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By Sinéad Carew and Tom Wilson
NEW YORK/ LONDON (Reuters) -MSCI’s global equities gauge and oil prices fell on Wednesday while safe-haven assets Treasuries and Japan’s yen were in demand as mixed batch of economic data drove concerns about slowing growth.
Crude oil futures settled lower for the third day in a row, including a more than 4% loss on Tuesday.
In U.S. Treasuries, yields fell and the closely watched yield curve between two-year and 10-year notes turned positive after data showed that U.S. job openings fell to a 3-1/2-year low in July.
On Tuesday, Wall Street stock indexes registered their biggest daily percentage drops since early August as investors took profits while weak U.S. manufacturing data did little to boost risk appetites.
On Wednesday, the S&P 500 was last down after spending the morning flitting between red and green as investors waited anxiously for the rest of the week’s data. Thursday will bring a reading on the U.S. services industry with jobless claims data.
Friday’s hotly anticipated August report for nonfarm payrolls is expected to provide the clearest clues as to the health of the U.S. economy and whether the Federal Reserve will cut interest rates this month by a quarter or a half a percentage point.
“In a historically weak month for stocks, investors are acting more cautious and more concerned about the growth outlook than the inflation outlook,” said Anthony Saglimbene, chief market strategist at Ameriprise Financial in Troy, Michigan.
Wednesday’s data was a mixed bag. A Commerce Department report showed new orders for U.S.-manufactured goods increased more than expected in July, boosted by defense aircraft. But demand elsewhere was moderate with borrowing costs high.
U.S. job openings in July dropped to their lowest level since January 2021, suggesting the labor market was losing steam and leading traders to add to bets that the Fed will deliver a half-a-percentage-point cut in rates at its meeting this month.
“The setup is changing. Maybe three-four months ago, markets would feel good about a 50 basis point cut. Now a 50 basis point cut would signal that growth is slowing more than expected and that the Fed is behind the curve,” said Ameriprise’s Saglimbene.
Also on Wednesday, Atlanta Federal Reserve President Raphael Bostic said the U.S. central bank must not keep interest rates too high much longer or it risks harming employment too much.
On Wall Street at 2:54 p.m. (1854 GMT) the Dow Jones Industrial Average fell 47.42 points, or 0.12%, to 40,889.51; the S&P 500 lost 16.20 points, or 0.29%, to 5,512.73; and the Nasdaq Composite lost 61.41 points, or 0.36%, to 17,074.89.
MSCI’s gauge of stocks across the globe fell 5.44 points, or 0.66%, to 814.03. Earlier in the day, Europe’s STOXX 600 index closed down 0.97%.
In foreign exchange markets, the dollar eased against most major currencies after the July U.S. job openings data tilted the odds further in favor of larger U.S. rate cuts while the yen benefited from a safe haven bid.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.32% to 101.37.
The euro was up 0.28% at $1.1074 while against the Japanese yen, the dollar weakened 1.05% to 143.94.
“Stock market instability and dropping U.S. yields have made the yen a strong performer,” said Marc Chandler, chief market strategist at Bannockburn Global Forex.
In Treasuries, the yield on benchmark U.S. 10-year notes fell 7.6 basis points to 3.768%, from 3.844% late on Tuesday. The 2-year note yield, which typically moves in step with interest rate expectations, fell 11.4 basis points to 3.7745%, from 3.888% late on Tuesday.
A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was last at a negative 0.9 basis points.
“The big event of the week comes in the form of Friday’s payrolls print,” said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets in New York. “That’s to a large extent going to give us the road map for what to expect from the Fed. The employment data is now overshadowing inflation as the biggest risk to near-term policy expectations.”
Crude oil prices fell on pessimism about demand in the coming months as crude producers offered mixed signals about supply increases. Lackluster data from the U.S. and China have added to persistent expectations for a weaker global economy.
U.S. crude settled down 1.6% at $69.20 a barrel while Brent settled at $72.70 per barrel, down 1.4%.
Gold prices reversed course to gain ground with help from a softer dollar and lower yields after the weak data on U.S. job openings. Spot gold added 0.05% to $2,494.07 an ounce.
(Reporting by Sinéad Carew, Saqib Iqbal Ahmed and Karen Brettell in New York, Tom Wilson, Dhara Rhanasinghe in London; Rae Wee in Singapore and Tom Westbrook in Sydney; Editing by Sam Holmes, Barbara Lewis, Mark Potter, William Maclean and Jonathan Oatis)
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