Stocks Waver as Traders Eye Clues on Rates Outlook: Markets Wrap

(Bloomberg) — European equities posted small moves and US stock futures edged lower as traders looked ahead to economic data for clues on the outlook for interest rates.

The Stoxx 600 index was steady, with the focus on euro zone inflation data after European Central Bank President Christine Lagarde said the bank is becoming more optimistic about getting price pressures under control. Contracts for the S&P 500 slipped 0.2% after the underlying benchmark notched its latest record high Monday.

The dollar climbed after Federal Reserve Chair Jerome Powell said the US central bank will lower interest rates “over time,” while re-emphasizing that the overall economy remains on solid footing. Markets were also bracing for any effect after Israel said it had begun “targeted ground raids” in Lebanon.

“I still think that global risk assets perform well heading into the end of the year as the macro backdrop and growth prove to be more resilient than previously expected,” said David Chao, a strategist at Invesco Asset Management. “Thus the near-term market narrative has shifted from questions about a slowing US economy to the size and velocity of the Fed’s rate cuts for the rest of the year.”

Inflation data for the 20-nation euro zone Tuesday is expected to show a slowdown to 1.8% from 2.2% in August. Yields on German and UK bonds dropped, while those on Treasuries ticked lower across the curve.

China’s markets are on a week-long holiday after the biggest surge in 16 years on Monday. The MSCI China Index beat an emerging-market gauge which excludes the nation’s equities by almost 22 percentage points in September, the biggest margin of outperformance since June 1999, according to data compiled by Bloomberg.

In the US, the S&P 500 secured its fourth consecutive quarter of advances — the longest such winning stretch since 2021. The tech-heavy Nasdaq 100 notched a similar run.

“The bull market has survived the year’s historically weakest quarter, the third quarter, and it is likely to remain intact through at least the end of the year, as earnings remain strong, interest rates are moving lower and consumers are still spending,” said Emily Bowersock Hill at Bowersock Capital Partners.

“We expect the fourth quarter to be quite similar to the third quarter – elevated volatility, but with a strong finish,” she added.

In other news, The International Longshoremen’s Association shut down all ports from Maine to Texas on Tuesday, according to a statement from its Facebook page. The affected ports have the combined capacity to handle as much as half of all US trade volumes, and the strike will halt container cargo and auto shipments.

In commodities, oil prices dropped as prospects of a return of Libyan supply countered the risks of a wider conflict in the Middle East.

Key events this week:

Atlanta Fed President Raphael Bostic, Fed Governor Lisa Cook, Richmond Fed President Thomas Barkin and Boston Fed President Susan Collins speak Tuesday
ECB policy makers speaking include Olli Rehn, Luis de Guindos, Isabel Schnabel and Joachim Nagel on Tuesday
BOE chief economist Huw Pill speaks Tuesday
South Korea CPI, S&P Global Manufacturing PMI on Wednesday
Fed speakers include Richmond’s Thomas Barkin, Cleveland’s Beth Hammack, St. Louis’s Alberto Musalem and Fed Governor Michelle Bowman on Wednesday
US nonfarm payrolls, Friday

Some of the main moves in markets:

Stocks