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European stocks rise as US futures signal Caution: Markets close

(Bloomberg) — A gauge of global stocks edged lower after the best start to the year in a generation as investors weighed whether the rally had gone too far given the outlook for inflation, growth and earnings. European shares rose modestly.

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The MSCI ACVI index slipped for the first time in seven days after posting its biggest advance in the first two weeks of data since 1988. Futures on the S&P 500 and Nasdaq 100 fell at least 0.2% each. The dollar snapped a three-day losing streak. US spot markets are closed for the holiday. Bond yields across Europe rose.

While 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 profits. The World Bank last week added to the gloomy outlook, warning of “one of the sharpest slowdowns we have seen in five decades”.

“Fear of missing out is currently a key driver of stocks,” Credit Agricole CIB strategists led by Jean-Francois Parren wrote in a note. “The market is a little ahead of itself right now.”

Earnings will be a key catalyst moving forward as traders assess whether companies have been able to navigate the upside, 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 number of Fed officials will speak this week, providing more clues for investors. The annual meeting of the World Economic Forum begins in Davos, Switzerland, and speakers include the President of the European Central Bank Christine Lagarde and Kristalina Georgieva from the International Monetary Fund.

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

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

Bitcoin fell below $21,000 after a recovery over the weekend, when it surged amid optimism that it may have bottomed.

Elsewhere, iron ore fell after China promised to tighten price controls following a surge in the metal in recent months. Oil and gold fell.

Key events this week:

  • Scheduled to earn this week 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 on Monday in Davos

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

  • China Retail Sales, Industrial Production, GDP, Tuesday

  • American Empire State Manufacturing Survey, Tuesday

  • The Fed’s John Williams will speak on Tuesday

  • Eurozone CPI, Wednesday

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

  • Bank of Japan rate decision, Wednesday

  • The Federal Reserve releases its Beige Book on Wednesday

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

  • US housing starts, initial jobless claims, Philadelphia index, Thursday

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

  • Fed speakers include Susan Collins and John Williams on Thursday

  • Japan CPI, Friday

  • Prime Chinese loan interest rates, Friday

  • US Existing Home Sales, Friday

  • The IMF’s Kristalina Georgieva and the ECB’s Lagarde are speaking in Davos on Friday

Some of the main moves in the market:

Actions

  • The Stokk Europe 600 was up 0.3% at 1:01 p.m. London time

  • Nasdaq 100 futures down 0.3%

  • S&P 500 futures down 0.2%

  • Dow Jones Industrial Average futures fell 0.1%

  • MSCI Asia-Pacific index fell 0.2%

  • The MSCI Emerging Markets Index was little changed

Currencies

  • Bloomberg Dollar Spot Index rose 0.2%

  • The euro fell 0.1% to $1.0818

  • The Japanese yen weakened 0.4% to 128.40 per dollar

  • The offshore yuan fell 0.4% to 6.7417 per dollar

  • The British pound weakened 0.3% to $1.2191

cryptocurrencies

  • Bitcoin fell 0.5% to $20,810.78

  • Ether fell 0.7% to $1,541.1

Bonds

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

  • Germany’s 10-year yield rose two basis points to 2.19%

  • Britain’s 10-year yield rose four basis points to 3.41%

Commodities

  • Brent crude fell 0.5% to $84.83 a barrel

  • Spot gold fell 0.3% to $1,914.90 an ounce

This story was produced with help from Bloomberg Automation.

–With assistance from Tasia Sipahutar and Richard Henderson.

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©2023 Bloomberg LP

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