European equities and US stock-index futures fell amid signs central banks will turn more hawkish and as investors focused on earnings reports from Wall Street banks.
(Bloomberg) — European equities and US stock-index futures fell amid signs central banks will turn more hawkish and as investors focused on earnings reports from Wall Street banks.
Contracts on the S&P 500 and Nasdaq 100 indexes slipped at least 0.3% each as US markets were set to reopen after a holiday. The Stoxx Europe 600 Index was dragged by technology and automobile-parts shares. Treasuries slid, with yield curves steepening. The dollar fluctuated between gains and losses, while gold declined. Freeport-McMoRan Inc. declined in premarket New York trading amid a muted demand outlook for copper.
Investors had their expectations for a pause in central-bank tightening damped by European Central Bank Chief Economist Philip Lane, who said interest rates will have to move into restrictive territory to bring inflation back to target. BlackRock Inc. Vice Chairman Philipp Hildebrand said he saw no chance of policy easing this year. Data including a record increase in UK wages signaled further rate hikes are necessary.
Several Federal Reserve officials will be speaking this week, providing more clues on their policy priorities. The World Economic Forum’s annual meeting kicks off in Davos, Switzerland, with speakers including European Central Bank President Christine Lagarde and the International Monetary Fund’s Kristalina Georgieva.
US corporate earnings may set the tone for traders this week as the reporting season moves up a gear. Goldman Sachs Group Inc. and Morgan Stanley are set to release their results on Tuesday, yielding a clue on the health of the world’s largest economy. Of the 29 companies on the S&P 500 that have posted earnings so far, 24 have beaten analysts’ expectations.
However, UBS Wealth Management expects “quite a bit of downside here on the earnings” in the US, according to Hartmut Issel, head of Asia Pacific equities.
Freeport McMoRan slid 2.6% in early New York trading. Bloomberg Intelligence analysts predict copper could fall to $8,000 a ton from more than $9,000 now as physical demand indicators are weakening. The bullish momentum that’s taken the metal 9% higher this year won’t be sustained if demand signals don’t improve, they say.
The benchmark gauge for European shares fell for the first time in five days. Ocado Group Plc tumbled more than 5% after the online retailer forecast a decline in earnings from its joint venture with Marks & Spencer Group Plc, reflecting tight competition for grocery spending in the UK.
The dollar traded marginally stronger after swinging between gains and losses at least 16 times on Tuesday. The greenback is still trading near the lowest level since April, with China’s reopening bringing back risk sentiment and sparking the best start to a year for global equities in records going back to 1988.
The 10-year Treasury yield increased 6 basis points, compared with the two-year rate that 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 published.
Stocks trading in Hong Kong and mainland China closed in the red after China said its economic growth last year slowed as Covid restrictions hammered activity. But better-than-forecast fourth quarter and December data add to optimism it may be primed for a recovery.
Shares rose in Japan, while the yen slightly fell against the dollar as traders weighed the prospects of a possible change in policy 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 wagers that it will adjust its yield-curve control policy.
Key events this week:
- Earnings to include: Charles Schwab, Discover Financial, Goldman Sachs, Interactive Brokers, Investor AB, Morgan Stanley, Netflix, Procter & Gamble, Prologis, State Street
- US Empire State manufacturing survey, Tuesday
- Fed’s John Williams to speak, Tuesday
- Euro-zone CPI, Wednesday
- US retail sales, PPI, industrial production, business inventories, MBA mortgage applications, cross-border investment, Wednesday
- Bank of Japan rate decision, Wednesday
- Federal Reserve releases Beige Book, Wednesday
- Fed speakers include Raphael Bostic, Lorie Logan and Patrick Harker, Wednesday
- US housing starts, initial jobless claims, Philadelphia Fed index, Thursday
- ECB account of its December policy meeting and President Christine Lagarde on a panel in Davos, Thursday
- Fed speakers include Susan Collins and John Williams, Thursday
- Japan CPI, Friday
- China loan prime rates, Friday
- US existing home sales, Friday
- IMF’s Kristalina Georgieva and ECB’s Lagarde speak in Davos, Friday
Some of the main moves in markets:
Stocks
- The Stoxx Europe 600 fell 0.2% as of 10 a.m. London time
- S&P 500 futures fell 0.3%
- Nasdaq 100 futures fell 0.5%
- Futures on the Dow Jones Industrial Average fell 0.2%
- The MSCI Asia Pacific Index was little changed
- The MSCI Emerging Markets Index fell 0.4%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0819
- The Japanese yen fell 0.2% to 128.82 per dollar
- The offshore yuan fell 0.6% to 6.7831 per dollar
- The British pound rose 0.1% to $1.2210
Cryptocurrencies
- Bitcoin rose 0.2% to $21,171.29
- Ether fell 0.9% to $1,564.75
Bonds
- The yield on 10-year Treasuries advanced six basis points to 3.56%
- Germany’s 10-year yield advanced three basis points to 2.20%
- Britain’s 10-year yield advanced six basis points to 3.44%
Commodities
- Brent crude rose 0.5% to $84.85 a barrel
- Spot gold fell 0.5% to $1,907.33 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Tassia Sipahutar and Richard Henderson.
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