Stocks Drop After Bitcoin Selloff, BOJ Sour Mood: Markets Wrap
(Bloomberg) — Global stocks and bonds started December on the back foot as a renewed selloff in cryptocurrencies and hawkish comments from the Bank of Japan weighed on sentiment.
S&P 500 futures fell 0.6%. Bitcoin slid below $86,000, dragging major tokens lower and pulling crypto-linked stocks into the red. The Magnificent Seven tech heavyweights also declined in premarket trading, with Meta Platforms Inc. and Nvidia Corp. falling more than 1.3%.
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Japan’s two-year yield hit its highest since 2008 after Governor Kazuo Ueda gave his clearest hint yet of a possible BOJ interest-rate hike. The move weighed on global bonds, lifting the rate on 10-year US Treasuries by four basis points to 4.05%.
In currency markets, the yen led gains among major peers as the dollar fell to the lowest since October.
The S&P 500 shook off November’s volatility to secure a seventh straight monthly gain, with traders now heading into December awaiting key data before the Federal Reserve’s next policy meeting. Attention is also turning to the central bank’s leadership after President Donald Trump said he has chosen a successor to Chair Jerome Powell.
“The market is still hesitating a bit ahead of the upcoming macro data, and before the Christmas rally people typically expect,” said Andrea Tueni, head of sales trading at Saxo Banque France. “The drop in Bitcoin is weighing on sentiment and so are the comments from the BOJ.”
Traders raised the odds of a BOJ rate hike in December to about 80% after Ueda told business leaders that the central bank “will consider the pros and cons of raising the policy interest rate and make decisions as appropriate.” Any hike would be an adjustment in the degree of easing, with the real interest rate still at a very low level, he said.
Given Japan’s role as a major source of global liquidity, any shift toward policy normalization will have implications for carry trades.
“It’s a structural change in global markets that investors need to adapt to,” said Alexandre Baradez, chief market analyst at IG in Paris.
In commodities, oil rose as a key pipeline linking Kazakh fields to Russia’s Black Sea coast halted loading after one of its three moorings was damaged in an attack. Brent traded near $63 a barrel. Silver and copper also climbed after hitting fresh records on Friday.
In the US, traders are awaiting fresh readings on manufacturing after the open. Fed officials will also receive a dated print of their preferred inflation gauge this week ahead of their final policy meeting of the year. Other data due include ADP private employment figures for November.
Meanwhile, White House economic adviser Kevin Hassett signaled markets were ready for the announcement of a new Fed chair. People familiar with the matter last week said that Hassett was seen as the likely choice to succeed Powell. Speaking on CBS’ Face the Nation on Sunday, he declined to address whether he considers himself the front-runner.
While the Fed enters its pre-meeting blackout period, Powell and Governor Michelle Bowman are scheduled to speak. They are barred from commenting on the economic outlook or policy.
“December could prove more challenging than many expected, especially for those who thought last month’s 5% dip was the long-awaited correction,” wrote Ipek Ozkardeskaya, a senior analyst at Swissquote. “With Fed funds futures pricing nearly a 90% chance of a 25bp cut, there isn’t much room left for additional dovish fuel.”
What Bloomberg Strategists Say…
“Even after Bitcoin’s latest slide below $86,000, a glance at the Fear and Greed indicator shows that the selling pressure isn’t about to relent. Bitcoin’s slide in the second half of November coincided with deteriorating sentiment, as implied by the indicator. In fact, it dropped far more than Bitcoin did, which often happens when markets are stretched and positioning is aggressively unwound.”
— Nour Al Ali, Markets Live strategist. For full analysis, click here.
Corporate News
Nvidia Corp. has invested $2 billion into chip-design software maker Synopsys Inc.’s stock as part of an engineering and design partnership. Merck & Co. starts an eight-part debt offering. Concerns are rising that Strategy Inc. soon may be forced to sell some of its roughly $56 billion cryptocurrency haul if token prices continue to fall, leading its shares to wobble in pre-market trading. Barrick Mining Corp. is exploring an initial public offering of its North American gold assets as the Canadian mining company grapples with operational issues and cost blowouts. The shares rose more than 4% in early trading. Airbus SE said the vast majority of the about 6,000 A320-family aircraft impacted by a software glitch have received the necessary modification over the weekend, helping the European planemaker sidestep a wider disruption in what has become the company’s largest recall to date.
Stocks
S&P 500 futures fell 0.6% as of 8:27 a.m. New York time Nasdaq 100 futures fell 0.9% Futures on the Dow Jones Industrial Average fell 0.4% The Stoxx Europe 600 fell 0.5% The MSCI World Index was little changed Currencies
The Bloomberg Dollar Spot Index fell 0.3% The euro rose 0.4% to $1.1642 The British pound rose 0.2% to $1.3265 The Japanese yen rose 0.9% to 154.78 per dollar Cryptocurrencies
Bitcoin fell 5.7% to $85,990.54 Ether fell 6.6% to $2,823.49 Bonds
The yield on 10-year Treasuries advanced four basis points to 4.05% Germany’s 10-year yield advanced five basis points to 2.74% Britain’s 10-year yield advanced four basis points to 4.48% Commodities
West Texas Intermediate crude rose 0.9% to $59.10 a barrel Spot gold rose 0.4% to $4,257.05 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Shikhar Balwani and James Hirai.
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