(Bloomberg) — Gilts fell and the pound erased gains after the Bank of England confirmed it will end its emergency bond-buying program on Friday.
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The confirmation followed some confusion on Wednesday as to whether the Oct. 14 deadline would be upheld. The Financial Times reported earlier that the BOE told some lenders it was prepared to extend support to stave off a crisis in UK pensions, but said the conversations took place before Governor Andrew Bailey vowed to end purchases as scheduled.
A report that the UK economy shrank unexpectedly in August for the first time in two months also weighed on gilts, while 10-year Treasury yields fell after closing at a decade high on Tuesday.
The dollar was little changed as investors look to earnings and US data for clues on Federal Reserve policy, while President Joe Biden said a recession was possible. US futures advanced, while European and Asian stocks fell.
“I don’t see any imbalances yet that would cause a pivot from the Fed,” Citigroup Inc. economist Veronica Clark said on Bloomberg Television. “The Fed will pay attention to global financial stability concerns, a strong dollar is part of that, but it’s ultimately going to be domestic conditions and what the Fed is seeing on inflation.”
Kristina Hooper, chief global market strategist for Invesco, said in a note that while world economy is slowing after rate hikes, there is yet to be a meaningful decline in inflation. “This is an extraordinary monetary policy tightening environment and we are waiting to see if something breaks globally,” she said. “The UK has come close.”
Elsewhere, gold rose and oil was little changed.
NATO defense chiefs are set to gather in Brussels on Wednesday to discuss how to better protect critical infrastructure, ramp up weapons production and maintain support for Ukraine.
Key events this week:
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Earnings this week include: JPMorgan Chase & Co., Citigroup Inc., Morgan Stanley, BlackRock Inc., Delta Air Lines Inc., UnitedHealth Group Inc., U.S. Bancorp, Wells Fargo & Co.
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FOMC minutes for September meeting, Wednesday
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US PPI, mortgage applications, Wednesday
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OPEC Monthly Oil Market Report, Wednesday
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Fed’s Michelle Bowman and Neel Kashkari speak
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ECB’s Christine Lagarde speaks
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US CPI, initial jobless claims, Thursday
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G-20 finance ministers and central bankers meet, Thursday
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China CPI, PPI, trade, Friday
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US retail sales, business inventories, University of Michigan consumer sentiment, Friday
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BOE emergency bond buying is set to end, Friday
Some of the main moves in markets:
Stocks
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The Stoxx Europe 600 fell 0.8% as of 8:45 a.m. London time
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Futures on the S&P 500 rose 0.3%
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Futures on the Nasdaq 100 rose 0.5%
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Futures on the Dow Jones Industrial Average rose 0.2%
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The MSCI Asia Pacific Index fell 2.2%
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The MSCI Emerging Markets Index fell 2.3%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro was little changed at $0.9711
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The Japanese yen fell 0.2% to 146.17 per dollar
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The offshore yuan was little changed at 7.1729 per dollar
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The British pound was little changed at $1.0962
Cryptocurrencies
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Bitcoin rose 0.4% to $19,099.74
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Ether rose 1% to $1,294.5
Bonds
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The yield on 10-year Treasuries declined two basis points to 3.93%
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Germany’s 10-year yield advanced four basis points to 2.34%
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Britain’s 10-year yield advanced three basis points to 4.47%
Commodities
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Brent crude fell 0.1% to $94.15 a barrel
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Spot gold rose 0.2% to $1,669.05 an ounce
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Read More: UK Gilts Fall as BOE Confirms End to Bond Buying: Markets Wrap