Sydney/London, Jan. 30 (Reuters) – Stocks fell on Monday as interest rate hikes in Europe and the United States and U.S. jobs and wage data set the agenda for markets. A new update in the war against inflation.
With investors expecting the Federal Reserve to raise rates by 25 basis points on Wednesday, followed by half-point hikes from the Bank of England and the European Central Bank, any deviation from that script would be a real shock.
The tech company’s earnings will also test the mettle of Wall Street bulls looking to take the Nasdaq to its best January since 2001.
Europe’s main index, the STOXX index, fell 0.5% on Monday morning, echoing a slight decline in MSCI’s broadest index of Asia-Pacific shares outside Japan. (.MIAPJ0000PUS)It rose 11% in January as China’s reopening boosted its economy.
Meanwhile, US stocks followed a tense Monday mood with S&P 500 futures and Nasdaq futures down nearly 1% as investors await guidance from the Federal Reserve later in the week.
Analysts expect a more hawkish tone to do more to control inflation. read more
“With US labor markets still tight, core inflation rising and financial conditions easing, Fed Chair Powell’s tone will be hawkish, not implying a pause in 25bp hikes,” said Bruce Gassman, chief economist at JP Morgan. , who expects another hike in March.
“We expect him to continue to push back against market pricing of rate cuts later this year.”
There is currently plenty of incentive to do so given futures expect rates to be around 5% in March, only to drop to 4.5% by the end of the year.
The dollar index was flat on the data, a fourth straight monthly loss of more than 1.5% on growing expectations that the central bank is nearing the end of its rate hike cycle.
Apple’s core
The yield on 10-year notes has fallen 33 basis points to 3.50% so far this month, mainly due to easing financial conditions as the Fed talks tougher about tightening.
That pessimistic outlook will also be tested by data from US wages, the employment cost index and various ISM surveys.
EU inflation readings could be key to whether the ECB signals a half-point rate hike for March or opens the door to a slowdown at a pace of tightening. read more
As for Wall Street’s recent rally, it depends on Apple Inc’s earnings (AAPL.O)Amazon.com (AMZN.O)Alphabet Inc (GOOGL.O) and meta-platforms (META.O)Among many others.
“Apple will provide a glimpse into the overall demand story for global consumers and a snapshot of China’s supply chain woes slowly starting to ease,” analysts at Wedbush wrote.
“We believe iPhone 14 Pro demand is firmer than expected based on our recent Asian supply chain tests,” they added. “Apple will cut some costs around the edges, but we don’t expect mass layoffs.”
Market pricing of early Fed easing has weighed on the dollar, which has lost 1.6% so far this month to 101.790 against a basket of major currencies.
The euro rose 1.5% in January to $1.0878 and is just above a nine-month peak. The dollar lost 1.3% to 129.27 against the yen despite the Bank of Japan stubbornly defending its ultra-easy policies.
The fall in the dollar and yields have been a boon for gold, which is up 5.8% month-to-date to $1,930 an ounce.
The precious metal was flat on Monday ahead of key central bank moves and data releases.
China’s rapid reopening is generally seen as a windfall for commodities, supporting everything from copper to iron ore to oil prices.
Brent was down 1% at $85.88 a barrel, while U.S. crude was down 87 cents at $78.8.
Reporting by Wayne Cole and Lawrence White; Editing by Christopher Cushing and Arun Koiyur
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