SYDNEY/LONDON, Jan 30 (Reuters) – Shares fell on Monday at the start of a crucial week for markets in which likely interest rate hikes in Europe and the United States, as well as data on the employment and wages in the United States will give the markets another update on the fight against inflation.
Investors expect the Federal Reserve to raise rates by 25 basis points on Wednesday, followed the next day by half-point hikes from the Bank of England and the European Central Bank, and any deviation from compared to this scenario would be a real shock.
Earnings from the tech giants will also test the mettle of Wall Street bulls, which are looking to propel the Nasdaq to its best January since 2001.
Europe’s benchmark STOXX fell 0.5% on Monday morning, echoing a slight decline in MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS), which jumped 11% in January until the reopening of China strengthens its economy.
Meanwhile, U.S. stocks were expected to follow Monday’s jittery mood with S&P 500 and Nasdaq futures down nearly 1% as investors await guidance later in the week on Reserve policy. federal.
Analysts are expecting a hawkish tone suggesting that more needs to be done to bring inflation under control. Read more
“With US labor markets still tight, underlying inflation elevated and financial conditions easing, Fed Chairman Powell’s tone will be hawkish, stressing that a move to a 25 basis point hike will not doesn’t mean a pause is imminent,” said Bruce Kasman, chief economist at JPMorgan. , which expects a further rise in March.
“We also expect him to continue to struggle against market prices or rate cuts later this year.”
There’s a lot to be done given that futures are currently expecting rates to peak at 5% in March, and then fall back to 4.5% by the end of the year.
The dollar index was flat ahead of the data, heading for a fourth straight monthly loss of more than 1.5% on growing expectations that the Fed is nearing the end of its rate hike cycle.
APPLE PIT
Yields on 10-year bonds have fallen 33 basis points so far this month to 3.50%, largely on easing financial conditions even as the Fed talks tough on tightening .
This dovish outlook will also be tested by US payroll data, the cost of employment index and various ISM surveys.
The reading on EU inflation could be important in determining whether the ECB signals a half-point rate hike for March or opens the door to a slower pace of tightening. Read more
As for the recent Wall Street rally, much will hinge on the earnings of Apple Inc (AAPL.O), Amazon.com (AMZN.O), Alphabet Inc (GOOGL.O) and Meta Platforms (META.O), among many others. ‘others.
“Apple will provide insight into the evolution of aggregate consumer demand around the world and insight into supply chain issues in China that are slowly beginning to ease,” the Wedbush analysts wrote.
“Based on our recent supply chain audits in Asia, we believe demand for iPhone 14 Pro is holding up more firmly than expected,” they added. “Apple will likely cut some costs around the edges, but we don’t expect massive layoffs.”
Market prices from the Fed’s early easing have been a drag on the dollar, which has fallen 1.6% so far this month to settle at 101.790 against a basket of major currencies.
The euro is up 1.5% in January at $1.0878 and just off a nine-month high. The dollar even lost 1.3% against the yen at 129.27 despite the Bank of Japan’s stubborn defense of its ultra-accommodative policies.
The lower dollar and yields have been a boon for gold, which is up 5.8% for the month so far at $1,930 an ounce.
The precious metal was flat on Monday ahead of the series of key central bank moves and data releases.
China’s rapid reopening was seen as a boon to commodities in general, supporting everything from copper to iron ore to oil prices.
The oil market was hesitant on fears that likely Fed rate hikes would stifle fuel demand, with Brent down nearly 1% at $85.88 a barrel, while U.S. crude fell by 87 cents to $78.8.
Reporting by Wayne Cole and Lawrence White; Editing by Christopher Cushing and Arun Koyyur
Our standards: The Thomson Reuters Trust Principles.
.