Global bonds rallied and stock markets were muted Monday, as sharp declines in manufacturing and services gauges across Europe fanned concerns about economic growth.
(Bloomberg) — Global bonds rallied and stock markets were muted Monday, as sharp declines in manufacturing and services gauges across Europe fanned concerns about economic growth.
Investors were wary of making big equity bets at the start of a week packed with major central bank policy decisions and corporate earnings. In Europe, advance readings of the Purchasing Managers’ Indexes showed the private-sector economy contracted more than anticipated in July in the euro area and slowed sharply in Britain.
The data highlights the quandary for policy-setters, with traders positioning for the Federal Reserve and the European Central Bank to raise interest rates this week and to signal whether more hikes are likely after record tightening campaigns.
Equity markets, meanwhile, are looking into their busiest earnings week this season, with more than 500 major companies worldwide due to report quarterly results, including US megacaps such as Alphabet Inc., and Meta Platforms Inc. The next few days will be crucial for investors, who will be watching to see if slowing economic momentum shows up on profit margins.
“Markets have entered a phase of anxious waiting, with two factors coming into play, central banks and earnings,” said Jeanne Asseraf-Bitton, head of research and strategy at BFT IM. “I’m not sure there will be a lot of surprises coming from the central banks so it’s really earnings that will be key. Valuations are expensive so earnings need to hold, margins need to hold.”
A Pivotal Earnings Week Looms for High-Flying Stock Markets
Bonds climbed, with the yield on German 10-year notes, the euro-area benchmark, sliding as much as seven basis points. UK yields fell 8 basis points, while Treasury yields also edged lower.
The data pushed the euro lower versus the dollar and as much as 0.8% lower against the Japanese yen.
Euro-Zone Private Sector Contracts in Dire Start to Quarter
In equity markets, Europe’s Stoxx 600 equity gauge traded modestly firmer, though Spanish equities underperformed after an inconclusive outcome in the election on Sunday. US stock-index futures posted modest gains.
Among individual movers, Mattel Inc. rose as much as much as 2.5% in premarket trading on Monday after Barbie became the top-grossing picture in US and Canadian cinemas, taking in $155 million in ticket sales. Warner Bros. Discovery Inc., the parent of the Hollywood studio that produced the movie, also advanced.
US mega-cap tech shares including Nvida Corp and Microsoft Corp also rose. The Nasdaq special rebalancing is unlikely to solve the problem of high market concentration, and index will remain too concentrated to be considered an actively managed diversified fund, according to Goldman Sachs strategists.
Some European corporate results highlighted weakening consumer demand. Among movers, Philips plunged as much as 7.7% after reporting a drop in order intake. Ryanair Holdings Plc fell after lowering its traffic prediction.
Later this week, the Bank of Japan is expected to stick to ultra-loose policy settings at its Friday meeting. The yen strengthened, however, with officials expected to consider sharply increasing their inflation forecast for this fiscal year.
Trading in China’s yuan was muted even after the country’s leaders signaled they will ease property policies.
Key events this week:
- US Conf. Board consumer confidence, Tuesday
- US new home sales, Wednesday
- FOMC rate decision, Fed Chair Powell news conference, Wednesday
- China industrial profits, Thursday
- ECB rate decision, Thursday
- US GDP, durable goods orders, initial jobless claims, wholesale inventories, Thursday
- Japan Tokyo CPI, Friday
- BOJ rate decision, Friday
- Eurozone economic confidence, consumer confidence, Friday
- US consumer income, employment cost index, University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
- The Stoxx Europe 600 rose 0.1% as of 11:15 a.m. London time
- S&P 500 futures rose 0.2%
- Nasdaq 100 futures rose 0.2%
- Futures on the Dow Jones Industrial Average rose 0.2%
- The MSCI Asia Pacific Index was little changed
- The MSCI Emerging Markets Index fell 0.3%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro fell 0.4% to $1.1082
- The Japanese yen rose 0.4% to 141.18 per dollar
- The offshore yuan fell 0.2% to 7.2009 per dollar
- The British pound fell 0.1% to $1.2835
Cryptocurrencies
- Bitcoin fell 2.7% to $29,317.5
- Ether fell 2.3% to $1,849.17
Bonds
- The yield on 10-year Treasuries declined three basis points to 3.81%
- Germany’s 10-year yield declined six basis points to 2.40%
- Britain’s 10-year yield declined nine basis points to 4.18%
Commodities
- Brent crude rose 0.9% to $81.76 a barrel
- Spot gold rose 0.2% to $1,965.79 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Michael Msika, Tassia Sipahutar and Phil Serafino.
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