5 Things You Need to Know to Start Your Day: Americas

Good morning. Stocks wilt on bets the Fed might have to keep rates on hold for longer, while a policy maker questions if the central bank’s [View in browser]( [Bloomberg]( Good morning. Stocks wilt on bets the Fed might have to keep rates on hold for longer, while a policy maker questions if the central bank’s main tool has become less effective. Here’s what’s moving markets. — [David Goodman]( Want to receive this newsletter in Spanish? [Sign up to get the Five Things: Spanish Edition newsletter](. Stocks slip US stocks headed for their first weekly decline in more than a month as traders pushed back expectations for the Federal Reserve’s first interest rate cut. That dynamic — which outweighed the impact of a [surge in Nvidia]( —  [hurt equities around the world]( on Friday, and has also sent the dollar and Treasury yields higher this week. Swaps now point to the first rate cut by the Fed in December, instead of November, with the latest move coming after stronger-than-expected US business activity data on Thursday. Less effective Federal Reserve Bank of Atlanta President Raphael Bostic offered more reason to think rates may stay higher for longer. Yesterday he said monetary policy has been [less effective in slowing growth](than in previous cycles. We could see more twists and turns in traders’ outlook today, as the US rounds off the week with a batch of durable goods and sentiment data. There’s also one more Fed speaker to hear from in the form of Christopher Waller. Carry on Not all central banks are on the same path though, and exploiting differences in the interest rates is set to become one of the most popular [investment strategies]( this summer. Strategists across Wall Street are touting carry trades, which harvest the extra income on higher-yielding currencies and bonds, and thrive in calm markets when there’s a lower risk of wild price swings wiping out profits. To name just two examples, UBS recommends selling the Swiss franc to buy US and Australian dollars, while Pictet Asset Management is locking in high yields with local-currency bonds from Mexico and Brazil.  UK election Traders, meanwhile, have given a cautious welcome to the news of the UK’s early election. Pound investors think that the July vote removes any outside chance of a June rate cut from the BOE, potential giving sterling’s peer-beating [rally another boost](, while stock bulls think it could boost the FTSE 100, partly by removing some of the “Brexit premium” that has dogged UK assets since 2016. Generally, as City of London executives told Bloomberg this week, it seems markets are [intensely relaxed]( about the prospect of a Labour victory that polls suggests is coming. Segantii drama Simon Sadler’s Segantii hedge fund is [shutting down](and returning capital to investors after an insider trading charge in Hong Kong sparked concerns about a flood of redemptions. The decision marks the end of a 16-year run for one of the largest and most successful hedge funds in Asia that generated returns long envied by industry. For a full account of its rise and fall, check out today’s [Bloomberg Big Take.]( What we’ve been reading This is what’s caught our eye over the past 24 hours. - FTSE 100 heads for[longest losing run]( since February. - [Inclement UK weather]( sends retail sales plunging. - Archegos sent Goldman [$470 million in error]( amid collapse. - [Bird stands down]( as Abrdn CEO after tumultuous tenure. - Citi, HSBC, Barclays ramp up demands for [five days in office]( And finally, here's what Katie’s interested in this morning I’ve [opined]( before on the difficulty of timing the Treasury curve steepener, which Goldman Sachs Asset Management called the “[easiest]( trade out there in rates” in its year-ahead outlook. Nearly halfway into 2024, it’s still not working. The spread between 2- and 10-year yields sunk to -46 basis points on Tuesday, hovering near the most inverted levels of the year. While traders expected the curve to normalize this year as the Federal Reserve’s rate cutting cycle drew closer, that expectation has been repeatedly [pushed out](, extinguishing any meaningful steepening impulse. “The problem with the steepener in this cycle is that the market already prices — and has priced for a while — a full cutting cycle over 2 to 3 years,” Bank of America strategists including Mark Cabana wrote in a note this week. While it’s not their base case, betting on the 2-, 10-year curve to invert further works as a positive carry, out-of-consensus position given the risk that rates stay on hold for even longer than expected, they wrote. With two-year yields all but anchored in place by current rate cut pricing, that leaves a lot of heavy lifting for the long-end to bring the curve back into positive territory. It’s unlikely that would be the dynamic — a so-called bearish steepener —that un-inverts the curve, according to Ian Lyngen of BMO Capital Markets. “The real steepener will be a bull steepener,” said Lyngen, BMO’s head of US rates strategy. “The only bear steepener will be if inflation doesn’t cool and the Fed is forced to cut soon because of a massive spike in the unemployment rate, but even that wouldn’t necessarily translate into sustainably higher 10- and 30-year yields.” Katie Greifeld is an anchor for Bloomberg TV in New York. Follow her on X [@kgreifeld]( Like Bloomberg's Five Things? [Subscribe for unlimited access]( to trusted, data-based journalism in 120 countries around the world and gain expert analysis from exclusive daily newsletters, The Bloomberg Open and The Bloomberg Close. [Bloomberg Markets Wrap: The latest on what's moving global markets. Tap to read.]( Follow Us Like getting this newsletter? 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