US stocks dipped ahead of a consequential Federal Reserve meeting this week, at which the central bank is expected to offer some clues about its path forward.
Wall Street’s benchmark S&P 500 fell 0.4 per cent on Tuesday, erasing earlier gains, while the tech-heavy Nasdaq Composite dropped 0.9 per cent. The S&P 500 fell during the previous session but notched a gain of almost 8 per cent for October.
The central bank’s Federal Open Market Committee is expected to implement its fourth consecutive 0.75 percentage point rate rise on Wednesday in an attempt to cool inflation that remains at the highest level in decades. Investors will also be watching closely for any indication that the Fed is prepared to slow its pace of raises in December.
Traders are mixed on the outcome of the December meeting: futures markets show a 49 per cent chance of a 0.75 percentage point increase, and a 44 per cent chance of a smaller increase of 0.5 percentage points. Robust jobs data released on Tuesday show a still healthy labour market, which, if it persists, could diminish the possibilities of a smaller rise in December. But interest rate expectations in the futures market on Tuesday were little moved.
Demand for US workers rebounded in September, with employers adding 437,000 job openings, bringing the total number of vacancies to 10.7mn, the labour department said. The figures represented “another example of data ‘not co-operating’ with the Fed’s desire to slow the pace of rate hikes”, said analysts at Citigroup.
Meanwhile, the Institute for Supply Management said its index tracking factory activity fell to 50.2 in October, indicating a small expansion in manufacturing output. Markets had expected a reading of 50.
The Fed has this year raised its key policy rate from close to zero to its current range of 3 per cent to 3.25 per cent in an aggressive tightening of monetary policy that has dragged the blue-chip S&P 500 down from a record high hit in January.
Big Tech has been hit particularly hard by the slowing economy and rising interest rate environment, with several companies posting weak earnings last week. Still, Uber’s third-quarter revenues and earnings came in above analysts’ expectations on Tuesday, sending its shares up 13 per cent.
In government bond markets, the yield on 10-year US Treasuries fell less than 0.01 percentage points to 4.04 per cent. The yield on the equivalent UK government bond declined 0.04 percentage points to 3.4 per cent.
Elsewhere in equity markets, Europe’s Stoxx 600 added 0.6 per cent and London’s FTSE 100 gained 1.3 per cent.
The gains followed a sharp rise in shares on mainland China and in Hong Kong. The CSI 300 index of equities in Shanghai and Shenzhen jumped 3.6 per cent, while Hong Kong’s Hang Seng climbed 5.2 per cent higher.
Analysts said the rise, which helped offset some of the losses sustained since the end of the Chinese Communist party’s 20th congress a week ago, was fuelled by unverified rumours circulated online that China’s government had created a task force to consider reopening plans.
Most of the day’s gains came after social media posts made shortly before the close of the Hong Kong morning session suggested, without naming sources, that China had established a “reopening committee” to assess different reopening scenarios for early next year.
Analysts said buying appeared to be motivated by the rumours, but were sceptical of their veracity.
“There are quite a few institutions buying shares today,” said Louis Tse, managing director at Hong Kong-based brokerage Wealthy Securities.
“The numbers are there, and there is heavy turnover, but if China opens it will do so gradually, rather than in one go. They can’t afford to have that many cases all of a sudden.”