SYDNEY/LONDON, Jan 30 (Reuters) – Stocks fell on Monday at the start of a busy week for markets in which likely interest rate hikes in Europe and the United States, as well as job and wage data from The United States will give markets a new update on the battle 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 that script would be a real shock.
The tech giants’ gains will also test the mettle of Wall Street bulls, who are looking to propel the Nasdaq to its best January since 2001.
Europe’s benchmark STOXX index fell 0.5% on Monday morning, echoing a slight decline in MSCI’s broader index of Asia-Pacific stocks outside of Japan. (.MIAPJ0000PUS)which has risen 11% in January as China’s reopening boosts its economy.
Meanwhile, US stocks were set to follow the jittery mood on Monday with S&P 500 futures and Nasdaq futures down nearly 1% as investors await guidance later in the week on Federal Reserve policy.
Analysts expect a hawkish tone suggesting more needs to be done to control inflation. read more
“With US labor markets still tight, core inflation elevated and financial conditions easing, Fed Chairman Powell’s tone will be aggressive, emphasizing that a cut to a 25bp increase does not mean it will stop.” there’s a pause coming,” said Bruce Kasman, chief economist at JPMorgan. , which expects another rise in March.
“We also expect it to continue to push against market prices from rate cuts later this year.”
There is plenty to do as futures currently expect rates to peak at 5% in March, only to fall back to 4.5% by the end of the year.
The dollar index was flat ahead of the data, on track for a fourth straight monthly loss of more than 1.5% on rising expectations that the Fed is nearing the end of its rate hike cycle.
APPLE CORE
Yields on 10-year notes have fallen 33 basis points so far this month to 3.50%, essentially due to easing financial conditions, even as the Fed talks tough on tightening.
That dovish outlook will also be tested by US payroll data, the labor cost index and various ISM surveys.
The EU inflation reading could be important if the ECB signals a half-point rate hike for March or opens the door for a slowdown in the pace of adjustment. read more
As for the recent rally on Wall Street, a lot will depend on Apple Inc’s earnings. (AAPL.O)amazon.com (AMZN.O)Alphabet Inc (GOOGL.O) and Metaplatforms (META.O)Among many others.
“Apple will take a look at the overall story of consumer demand globally and a snapshot of China’s supply chain woes that are slowly beginning to abate,” the Wedbush analysts wrote.
“Based on our recent checks of the Asian supply chain, we believe demand for the iPhone 14 Pro remains firmer than expected,” they added. “Apple is likely to cut some costs, but we don’t expect massive layoffs.”
The market price of the Fed’s initial easing has been a drag on the dollar, which has shed 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 to $1.0878 and just below a nine-month high. The dollar has even lost 1.3% against the yen, at 129.27, despite the Bank of Japan’s dogged defense of its ultra-loose policies.
The falling dollar and yields have been a boon for gold, which is up 5.8% so far this month at $1,930 an ounce.
The precious metal was flat on Monday ahead of the series of key central bank moves and data releases.
The rapid reopening of China is seen as a windfall for commodities across the board, supporting everything from copper to iron ore to oil prices.
The oil market wavered on concern that possible Fed rate hikes could stifle demand for fuel, with Brent down nearly 1% at $85.88 a barrel, while US crude was down 87 cents at $78. .8 dollars.
Reporting by Wayne Cole and Lawrence White; Edited by Christopher Cushing and Arun Koyur
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