NEW YORK, Sept 30 — MSCI’S global equities ended yesterday’s choppy session slightly lower as investors prepared for a likely US government shutdown and adjusted portfolios for the quarter’s end.
Hardline Republicans in the US House of Representatives yesterday afternoon rejected their leader’s proposed bill to temporarily fund the government, making it all but certain that federal agencies will partially shut down beginning tomorrow.
Underlying US inflation pressures moderated in August, with the annual rise in prices excluding food and energy falling below 4.0 per cent for the first time in more than two years — seen as welcome news for the Federal Reserve as it ponders the monetary policy outlook.
Earlier data also showed headline inflation in Europe rising more slowly than expected and at its lowest level in two years.
But an earlier boost to stocks from signs of subsiding inflation faded as the session wore on.
While New York Fed President John Williams said the central bank is likely at or near peak rates, he said he still expects it will need to stay restrictive “for some time.”
“What’s driving everything is interest rates, and what the Fed finally got markets to buy is that lower inflation is not a reason to lower interest rates,” said Robert Phipps, director at Per Stirling Capital Management, who saw the comments by Williams as the biggest drag on stocks yesterday as it reminded investors that rates will likely stay higher for longer.
On top of this, Phipps also cited end-of quarter portfolio adjustments, the prospect of a government shutdown, and an expansion of Detroit’s auto workers’ strikes as incentives for traders to sell shares going into the weekend.
Traders were betting on an 85.8 per cent probability that the Fed would keep rates steady at its next meeting in November compared with an 80.7 per cent probability on Thursday, according to the latest data from CME Group’s Fedwatch tool.
The Dow Jones Industrial Average fell 158.84 points, or 0.47 per cent, to 33,507.5, the S&P 500 lost 11.65 points, or 0.27 per cent, to 4,288.05 and the Nasdaq Composite added 18.05 points, or 0.14 per cent, to 13,219.32.
MSCI’s gauge of stocks across the globe shed 0.04 per cent on the day. For the month of September it fell 4.3 per cent, which was its biggest monthly decline in a year. For the quarter it lost 6.6 per cent, for its first quarterly decline in a year.
In currencies, the dollar was headed for its biggest quarterly gain in a year and gains for the 11th consecutive week while Japan’s yen remained under scrutiny for potential government intervention.
The yen weakened 0.07 per cent versus the greenback at 149.43 per dollar. The dollar index, which measures the greenback against a basket of major currencies, rose 0.038 per cent, with the euro up 0.09 per cent to US$1.0568.
Sterling was last trading at US$1.22, up 0.02 per cent after data showed Britain’s economic performance since the start of the Covid-19 pandemic was stronger than previously thought.
In US Treasuries, Benchmark 10-year yields were well above their lows of the day but still down 1.6 basis points at 4.581 per cent, from 4.597 per cent late on Thursday. The 30-year bond was last down 2.3 basis points to yield 4.7065 per cent. The 2-year note was last was down 1.3 basis points to yield 5.0582 per cent.
In energy markets, US crude oil prices settled 1 per cent lower due to macroeconomic concerns and profit taking, but rose about 30 per cent for the quarter as Opec+ production cuts squeezed global crude supply.
US crude settled down 1 per cent at US$90.79 per barrel and Brent ended at US$95.31, down 0.07 per cent on the day.
In precious metals, gold prices were lower on the day and eying monthly and quarterly declines on expectations that the US central bank may keep interest rates higher for longer.
Spot gold dropped 0.9 per cent to US$1,848.59 an ounce. US gold futures fell 0.77 per cent to US$1,846.10 an ounce. — Reuters