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Stock Futures Fluctuate Amid Grim Economy Warning: Markets Wrap

(Bloomberg) — U.S. futures fluctuated and European stocks turned lower as investors weighed a grim economic forecast by the OECD with the expectation of more support from the Federal Reserve. The dollar slipped.

Contracts on the S&P 500 and Dow Jones Industrial Average swung between gains and losses after the international group forecast a 6% contraction in the global economy this year. Nasdaq 100 futures traded in the green all morning. The Stoxx Europe 600 index was lower after reversing an earlier advance. Treasuries extended gains. Crude oil retreated.

While the Fed is expected to keep its benchmark interest rate unchanged after its meeting on Wednesday, investors will be looking for reassurance on the central bank’s willingness to keep providing extraordinary support for the economy. Policy makers may also comment on potentially targeting yields for some Treasury maturities. Markets are balancing that with the OECD’s assessment that the economic hit from the pandemic may be deeper than anticipated.

“Markets have been cautious before the Fed meeting and technical indicators are stretched after the recent powerful rally,” strategists at Credit Agricole CIB led by Jean-Francois Paren said in a client note. “For now, it sounds like yield-curve control is the necessary condition for markets to further rally, but it may not be sufficient by itself as it also highlights the fragility of the system we are now living in.”

America’s top infectious-disease specialist, Anthony Fauci, added to the unease with a warning that the coronavirus outbreak is far from over.

What to watch this week:

The Fed’s next policy decision is Wednesday. Officials are expected to leave rates above zero.Euro-area finance ministers meet Thursday to discuss the EU’s recovery package and Eurogroup presidency succession.

These are some of the main moves in markets:

Stocks

The Stoxx Europe 600 Index fell 0.2% as of 7:10 a.m. New York time.Futures on the S&P 500 Index were little changed.Nasdaq 100 Index futures increased 0.4%.The MSCI Asia Pacific Index climbed 0.4%.

Currencies

The Bloomberg Dollar Spot Index dipped 0.5%.The euro gained 0.3% to $1.1369.The British pound advanced 0.3% to $1.277.The Japanese yen strengthened 0.4% to 107.32 per dollar.

Bonds

The yield on 10-year Treasuries dipped three basis points to 0.79%.The yield on 30-year Treasuries dropped three basis points to 1.54%.Germany’s 10-year yield declined one basis point to -0.32%.Britain’s 10-year yield fell three basis points to 0.308%.

Commodities

Brent crude decreased 2.1% to $40.33 a barrel.Gold strengthened 0.2% to $1,719.20 an ounce.LME aluminum gained 1.7% to $1,632 per metric ton.

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