The MSCI All-World index slipped 0.79%, while in Europe, the STOXX 600 closed 0.30% lower
Global stocks dropped on Wednesday amid weak trading, while gold prices retreated from record highs.
In the US, markets are pricing a 92% probability of a 25 bp cut at the Federal Reserve’s next meeting in November and another 25 bp cut by year-end. A month ago, traders were pricing in as much as a full percentage point in cuts by January. The yield on benchmark US 10-year notes reached three-month highs and was last up 3.2 bps at 4.238%.
This is a classic case of buy the rumour and sell the fact, said Bill Strazzullo, chief markets strategist at Bell Curve Trading in Boston (US). Buy the rumour of the rate cuts, and then as you get the rate cut, sell into it.
On Wall Street, all three main indexes closed lower, driven by losses in consumer discretionary, technology and communication services stocks. Real estate and utilities were the biggest gaining sectors.
The MSCI All-World index slipped 0.79%, while in Europe, the STOXX 600 closed 0.30% lower.
The Dow Jones Industrial Average declined 0.96% to 42,514.95, the S&P 500 slid 0.92% to 5,797.42 and the Nasdaq Composite tumbled 1.60% to 18,276.65.
We’ll see what the Fed does if they can handle this the right way and get the soft landing or not. And then, on top of that, obviously you got the election, Strazzullo said, referring to the November 5 US election.
The chances of Republican candidate Donald Trump beating Democratic candidate Kamala Harris have recently edged higher on betting websites, though opinion polls show the race to the White House remains too tight to call.
There is an illusion that if Trump wins, you want to buy energy. Energy actually underperformed during the period from 2016 to 2020 (when Trump was president). What did outperform, and people should be buying on that basis, would be industrials such as Boeing, small caps, and, believe it or not, emerging markets and China equities, said Thomas Hayes, chairman at Great Hill Capital in New York.
Gold pulled back after reaching record highs amid gains in the US dollar. Demand for safe-haven gold is partly driven by geopolitical tensions in the Middle East, Europe and US election.
Bullion, which has gained 33% this year, was last down 1.19% at $2,715.62 an ounce.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, added 0.26% to 104.37.
Against the Japanese yen, the dollar firmed 1% to 152.57. The euro skidded 0.11% to $1.0785.