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European stocks rise as US futures signal caution: markets end

(Bloomberg) – A gauge of global equities was little changed after its best start to the year in a generation as investors assessed whether the rally had gone too far given the outlook for inflation, growth and earnings. European stocks rose.

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The MSCI ACWI index slid for the first time in seven days after posting the biggest gain in the first two weeks in data dating back to 1988. Futures on the S&P 500 and Nasdaq 100 indices fell at least 0.2% each. The dollar ended a three-day losing streak. US cash markets were closed for a holiday. Bond yields across Europe have climbed.

As US inflation appears to have peaked, aggressive policy tightening by the Federal Reserve and other central banks risks pushing the global economy into a recession that could hurt corporate earnings. The World Bank added to the bleak outlook last week, warning of “one of the sharpest downturns we’ve seen in the past five decades.”

“The fear of missing out is currently a key driver for equities,” Crédit Agricole CIB strategists led by Jean-Francois Paren wrote in a note. “The market is getting a bit ahead of itself right now.”

Earnings will be a key catalyst moving forward as traders assess whether companies have been able to weather headwinds including higher interest rates. The busy week will also be punctuated by corporate earnings, including Wall Street heavyweights Goldman Sachs Group Inc. and Morgan Stanley.

A host of Fed officials will speak this week, providing more clues for investors. The annual meeting of the World Economic Forum kicks off in Davos, Switzerland, with speakers including European Central Bank President Christine Lagarde and Kristalina Georgieva of the International Monetary Fund.

Meanwhile, Japanese markets continued to be driven by speculation over a change in monetary policy, with the Topix index trading lower as the rebound in the yen weighed on exporters.

Investors are on guard for another surprise from the Bank of Japan when it sets policy on Wednesday. The yen strengthened to levels last seen in May and the benchmark Japanese 10-year bond yield broke above the BOJ ceiling for a second day.

Bitcoin slipped below $21,000 after rebounding over the weekend, when it surged amid optimism it might have bottomed.

Elsewhere in the markets, iron ore fell after China pledged to tighten price surveillance following the metal’s surge in recent months. Oil and gold fell.

Key events this week:

  • Earnings this week are expected to include: Charles Schwab, Discover Financial, Goldman Sachs, HDFC Bank, Interactive Brokers, Investor AB, Morgan Stanley, Netflix, Procter & Gamble, Prologis, State Street

  • World Economic Forum kicks off in Davos on Monday

  • US markets closed for Martin Luther King Jr. Day, Monday

  • China retail sales, industrial production, GDP, Tuesday

  • Empire State Manufacturing Survey in the United States, Tuesday

  • The Fed’s John Williams will speak on Tuesday

  • Eurozone CPI, Wednesday

  • U.S. retail sales, PPI, industrial production, business stocks, MBA mortgage applications, cross-border investment, Wednesday

  • Bank of Japan rate decision Wednesday

  • Federal Reserve releases Beige Book on Wednesday

  • Fed speakers include Raphael Bostic, Lorie Logan and Patrick Harker on Wednesday

  • US Housing Starts, First Jobless Claims, Philadelphia Fed Index, Thursday

  • ECB debriefing from its December policy meeting and President Christine Lagarde during a panel in Davos on Thursday

  • Fed speakers include Susan Collins and John Williams on Thursday

  • Japan CPI, Friday

  • Chinese prime lending rates, Friday

  • Sales of existing homes in the United States, Friday

  • IMF’s Kristalina Georgieva and ECB’s Lagarde speak in Davos on Friday

Some of the major movements in the markets:

Shares

  • The Stoxx Europe 600 rose 0.3% at 11:47 am London time

  • Nasdaq 100 futures fell 0.3%

  • S&P 500 futures fell 0.2%

  • Dow Jones Industrial Average futures fell less than 0.1%

  • The MSCI Asia-Pacific index fell 0.2%

  • The MSCI Emerging Markets Index rose 0.1%

Currencies

  • The Bloomberg Dollar Spot Index rose 0.1%

  • The euro remained unchanged at $1.0830

  • The Japanese yen fell 0.3% to 128.24 per dollar

  • The offshore yuan fell 0.4% to 6.7430 per dollar

  • The British pound fell 0.1% to $1.2211

Cryptocurrencies

  • Bitcoin fell 0.3% to $20,837.78

  • Ether fell 0.5% to $1,544.76

Obligations

  • The 10-year Treasury yield was little changed at 3.50%

  • The German 10-year rate rose two basis points to 2.18%

  • The UK 10-year yield rose three basis points to 3.40%

Merchandise

This story was produced with assistance from Bloomberg Automation.

–With the help of Tassia Sipahutar and Richard Henderson.

Bloomberg Businessweek’s Most Read

©2023 Bloomberg LP

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