Markets

Stocks slide as traders fret over rates, earnings: Markets close

(Bloomberg) — European stocks and U.S. stock index futures fell amid signs that central banks will become more hawkish and as investors focused on earnings reports from Wall Street banks.

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S&P 500 and Nasdaq 100 contracts fell at least 0.3% each as the U.S. market was set to reopen after the holiday. The Stokk Europe 600 index pulled back the share of consumer goods, retail and media. Treasuries slid and yield curves steepened. The dollar fluctuated between gains and losses, while gold fell.

Investors had been expecting a pause in central bank tightening eased by European Central Bank chief economist Philip Lane, who said interest rates would need to move into restrictive territory to bring inflation back on target. Vice President of BlackRock Inc. Philipp Hildebrand said he saw no chance of policy easing this year. The data, which included a record wage increase in the UK, signaled that further rate hikes were necessary.

Several Federal Reserve officials will speak this week, giving more clues about their policy priorities. The World Economic Forum’s annual meeting begins in Davos, Switzerland, with speakers including European Central Bank President Christine Lagarde and Kristalina Georgieva of the International Monetary Fund.

US corporate earnings could set the tone for traders this week as the reporting season ramps up. Goldman Sachs Group Inc. and Morgan Stanley will announce its results on Tuesday, which will give an indication of the health of the world’s largest economy. Of the 29 S&P 500 companies that have reported earnings so far, 24 beat analysts’ expectations.

However, UBS Wealth Management expects a “fairly weak earnings side” in the US, according to Hartmut Issel, head of Asia Pacific.

The benchmark indicator for European shares fell for the first time in five days. Ocado Group Plc fell more than 8% after the online retailer forecast a drop in earnings from its joint venture with Marks & Spencer Group Plc, reflecting fierce competition for UK grocery spending.

The dollar traded slightly lower after swinging between gains and losses at least 13 times on Tuesday. The dollar is trading near its lowest level since April, and China’s reopening has restored risk-on sentiment and sparked the best start to a year for global stocks since 1988.

The 10-year Treasury yield increased 5 basis points, compared with the two-year rate, which rose 1 basis point. Bonds across Europe also fell. Oil contracts traded mixed as traders weighed the chances of a revival in Chinese demand after the nation’s growth data was released.

Shares in Hong Kong and mainland China were mostly in the red after China said its economic growth slowed last year as Covid restrictions hurt activity. But better-than-expected fourth-quarter and December data add to optimism that a recovery may be on the way.

Shares in Japan rose, while the yen weakened slightly against the dollar as traders weighed the prospect of a possible policy change by the Bank of Japan on Wednesday. The nation’s 10-year yield climbed above the central bank’s ceiling for a third day as traders added to bets it would adjust its yield curve control policy.

Key events this week:

  • Earnings that include: Charles Schwab, Discover Financial, Goldman Sachs, Interactive Brokers, Investor AB, Morgan Stanley, Netflix, Procter & Gamble, Prologis, State Street

  • 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 down 0.1% at 8:26 a.m. London time

  • S&P 500 futures down 0.3%

  • Nasdaq 100 futures down 0.4%

  • Dow Jones Industrial Average futures fell 0.2%

  • The MSCI Asia-Pacific Index was little changed

  • MSCI Emerging Markets index fell 0.4%

Currencies

  • The Bloomberg Dollar Spot Index was little changed

  • The euro rose 0.1% to $1.0833

  • The Japanese yen was little changed at 128.57 to the dollar

  • The offshore yuan fell 0.5% to 6.7734 per dollar

  • The British pound rose 0.2% to $1.2222

cryptocurrencies

  • Bitcoin rose 0.3% to $21,187.04

  • Ether fell 0.9% to $1,564.95

Bonds

  • The yield on 10-year Treasuries rose five basis points to 3.55%

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

  • Britain’s 10-year yield rose two basis points to 3.40%

Commodities

  • Brent crude rose 0.3% to $84.69 a barrel

  • Spot gold fell 0.3% to $1,910.17 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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