(Bloomberg) — Bonds extended declines and stocks traded mixed as the prospect of less aggressive Federal Reserve interest-rate cuts continued to weigh on markets.
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US futures pointed to a small drop at the Wall Street open and Europe’s Stoxx 600 benchmark was little changed at the start of a busy earnings day. In the US, traders will be watching for surprises in results from Tesla Inc., Boeing Co., Coca-Cola Co. and others after downbeat news from some key American companies on Tuesday.
Ten-year Treasuries dropped, lifting the yield two basis points after topping 4.2% for the first time since July earlier this week. Yields on Japan’s 40-year notes reached the highest in 16 years.
The broader risk-off tone comes as investors pare back bets on rapid policy easing, on signs that the US economy remains robust and concerns about wider fiscal deficits after the presidential election. Most Fed officials speaking earlier this week signaled they favor a slower tempo of rate reductions.
Bank of America Corp. Chief Executive Officer Brian Moynihan was among the latest to join the monetary policy debate, urging Fed policymakers to be measured in the magnitude of interest-rate reductions.
The International Monetary Fund lowered its global growth forecast for next year and warned of accelerating risks from wars to trade protectionism, even as it credited central banks for taming inflation without sending nations into recession.
Chinese Outliers
In Asia, an index tracking equities in the region was flat, amid declines in Japan and gains in South Korea. Hong Kong and mainland Chinese shares were outliers, rising after a top government-linked think tank called on authorities to issue 2 trillion yuan ($281 billion) of special government bonds to help create a market stabilization fund.
“Asia is mostly on its back foot,” said Vishnu Varathan, Asia head of economics and strategy for Mizuho Bank. “USD is dominating against a backdrop of Fed speak suggesting more gradual cuts, IMF revisions suggesting relative US exceptionalism holding up, and the absence of follow-through bulls in China.”
Oil fell as a US industry group signaled a rise in nationwide crude inventories, and the Biden administration renewed efforts to secure a cease-fire in the Middle East. Gold was steady after climbing to a fresh record.
