European stocks wavered and US equity futures slipped as traders weighed the latest corporate earnings reports before a slew of economic data this week that may help illuminate the path for interest rates.
(Bloomberg) — European stocks wavered and US equity futures slipped as traders weighed the latest corporate earnings reports before a slew of economic data this week that may help illuminate the path for interest rates.
The Stoxx Europe 600 fluctuated in early trading, with energy companies leading declines as crude prices added to last week’s slump. Royal Philips NV jumped more than 12% after easing supply-chain pressures helped drive strong first-quarter earnings for the Dutch medical technology firm.
Contracts for the S&P 500 and the Nasdaq 100 extended losses following a muted end to trading last week. MSCI Inc.’s Asia Pacific Index was on course for the lowest close since the end of March. Treasury yields fell and a gauge of the dollar was steady.
Leveraged investors boosted net short positions on 10-year Treasury futures to a record 1.29 million contracts as of April 18, data from the Commodity Futures Trading Commission show. That’s an indication they think the Federal Reserve will keep raising rates to tackle inflation. Big-tech earnings this week will be parsed for insights into the effect of higher borrowing costs and a struggling economy.
“Earnings estimates for the back half of the year in the US remain too optimistic; we do still see a mild recession ahead,” Laura Cooper, a senior investment strategist at BlackRock International Ltd., said on Bloomberg TV. “So we are really more selective in our equity space and crucially, earnings will provide some color on guidance going forward and that could tilt out view a bit.”
Swaps markets continue to see Fed rates peaking in coming weeks before a series of cuts later this year. US GDP data is forecast to reveal slowing growth, while the so-called core PCE deflator, the central bank’s preferred inflation gauge, is expected to show price growth cooled.
“We should take the Fed at face value when they say rates are not going lower this year,” said Kieran Calder, head of equity research for Asia at Union Bancaire Privée in Singapore, on Bloomberg Television. “Inflation, especially core inflation, remains really sticky.”
Elsewhere this week, the euro-area will publish GDP data and there will be a policy decision in Sweden. Data Monday showed Germany’s business outlook unexpectedly improved for a sixth month as the economy gradually recovers from the energy shock.
Meanwhile, new Bank of Japan Governor Kazuo Ueda will hold his first policy meeting later this week. The central bank is planning to review and inspect policies taken over the past decades as soon as this week’s meeting, Sankei newspaper reported Sunday.
A global gauge of cross-asset volatility remained near the lowest since February 2022, while other volatility gauges, such as the VIX Index and the ICE BofA MOVE Index, are also well below recent highs.
The situation may not last. Volatility is likely to pick up due to the lack of clarity after the Fed’s May meeting, said Priya Misra, global head of rates strategy at TD Securities in New York. “There’s enough uncertainty on the economic outlook as well as how the Fed might respond,” she said on Bloomberg Radio.
A busy week for earnings will include The Cocal Cola Co., First Republic Bank and First Citizens Bank, the acquirer of Silicon Valley Bank. Tech companies will also be in the spotlight with those to report including Microsoft Corp., Meta Platforms Inc. and Amazon.com Inc.
Credit Suisse Group AG earlier Monday reported 61.2 billion francs ($69 billion) of outflows in the first quarter and net revenue of 18.47 billion francs. The bank said it expects a substantial loss in wealth management for this year.
Key events this week:
- ECB Governing Council members Boris Vujcic, Francois Villeroy de Galhau, speak at events, Monday
- US new home sales, consumer confidence, Tuesday
- South Korea GDP, Tuesday
- Australia CPI, Wednesday
- Sweden rate decision, Wednesday
- Eurozone economic, consumer confidence, Thursday
- US initial jobless claims, GDP, Thursday
- Bank of Japan meets on interest rates, Friday
- Euro-area GDP, Friday
- US personal income, Friday
Earnings highlights:
- Monday: Coca-Cola, First Republic
- Tuesday: Pepsi, General Motors, General Electric, McDonalds, Microsoft, UBS, UPS
- Wednesday: Boeing, Meta, Hilton
- Thursday: Amazon, American Airlines, Intel, Mastercard, Southwest Airlines, Hershey, Honeywell, Barclays
- Friday: First Citizens Bank, acquirer of Silicon Valley Bank
Some of the main moves in markets:
Stocks
- The Stoxx Europe 600 was little changed as of 9:36 a.m. London time
- S&P 500 futures fell 0.4%
- Nasdaq 100 futures fell 0.4%
- Futures on the Dow Jones Industrial Average fell 0.3%
- The MSCI Asia Pacific Index fell 0.2%
- The MSCI Emerging Markets Index fell 0.3%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0993
- The Japanese yen fell 0.1% to 134.36 per dollar
- The offshore yuan was little changed at 6.9037 per dollar
- The British pound was little changed at $1.2437
Cryptocurrencies
- Bitcoin fell 0.5% to $27,380.69
- Ether fell 0.5% to $1,840.1
Bonds
- The yield on 10-year Treasuries declined three basis points to 3.54%
- Germany’s 10-year yield declined one basis point to 2.47%
- Britain’s 10-year yield advanced one basis point to 3.77%
Commodities
- Brent crude fell 0.5% to $81.24 a barrel
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Tassia Sipahutar and Allegra Catelli.
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