Stocks faced a decline and the dollar strengthened following comments from Minneapolis Fed President Neel Kashkari that dampened hopes for swift interest rate cuts by the US central bank. S&P 500 futures indicated a 0.3% loss, signalling a potential end to the six-day winning streak of the US equity benchmark, while Europe’s Stoxx 600 index remained relatively unchanged. West Texas Intermediate crude dropped below $80 per barrel for the first time in over two months.
Kashkari, speaking during a Fox News interview, emphasized that it is premature to declare victory over inflation, stating that three months of promising inflation data are insufficient to warrant a central bank pivot. This outlook has raised concerns among investors and analysts, who see potential risk factors that could hinder a smooth decline in inflation.
On the bond market front, the Bank of England Chief Economist Huw Pill hinted at possible rate cuts by mid-2024, leading to rising bond markets, particularly in the UK. Two-year gilt yields fell by 11 basis points to 4.61%, while the yield on 10-year Treasuries declined by five basis points to 4.59%.
In individual stock movements, European equity benchmarks were weighed down by oil producers, with Shell Plc and BP Plc experiencing losses of over 1%. On a more positive note, UBS Group AG saw a 3.7% increase in its stock value after reporting stronger-than-expected client inflows in its wealth-management business. Additionally, Watches of Switzerland Group Plc, the leading UK Rolex retailer, surged by 10% after revealing expectations of doubling sales and profits by 2028.
In Asian markets, South Korea’s Kospi Index witnessed a 2.3% decrease following a rally on Monday triggered by a short-selling ban. In Australia, the resumption of policy tightening and an increased inflation forecast indicated that central banks may not have completed their interest rate hikes.
Key events to watch this week include data releases, speeches by central bank officials, and earnings reports, all of which are expected to impact market dynamics.
