New York: A global stock index fell and US Treasury yields edged up on Monday as investors prepared for the US Federal Reserve to stick with its aggressive approach to raising interest rates this week.
The dollar advanced across the board.
Even though they declined for the day, major U.S. stock indexes posted strong gains for October, with the Dow's percentage gain in October its strongest for any month since 1976. The Dow jumped about 14 per cent for the month.
The Fed, which begins its two-day meeting Tuesday, is expected to deliver a fourth straight 75-basis-point rate hike on Wednesday in its attempt to tame inflation. Investors will also focus on the communication of the outlook.
Some investors have been entertaining the idea the Fed could pause its rate hikes or at least shift to a less aggressivee hiking campaign, and those views have helped support stocks recently. Others see little evidence to support that view.
"The bond market has continued to doubt that the Fed is ready to either slow interest rate increases or actually move to the sidelines," said Anthony Saglimbene, chief market strategist at Ameriprise Financial in Troy, Michigan, adding that markets had gotten ahead of themselves.
Investors are expecting another 75 basis-point rate hike by the Bank of England later this week as well.
Investors also were digesting data released Monday that showed eurozone inflation came in hotter than expected and also, separately, data that showed China's factory activity unexpectedly fell in October.
The Dow Jones Industrial Average fell 128.85 points, or 0.39 per cent, to 32,732.95, the S&P 500 lost 29.08 points, or 0.75 per cent, to 3,871.98 and the Nasdaq Composite dropped 114.31 points, or 1.03 per cent, to 10,988.15.
Quarterly results from S&P 500 tech and growth companies have so far been mixed this earnings season, adding to recent volatility in U.S. stocks.
The pan-European STOXX 600 index rose 0.35 per cent and MSCI's gauge of stocks across the globe shed 0.44 per cent.
The yield on two-year notes, which typically moves in step with rate expectations, was up 8.1 basis points at 4.503 per cent while the 10-year yield rose 7.1 basis points to 4.081 per cent.
U.S. wheat futures jumped, hitting a two-week high, and corn rose more than 1 per cent as Russia's withdrawal from a Black Sea export agreement raised concerns over global supplies.
Benchmark CBOT wheat futures hit a record high of $13.63-1/2 a bushel in March.
GRAINS REPORT In currencies, the dollar rose 0.8 per cent against the struggling yen to 148.62 yen. For the month of October, the dollar was up 2.7 per cent, on track to post its third monthly gain versus the Japanese currency.
On Monday, Japan's finance ministry said it spent a record $42.8 billion on currency intervention this month to prop up the yen.
The euro dropped 0.8 per cent against the dollar to $0.9887 . Elsewhere, the Chinese yuan slumped after data released on Monday showed China's factory activity unexpectedly fell in October.
The dollar was last 0.9 pe cent higher against the yuan traded offshore at 7.336.
Brazil's currency and main stock index rallied Monday, a day after leftist Luiz Inacio Lula da Silva won the country's presidential election.
The Brazilian real gained more than 2 per cent against the dollar after having fallen 2 per cent overnight. The Bovespa stock index sank 2 per cent at the opening and ended the session up 1.3per cent.
In the energy market, oil prices fell as investors expected U.S. production could increase. Brent crude futures dropped 94 cents, or 0.98 per cent, to $94.83 a barrel. U.S. West Texas Intermediate crude fell $1.37 to $86.53 a barrel, a 1.6 per cent loss.
Investors will also focus on the communication of the outlook, look for any signals the Fed may be considering a deceleration in interest rate hikes in the future.