(Bloomberg) — Global equities stalled after their best start in a year as investors assess whether the rally went too far given the inflation, growth and earnings outlook. European stock markets rose.
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The MSCI ACWI Index was little changed after recording the largest increase in the first two weeks in data going back to 1988. The S&P 500 and Nasdaq 100 indexes each fell at least 0.2%. The dollar ended its three-day streak. US spot markets were closed for a holiday. European stocks rose on gains in real estate companies.
While inflation seems to have peaked in the US, 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 “one of the sharpest slowdowns we’ve seen in the last fifty years.”
“The year has been off to a pretty crazy start, so investors may be taking advantage of the opportunity to hold their breath,” Craig Erlam, a senior market analyst at Oanda Europe Ltd., said in a note. “The question now is whether the earnings season will foster this new sense of hope or spoil the party before it really starts. A bad earnings season could undermine hopes for a soft landing, which now seems more likely than it has been in months.”
Earnings will be a major catalyst this week as traders assess whether companies can navigate headwinds, including higher interest rates. Busy period, Wall Street heavyweights Goldman Sachs Group Inc. It will also end with corporate earnings, including and Morgan Stanley.
A few Fed officials will speak this week and give more hints on policy priorities. The annual meeting of the World Economic Forum started in Davos, Switzerland, with speakers including Christine Lagarde, President of the European Central Bank, and Kristalina Georgieva from the International Monetary Fund.
Meanwhile, Japanese markets continued to move on speculation of a change in monetary policy, and the Topix index traded lower as the yen’s recovery put exporters under pressure.
Investors are on the lookout for another surprise from the Bank of Japan as it sets policy on Wednesday. The yen strengthened to levels last seen in May, and Japan’s 10-year benchmark bond yield climbed above the BOJ ceiling for a second day.
Bitcoin fluctuated between gains and losses on Monday after the weekend rally amid optimism that it may have bottomed out.
In other markets, iron ore prices fell sharply after China promised to tighten control over pricing after the metal’s rise in recent months. Oil and gold fell.
Key events this week:
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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
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The World Economic Forum kicks off in Davos on Monday
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US markets Martin Luther King Jr. closed for. day, Monday
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China retail sales, industrial production, GDP, Tuesday
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US Empire State manufacturing survey, Tuesday
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Fed’s John Williams to speak on Tuesday
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Eurozone CPI, Wednesday
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US retail sales, PPI, industrial production, business stocks, MBA mortgage applications, cross-border investment, Wednesday
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Bank of Japan rate decision, Wednesday
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Federal Reserve releases Beige Book on Wednesday
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Fed speakers include Raphael Bostic, Lorie Logan and Patrick Harker, Wednesday
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US housing starts, initial jobless claims, Philadelphia Fed index, Thursday
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Thursday, December policy meeting and ECB account by President Christine Lagarde at a panel in Davos
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Fed speakers include Susan Collins and John Williams on Thursday
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Japan CPI, Friday
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Chinese loan rates, Friday
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US current home sales, Friday
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Kristalina Georgieva of the IMF and Lagarde of the ECB speak in Davos on Friday
Some of the main movements in the markets are:
Stocks
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S&P 500 futures were down 0.2% as of 2:05 p.m. New York time.
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Stoxx Europe 600 up 0.5%
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Futures down 0.1% in Dow Jones Industrial Average
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MSCI World index changed little
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Nasdaq 100 futures fell 0.4%
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MSCI Asia Pacific Index fell 0.3%
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MSCI Emerging Markets Index fell 0.1%
currencies
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Bloomberg Dollar Spot Index rose 0.2%
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Euro fell 0.1% to $1.0814
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The British Pound fell 0.3% to $1,2190.
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The Japanese yen fell 0.6% to 128.60 against the dollar.
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The offshore yuan fell 0.5 percent to 6.7469 per dollar.
cryptocurrencies
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Bitcoin rose 2.3% to $21,380.85
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Ether rose 2.2% to $1,586.55
bonds
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Yields on 10-year Treasuries changed little at 3.50%
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Germany’s 10-year bond yield changed little at 2.17%
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UK’s 10-year bond yield rose two basis points to 3.38%
commodity
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West Texas Intermediate crude fell 1.3% to $78.84 a barrel
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Gold futures fell 0.2% to $1,917.30 an ounce.
This story was produced with the help of Bloomberg Automation.
–with assistance from Tassia Sipahutar, Richard Henderson and Sebastian Boyd.
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