European Stocks Rise as US Futures Signal Watch Out: Markets Wrap

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

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The MSCI ACWI index fell for the first time in seven days after the biggest increase in its 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 broke a three-day losing streak. US spot markets were closed for a holiday. Bond yields across Europe rose.

While inflation in the US appears to have peaked, aggressive policy tightening by the Federal Reserve and other central banks threatens to push the global economy into a recession that could hurt corporate earnings. Adding to the gloomy outlook last week, the World Bank warned of “one of the sharpest slowdowns we’ve seen in the past five decades.”

“The fear of missing out is a major driver for equities right now,” Credit Agricole CIB strategists led by Jean-François Paren wrote in a note. “The market is getting ahead of things a bit now.”

Earnings will be an important catalyst going forward as traders assess whether companies were able to handle headwinds including higher interest rates. The busy week will also be marked by corporate gains, including Wall Street heavyweights Goldman Sachs Group Inc. and Morgan Stanley.

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

Meanwhile, Japanese markets continued to be driven by speculation about a shift in monetary policy, with the Topix index trading lower as the yen’s recovery weighed on exporters.

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

Bitcoin fell below $21,000 after a rally over the weekend, as it rose amid optimism it may have bottomed out.

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

Main events this week:

  • This week’s earnings include: Charles Schwab, Discover Financial, Goldman Sachs, HDFC Bank, Interactive Brokers, Investor AB, Morgan Stanley, Netflix, Procter & Gamble, Prologis, State Street

  • The World Economic Forum begins Monday in Davos

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

  • China retail sales, industrial production, GDP, Tuesday

  • US Empire State Manufacturing Survey, Tuesday

  • Fed’s John Williams speaks Tuesday

  • Eurozone CPI, Wednesday

  • US Retail Sales, PPI, Industrial Production, Business Inventories, MBA Mortgage Applications, Cross Border Investments, Wednesday

  • Bank of Japan interest rate decision, Wednesday

  • Federal Reserve releases Beige Book on Wednesday

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

  • US housing starts, first jobless claims, Philadelphia Fed index, Thursday

  • ECB report from its December policy meeting and President Christine Lagarde at a panel in Davos, Thursday

  • Fed speakers include Susan Collins and John Williams, Thursday

  • Japan CPI, Friday

  • Chinese loan first interest rates, Friday

  • Sale of existing homes in the US, Friday

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

Some of the major moves in markets:

Shares

  • The Stoxx Europe 600 was up 0.3% from 11:47am London time

  • Nasdaq 100 futures fell 0.3%

  • S&P 500 futures fell 0.2%

  • Futures on the Dow Jones Industrial Average 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 was 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 USD 1,544.76

Bonds

  • The yield on 10-year government bonds was little changed at 3.50%

  • German 10-year yields rose by two basis points to 2.18%

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

Raw materials

This story was created with the help of Bloomberg Automation.

–With help from Tassia Sipahutar and Richard Henderson.

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