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U.S. equity futures edged lower in early Wednesday trading, while the dollar slipped against its global peers, as investors adjusted to a new reality of lower interest rates in key markets around the world that could test risk sentiment over the coming months.
Stocks ended higher on Wall Street yesterday, with the S&P 500 notching its 41st closing high of the year, as a late-session surge for Nvidia (NVDA) helped offset concerns over fading consumer sentiment in the world’s biggest economy.
The Conference Board’s closely-tracked reading showed the biggest month-on-month decline in three years, with respondents noting underlying concerns over the labor market, and added to bets on another outsized Federal Reserve rate cut later this autumn.
The CME Group’s FedWatch tool, in fact, pegs the odds of a 50 basis point cut in November at around 58.1%, up from just 37% a week ago, while rate-sensitive 2-year notes yields continue to slide lower and were last marked at 3.533% in overnight trading.
A weaker-than-expected reading for September consumer sentiment is adding to bets on another big Fed rate hike.
Rate cut signals from the European Central Bank, as well as a third day of reductions in China and talk of policy patience from the Bank of Japan earlier this week, laid the groundwork for an easier monetary backdrop heading into the final months of the year, but added to global growth concerns at the same time.
That’s helping lift gold prices to another record high in the overnight session, while putting modest pressure on most global stock benchmarks, including those on Wall Street.
Related: Goldman Sachs shifts view on economy, Fed rate cuts
Futures contracts tied to the S&P 500 suggest a modest 9 point pullback to start the trading day, with the Dow Jones Industrial Average called 25 points from last night’s record close.
The tech-focused Nasdaq, meanwhile, is called 70 points lower with Nvidia, Tesla (TSLA) and Intel (INTC) marked red in premarket dealing and Micron Technology (MU) edging 0.26% higher ahead of its fourth quarter earnings after the closing bell.
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In Europe, the region-wide Stoxx 600 was marked 0.14% lower in early Frankfurt trading, while Britain’s FTSE 100 edged just 0.065% higher as the stronger pound put pressure on export stocks.
Overnight in Asia, China shares added to yesterday’s gains after the PBOC cut a key bank lending rate by 300 basis points, the most on record, as the government doubles-down on its hefty stimulus effort in the world’s second-largest economy.
The regional MSCI ex-Japan benchmark rose 0.32% into the close of trading while the Nikkei 225 ended 0.19% lower in Tokyo.
Related: Veteran fund manager sees world of pain coming for stocks
