Stock markets mixed on rate cut expectations

by Jonathan Adams
Global stock markets

All three main indexes on Wall Street closed well down, with the Nasdaq losing more than 1%, Hong Kong led the decline in Asia by similarly dropping more than 1%, while Tokyo, Sydney, Seoul and Wellington gained

Stock markets were mixed Thursday following steep losses on Wall Street as a rise in US Treasury yields led investors to scale back their expectations on interest rate cuts.

With the US presidential election still seen as a coin toss less than two weeks out, there was plenty of uncertainty on trading floors, though observers said dealers were eyeing a win for Donald Trump and policies that could stoke inflation again.

That, along with a strong run of economic data and remarks from Fed officials backing a cautious approach to easing monetary policy, has seen expectations for rate cuts whittled back.

Traders had last month been confident the central bank would follow up last month’s bumper 50 bp cut with another at its November meeting and a smaller one in December.

But those expectations have diminished as Treasury yields push higher to 4.24% compared with 3.73% in September.

Observers said there is concern that a win for Trump over rival Kamala Harris could see him introduce tax cuts, ramp up trade tariffs and push for more deregulation.

This has fuelled the so-called Trump trade in which investors jockey for positions to prepare for such an eventuality.

Sentiment has been weighed down by the move up in yields and push back on Fed rate cut expectations, according to National Australia Bank’s Rodrigo Catril.

Solid economic momentum as well as Fed messaging emphasising a gradual and deliberate approach to further policy easing is making the market nervous, he said.

Then once you add the upcoming US election alongside its associated uncertainty, taking some chips off the table makes sense, he added.

All three main indexes on Wall Street closed well down, with the Nasdaq losing more than 1%.

Hong Kong led the decline in Asia by similarly dropping more than 1%, while Shanghai, Seoul, Taipei and Manila were also down.

Tokyo, Sydney, Seoul and Wellington gained.

Disclaimer: The opinions expressed by our writers are their own and do not represent the views of Trading and Investment News. The information provided on Trading and Investment News is intended for informational purposes only. Trading and Investment News is not liable for any financial losses incurred. Conduct your own research by contacting financial experts before making any investment decisions.

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