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European shares rise as signal of concern for US futures: Market overview


(Bloomberg) — The gauge of global stocks paused after its best start to a year in a generation as investors gauged whether the rally has gone too far given the outlook for inflation, growth and earnings. European shares rose.

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The MSCI ACWI index was little changed after posting its biggest advance for the first two weeks in data since 1988. S&P 500 and Nasdaq 100 futures fell at least 0.2 percent each. The dollar snapped a three-day losing streak. US spot markets were closed for a holiday. European stocks were boosted by gains in real estate companies.

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

“It’s been a pretty frantic start to the year, so investors may want to take a breather,” Craig Erlam, senior market analyst at Oanda Europe Ltd, wrote in a note. “The question now is whether earnings season will reinforce this new sense of hope or spoil the party before it’s really started.” A poor earnings season could undermine hopes for a soft landing, which looks more likely now than it has for many months.”

Earnings will be a key catalyst this week as traders assess whether companies have weathered headwinds, including higher interest rates. The busy period will also be highlighted by corporate earnings, including Wall Street heavyweight Goldman Sachs Group Inc. and Morgan Stanley.

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

Meanwhile, Japanese markets continued to be driven by speculation about a change in monetary policy, with the Topix index trading lower as the yen’s recovery 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 rose above the BOJ’s ceiling for a second day.

Bitcoin fluctuated between gains and losses on Monday, following a recovery over the weekend when it rose on optimism that it may have bottomed.

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

Key events this week:

  • Earnings this week are scheduled to 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 in Davos on Monday

  • US markets closed for Martin Luther King Day, Monday

  • China Retail Sales, Industrial Production, GDP, Tuesday

  • US Empire State Manufacturing Survey, Tuesday

  • The Fed’s John Williams will speak on Tuesday

  • Eurozone CPI, Wednesday

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

  • Bank of Japan rate decision Wednesday

  • The Federal Reserve releases the Beige Book, Wednesday

  • Fed speakers include Raphael Bostick, Laurie Logan and Patrick Harker, Wednesday

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

  • The ECB reports on 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

  • Key lending rates in China, Friday

  • US existing home sales, Friday

  • IMF’s Kristalina Georgieva and ECB’s Lagarde speak in Davos, Friday

Some of the major moves in the markets:

Stock up

  • S&P 500 futures were down 0.2% as of 1:03 p.m. New York time

  • Stoxx Europe 600 rose 0.5%

  • Dow Jones Industrial Average futures fell 0.1%

  • The MSCI World Index was little changed

  • Nasdaq 100 futures fell 0.4%

  • MSCI Asia Pacific Index fell 0.3%

  • The MSCI Emerging Markets Index was little changed

Currencies

  • The Bloomberg Dollar Spot index rose 0.2%

  • The euro fell 0.1% to $1.0814

  • The British pound fell 0.3 percent to $1.2192

  • The Japanese yen fell 0.6% to 128.69 per dollar

  • The offshore yuan fell 0.5 percent to 6.7454 per dollar

Cryptocurrencies

  • Bitcoin rose 0.9% to $21,092.58

  • Ether rose 0.6% to $1,561.2

Bonds

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

  • Germany’s 10-year bond yield was little changed at 2.17%

  • Britain’s 10-year bond yield rose two basis points to 3.38%

Goods

  • West Texas Intermediate crude fell 1% to $79.04 a barrel

  • Gold futures fell 0.2% to $1,917.10 an ounce

This story was created using Bloomberg Automation.

–With assistance from Tasia Sipahutar, Richard Henderson and Sebastian Boyd.

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