Stocks Reduce Selloff as Fed Rate Cut Bets Increase – Europe Market Wrap

A market selling frenzy subsided as traders raised expectations for Fed rate reduction amid rising economic concerns, just days before Trump’s deadline for reciprocal tariffs to take effect.

S&P 500 futures fell less than 2% on Monday, reversing the majority of a 5.5% drop the previous day. A $9.5 trillion drop in global asset value pushed the US equity benchmark to the verge of a bear market. Investors have sold risk and bought bonds, sending two-year rates down as high as 22 bps before paring the move. Markets anticipated 125 bps of easing by year-end, comparable to five quarter-point cuts.

The severity of swings in equities, rates, and various commodities has resulted in hedge firms receiving some of their highest margin calls since the COVID epidemic. The good news is that this forced de-risking may be nearing completion, giving US stocks a chance to rise in the American session when cash trading resumes.

Wall Street analysts are hurrying to moderate their expectations for US stocks as Trump’s sweeping tariffs threaten to upend the global economy.