World Stock Watch

Asian Markets Set to Decline as Wall Street Takes a Breather

After a relentless advance to all-time highs, Wall Street stocks finally took a step back, and Asian markets are expected to follow suit. Futures for benchmarks in Hong Kong, Shanghai, and Sydney pointed to losses, while Tokyo shares were headed for small gains.

A Much-Needed Correction?

The S&P 500 fell 0.2%, with all of its major groups except technology pushing lower. The Dow Jones Industrial Average slid 0.8%. This decline comes after a month-long streak of no consecutive down days, which ranks among the best since 1928. According to Dan Wantrobski, director of research at Janney Montgomery Scott, “The index remains overbought across multiple time frames and is still vulnerable to profit-taking over the short run.”

Bond Yields on the Rise

US 10-year yields jumped 11 basis points to 4.20%, and Australia’s equivalent rose nine basis points in early trading. This increase in yields is expected to continue, with some experts predicting that US 10-year yields will test the 5% threshold in the next six months.

Earnings Season Heats Up

Wall Street faces a big earnings hurdle this week, with roughly 20% of the S&P 500 companies scheduled to report. Traders are gearing up for key results from Tesla, Boeing, and United Parcel Service. According to the latest Bloomberg Markets Live Pulse survey, respondents see Corporate America’s results as more crucial for the equity market’s performance than who wins the November election or even the Federal Reserve’s policy path.

Market Volatility on the Rise

Protection volatility is elevated for options on stocks, bonds, and currencies alike as investors pay up for protection. The risks are clear: a hotly contested US election, interest-rate decisions in the US and Europe, the threat of a wider Middle East conflict, and quarterly earnings. According to Matt Maley at Miller Tabak, “We certainly cannot blame investors for buying some protection in the options market and/or gold.”

Key Events This Week

• ECB’s Christine Lagarde is interviewed by Bloomberg Television on Tuesday
• BOE’s Andrew Bailey, ECB’s Klaas Knot, and Robert Holzmann speak at Bloomberg Global Regulatory Forum in New York on Tuesday
• Philadelphia Fed President Patrick Harker speaks on Tuesday
• Canada rate decision on Wednesday
• Eurozone consumer confidence on Wednesday
• US existing home sales on Wednesday
• Boeing, Tesla, Deutsche Bank earnings on Wednesday
• Fed’s Beige Book on Wednesday
• US new home sales, jobless claims, S&P Global Manufacturing and Services PMI on Thursday
• UPS, Barclays earnings on Thursday
• Fed’s Beth Hammack speaks on Thursday
• US durable goods, University of Michigan consumer sentiment on Friday

Market Moves

• Stocks: Hang Seng futures fell 0.4%, S&P/ASX 200 futures fell 0.8%, Nikkei 225 futures rose 0.3%, S&P 500 futures were little changed
• Currencies: Euro was little changed, British pound fell 0.5%, Japanese yen was little changed, offshore yuan was little changed
• Cryptocurrencies: Bitcoin was little changed, Ether was little changed
• Bonds: Yield on 10-year Treasuries advanced 11 basis points, Australia’s 10-year yield rose nine basis points
• Commodities: Spot gold was little changed, West Texas Intermediate crude fell 0.1%