(Bloomberg) — US equities erased gains as Treasury yields ticked higher in yet another about face in sentiment in the final week of a dismal year for markets.
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Both the S&P 500 and the Nasdaq 100 slipped. Shares in Tesla Inc. rose, snapping a seven-day losing streak prompted by concerns about ebbing demand. Treasury yields edged higher and a gauge of the dollar pared losses.
The still-cautious mood is damping hopes for a rally in the last trading week of 2022 after a brutal year for financial markets. Global equities have lost a fifth of their value, the largest decline since 2008 on an annual basis, and an index of global bonds has slumped 16%. The dollar has surged 7% and the US 10-year yield has jumped to above 3.80% from just 1.5% at the end of 2021.
“We think investors have become way too pessimistic given where we are in the rate hiking cycle,” wrote Nancy Tengler, CEO and chief investment officer at Laffer Tengler Investments. Following one of the fastest rate-hiking regimes in history, “we expect the economy to slow materially or enter recession at some point in 2023. To be sure a severe recession would be bearish for stocks, yet given the resilience of the U.S. economy and the tight labor market, we are expecting a slowdown or shallow and brief recession. That could allow stocks to rally in the second half of 2023.”
In a bid to revive Hong Kong as a finance hub, the city will end some of its last major Covid rules, scrapping gathering limits to vaccination checks and testing for travelers. Still, while the dismantling of Covid curbs may be a boost for the global economy, there’s concern about inflation pressures that could prompt the policy makers in the US to maintain tight monetary policy.
Effects of the Federal Reserves aggressive tightening policy is taking a toll on the housing market. Data Wednesday showed US pending home sales fell for a sixth month in November to the second-lowest on record. With borrowing costs roughly double where they were at the start of the year, home sales, and therefore prices, have been declining for months.
Elsewhere in markets, the Stoxx Europe 600 index advanced, led by basic-resources companies as prices for industrial metals including copper climbed. Most European bonds gained, with Germany’s 10-year yield falling more than five basis points.
Oil dipped amid thin liquidity as investors weighed the fallout from a Russian ban on exports to buyers that adhere to a price cap. Iron ore surged to its highest since early August, while copper gained in New York as China’s rollback of pandemic curbs boosted prospects for commodities demand in 2023.
Key events this week:
US initial jobless claims, Thursday
ECB publishes economic bulletin, Thursday
Some of the main moves in markets:
Stocks
The S&P 500 fell 0.2% as of 10:42 a.m. New York time
The Nasdaq 100 fell 0.2%
The Dow Jones Industrial Average was little changed
The Stoxx Europe 600 was little changed
The MSCI World index fell 0.2%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.0638
The British pound rose 0.4% to $1.2079
The Japanese yen fell 0.4% to 134.08 per dollar
Cryptocurrencies
Bitcoin fell 0.4% to $16,620.98
Ether fell 1.5% to $1,192.59
Bonds
The yield on 10-year Treasuries advanced two basis points to 3.87%
Germany’s 10-year yield declined one basis point to 2.51%
Britain’s 10-year yield advanced six basis points to 3.70%
Commodities
West Texas Intermediate crude fell 2.5% to $77.53 a barrel
Gold futures fell 0.7% to $1,809.50 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Richard Henderson, Robert Brand and Peyton Forte.
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