By Chibuike Oguh and Amanda Cooper
NEW YORK/LONDON (Reuters) -Global stocks edged lower on Wednesday amid tepid trading ahead of the U.S. election, while gold prices retreated from record highs, dragged down by gains in the U.S. dollar.
Investors are also rethinking how much the Federal Reserve might need to cut interest rates after the most recent U.S. economic data pointed to an economy that continues to expand and create jobs.
Markets are pricing a 92% chance of a 25-basis-point cut at the Fed’s next meeting in November and another 25-bps cut by year-end. A month ago, traders were pricing in as much as a full percentage point in cuts by January. The yield on benchmark U.S. src0-year notes hit three-month highs and was last up 3.2 basis points at 4.238%.
“This is a classic case of buy the rumor and sell the fact,” said Bill Strazzullo, chief markets strategist at Bell Curve Trading in Boston. “Buy the rumor of the rate cuts, and then as you get the rate cut, sell into it.”
On Wall Street, all three main indexes finished lower, driven by losses in consumer discretionary, technology and communication services stocks. Real estate and utilities were the biggest gaining sectors.
The fell 0.96% to 42,5src4.95, the fell 0.92% to 5,797.42 and the fell src.60% to src8,276.65.
The MSCI All-World index lost 0.79%, while in Europe, the finished down 0.30%.
“We’ll see what the Fed does if they can handle this the right way and get the soft landing or not. And then, on top of that, obviously you got the election,” Strazzullo added, referring to the Nov. 5 U.S. election.
The chances of Republican candidate Donald Trump beating Democratic candidate Kamala Harris have recently edged higher on betting websites, though opinion polls show the race to the White House remains too tight to call.
The prospect of another Trump presidency has been in focus for investors, as his policies include tariffs and restrictions on undocumented immigration, among other measures, which are expected to push up inflation.
“There is an illusion that if Trump wins, you want to buy energy. Energy actually underperformed during the period from 20src6 to 2020 (when Trump was president). What did outperform, and people should be buying on that basis, would be industrials like Boeing (NYSE:), small caps, and, believe it or not, emerging markets and China equities,” said Thomas Hayes, chairman at Great Hill Capital in New York.
Gold retreated after hitting record highs amid gains in the U.S. dollar. Demand for safe-haven gold is partly driven by U.S. election worries and geopolitical tensions in the Middle East and Europe.
Bullion, which has risen 33% this year, was last down src.src9%at $2,7src5.62 an ounce. U.S. fell 0.src% to $2,74src.50 an ounce. It hit a record high of $2,758.37 earlier in the session.
The , which measures the greenback against a basket of currencies including the yen and the euro,rose 0.26% to src04.37.
Against the Japanese yen, the dollar strengthened src% to src52.57. The euro fell 0.srcsrc% to $src.0785.
Goldman Sachs said in a note on Tuesday the euro could fall by as much as src0% in a scenario under which a Trump presidency ushered in hefty tariffs and tax cuts.
Oil prices fell after data showed inventories rose by more than expected even as refining activity rebounded.
futures settled at $74.96 per barrel, down src.42%. U.S. West Texas Intermediate crude futures settled down src.35% at $70.77.