday
HCOB Euro Area PMI and PPI services, Wednesday
Poland Interest Rate Decision, Wednesday
Fed Beige Book, Wednesday
Canada Interest Rate Decision, Wednesday
South Korea’s GDP, Thursday
Malaysia Interest Rate Decision, Thursday
Consumer Price Index in the Philippines, Thursday
Taiwan Consumer Price Index, Thursday
Thailand Consumer Price Index, Thursday
Eurozone Retail Sales, Thursday
German factory orders, Thursday
US Initial Jobless Claims, ADP Employment, ISM Services Index, Thursday
Eurozone GDP, Friday
US Non-Farm Payrolls, Friday
Unemployment in Canada Friday
Chile Consumer Price Index, Friday
Colombia Consumer Price Index, Friday

Some key movements in the markets:

Stocks

S&P 500 futures were little changed as of 11:52 a.m. New York time.
Dow Jones Industrial Average futures were little changed.
The Stoxx Europe 600 index was little changed.
The MSCI World Index saw little change.

Currencies

The Bloomberg Dollar Index was little changed.
The euro rose 0.2% to $1.1069.
The pound rose 0.2% to $1.3147.
The Japanese yen fell 0.5% to 146.95 yen per dollar.

Cryptocurrencies

Bitcoin rose 0.4% to $58,641.01
Ether rose 0.7% to $2,519.15

Bonds

The yield on the 10-year US Treasury note was little changed at 3.90%.
The yield on the 10-year German bond rose four basis points to 2.34%.
The yield on 10-year British bonds rose four basis points to 4.05%.

Goods

West Texas Intermediate crude rose 0.2% to $73.68 a barrel.
Spot gold fell 0.1 percent to $2,500.66 an ounce.

This story was produced with the help of Bloomberg Automation.

–With assistance from Catherine Bosley and Sagarika Jaisinghani.