U.S. stock index futures fell on Tuesday, after the Labor Day holiday, as investors awaited crucial economic data in the week ahead that is expected to shape the Federal Reserve’s stance on monetary easing.
The August nonfarm payrolls report, due on Friday, is the centerpiece of the week and will follow a monthly private payrolls reading and job openings figures.
Markets are pricing in about a 90 per cent chance of a 25-basis-point cut in interest rates at the Fed’s meeting later this month, according to the CME Group’s FedWatch tool.
Investors’ dovish tilt came after July’s weak job report, with Fed Chair Jerome Powell acknowledging the growing risks to the labor market at the Jackson Hole symposium, helping the S&P 500 and the Dow log their fourth consecutive month of gains in August.
The Nasdaq logged its fifth straight monthly gain last month.
At 5:33 a.m. ET, Dow E-minis fell 178 points, or 0.39 per cent, S&P 500 E-minis shed 31 points, or 0.48 per cent, and Nasdaq 100 E-minis were down 145.25 points, or 0.61 per cent.
Yields on longer-dated U.S. Treasuries rose on Tuesday, with those on the 10-year and 30-year notes at their highest levels in more than a month, pressuring equities.
The CBOE Market Volatility index also touched its highest mark in more than three weeks and was last up 0.99 points at 17.11.
Hedge funds remained hesitant about buying U.S. stocks at the outset of September, a seasonally dour month for markets, according to Goldman Sachs data up to August 25.
The benchmark S&P 500 has lost 1.5 per cent on average in September – its worst month – since 2000, according to data compiled by LSEG.
The rate-cut optimism overshadowed concerns about the Fed’s independence as U.S. President Donald Trump kept up attacks on the central bank. Uncertainty over artificial-intelligence-fueled trade also crept in after quarterly updates from some AI-linked companies failed to impress investors.
The markets will also focus on quarterly earnings from a host of retailers, including Macy’s and Dollar Tree , to gauge the strength of the U.S. consumer as the impact of Trump’s tariffs on the economy starts to show.
U.S. manufacturing activity data for August is due after markets open.
In stocks, gold miners gained in premarket trading after bullion prices hit a record high. U.S.-listed shares of Harmony Gold rose 6.2 per cent, Kinross Gold gained 2.7 per cent and Newmont added 1.5 per cent.
Fortinet dipped 2.7 per cent after Morgan Stanley downgraded the cybersecurity firm’s stock to “underweight” from “equal-weight.”
Long-dated bond yields in Britain and France hit their highest in over a decade on Tuesday as investors grow increasingly worried about the state of finances in countries around the world, while gold touched a fresh record high.
As markets suffered a sharp back-to-school shock, the Japanese yen also tumbled after a close aide to Prime Minister Shigeru Ishiba said on Tuesday he would resign from his post. Later in the day, U.S. business activity data will be the first in a raft of important economic figures to come this week.
Britain’s 30-year bond yield rose nearly 6 basis points to 5.697 per cent, its highest since 1998, while France’s rose a similar amount to 4.513 per cent, its highest since 2009.
Bond yields move inversely to prices, and yields especially on super-long-dated 30-year bonds have been soaring around the world , with investors concerned about the scale of debt in countries from Japan to the United States.
But Britain and France are in particular focus.
French Prime Minister Francois Bayrou looks set to lose a confidence vote next week as opposition parties balk at his cuts to government spending, while British finance minister Rachel Reeves is expected to raise taxes in her autumn budget in order to remain in line with her fiscal targets.
Sterling also tumbled sharply, down over 1 per cent on the dollar at $1.3402, and at its weakest in nearly a month on the euro.
“Thirty-year yields at their highest in almost three decades are not a good look for (Britain’s) Labour government, and underscore that there is little fiscal or economic credibility left,” said Neil Wilson, UK investor strategist at Saxo Bank.
“But it wasn’t just the UK in isolation here … the thing to consider here is that global long-end bonds are in trouble as no one wants to wear duration – this is seeing gold breach a fresh record.”
Gold rose as high as $3,508.5 an ounce early on Tuesday, its highest on record, while silver rose to a 14-year high.
Both then retreated in European trading hit by a rebound in the dollar, as investors tried to get out of sterling, yen and euros all at the same time.
The dollar was last up 0.86 per cent on the yen, at 148.47 after the Japanese ruling party’s secretary general Hiroshi Moriyama, a close aide to the prime minister, said he intends to resign to take responsibility for the party’s defeat in the July 20 upper house election.
All that hurt stocks, and Europe’s broad Stoxx 600 share benchmark was down 0.6 per cent, with rate-sensitive real estate stocks down nearly 2 per cent.
Still to come is U.S. business activity data, the first installment in a packed week of economic figures which will either underscore expectations the Federal Reserve will cut rates later this month, or put them into question.
The most important of the week’s data is Friday’s U.S. nonfarm payrolls report, which will be preceded by data on job openings and private payrolls, providing investors and the Fed a clearer picture of the labor market that has become the center of policy debate.
Markets widely expect the Fed to lower interest rates later this month, pricing in an 89 per cent chance of a 25-basis-point cut.
Oil prices rose on Tuesday as concerns about supply disruptions grew amid an escalation of the conflict between Russia and Ukraine. Brent crude rose 1.5 per cent to $69.17 a barrel.
Reuters
