Stocks Hover as Traders Brace for September Swings: Markets Wrap

(Bloomberg) — Global equities hovered near record highs on Monday as investors prepared for what’s typically considered the most challenging month for stocks.

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Europe’s Stoxx 600 index pared most losses from earlier in the session after closing at an all-time high on Friday. Volkswagen AG rose 1.3% after the automaker said it’s considering unprecedented factory closures in Germany, while Rightmove Plc surged 27% in London on the back of takeover interest from Rupert Murdoch’s REA Group Ltd.

US equity futures were little changed. The dollar edged higher after its worst month this year, while cash Treasuries were closed for the US Labor Day holiday. Mexican stocks gained while Brazilian assets retreated.

Historically, September has been a particularly poor month for stocks over the past four years, according to data compiled by Bloomberg. Wall Street’s fear gauge – the Cboe Volatility Index, or VIX – has risen each September since 2021.

The trend could persist, especially with the upcoming US jobs report on Friday, which will provide crucial insights into how quickly or slowly the Federal Reserve might cut rates and as the US election campaign gets into full swing. Traders are pricing the US easing cycle will begin this month, with a roughly one-in-four chance of a 50 basis-point cut, according to data compiled by Bloomberg.

“I think the market is pretty well versed with what it thinks is going to happen — there will be some kind of cut,” Fiona Boal, global head of equities at S&P Dow Jones Indices, told Bloomberg Television. “As we move through autumn, we will see the VIX move more to thinking about the markets, thinking about political issues.”

JPMorgan Chase & Co. strategists cautioned that the equity market rally could stall even if the Fed initiates a rate cut. Any policy easing would be in response to slowing growth, while the seasonal trend for September would be another impediment, the team led by Mislav Matejka wrote in a note.

“We are not out of the woods yet,” Matejka said, reiterating his preference for defensive sectors against the backdrop of a pullback in bond yields. “Sentiment and positioning indicators look far from attractive, political and geopolitical uncertainty is elevated, and seasonals are more challenging.”

Jobs data potentially pointing to a very gradual cooling down of the US labor market could lead traders to adjust their expectations for rate cuts to the benefit of the dollar, according to to Valentin Marinov, head of G-10 FX strategy at Credit Agricole CIB.

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“The markets may be leaning too dovish into the September Fed meeting,” Marinov told Bloomberg Television. “The dollar could recoup some ground once the markets realized that the Fed will move more cautiously.”

A gauge for Asian stocks retreated on the back of heightened concerns about the health of the economy in China, where a prolonged property market slump is curbing domestic demand.

“I think there’s a huge problem — by now everybody recognizes that,” Hao Ong, chief economist at Grow Investment Group, told Bloomberg’s David Ingles and Yvonne Man in an interview. “The government needs to do substantially more.”

In commodities, oil fluctuated between small gains and losses as traders weigh a planned production increase from OPEC+ next month, economic headwinds in China and lower output in Libya.

Key events this week:

US markets closed for Labor Day holiday, Monday

South Korea CPI, Tuesday

Switzerland GDP, CPI, Tuesday

South Africa GDP, Tuesday

US construction spending, ISM Manufacturing index, Tuesday

Mexico unemployment, Tuesday

Brazil GDP, Tuesday

Chile rate decision, Tuesday

Australia GDP, Wednesday

China Caixin services PMI, Wednesday

Bloomberg CEO Forum in Jakarta, Wednesday

Eurozone HCOB services PMI, PPI, Wednesday

Poland rate decision, Wednesday

Fed’s Beige Book, Wednesday

Canada rate decision, Wednesday

South Korea GDP, Thursday

Malaysia rate decision, Thursday

Philippines CPI, Thursday

Taiwan CPI, Thursday

Thailand CPI, Thursday

Eurozone retail sales, Thursday

Germany factory orders, Thursday

US initial jobless claims, ADP employment, ISM services index, Thursday

Eurozone GDP, Friday

US nonfarm payrolls, Friday

Canada unemployment, Friday

Chile CPI, Friday

Colombia CPI, Friday

Some of the main moves in markets:

Stocks

S&P 500 futures were little changed as of 2:27 p.m. New York time

Futures on the Dow Jones Industrial Average were little changed

The MSCI World Index was little changed

Nasdaq 100 futures rose 0.1% to the highest since Aug. 27

The MSCI Asia Pacific Index fell 0.4%, more than any closing loss since Aug. 8

The MSCI Emerging Markets Index fell 0.3%, more than any closing loss since Aug. 27

S&P/BMV IPC rose 1.1%

The Ibovespa Index fell 0.7%

Currencies

The Bloomberg Dollar Spot Index was little changed

The euro rose 0.2% to $1.1070

The British pound rose 0.1% to $1.3145

The Japanese yen weakened 0.5%, falling for the fourth straight day, the longest losing streak since June 21

The offshore yuan slipped 0.4%, more than any closing loss since Aug. 15

The Mexican peso fell 0.3% to 19.79

The Brazilian real weakened 0.2% to 5.6209

Cryptocurrencies

Bonds

The yield on 10-year Treasuries was little changed at 3.90%

Germany’s 10-year yield advanced four basis points to 2.34%

Britain’s 10-year yield advanced four basis points to 4.05%

Commodities

West Texas Intermediate crude rose 0.7% to $74.04 a barrel

Spot gold fell 0.2% to $2,499.34 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Catherine Bosley, Sagarika Jaisinghani and Sebastian Boyd.

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