European shares rise as US futures signal a warning. markets are wrapped

(Bloomberg) — A gauge of global stocks was little changed after its best start in a year, as investors weighed whether the rally had gone too far against the outlook for inflation, growth and earnings. European securities have increased in price.

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The MSCI ACWI index slipped for the first time in seven days after posting its biggest advance in the first two weeks since 1988. S&P 500 and Nasdaq 100 index futures fell at least 0.2%. The dollar broke the three-day losing streak. US spot markets are closed for the holiday. Across Europe, bond yields have risen.

While US 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 bleak outlook, warning of “one of the sharpest slowdowns we’ve seen in five decades.”

“Fear of missing out is currently the main driver of stocks,” Credit Agricole CIB strategists led by Jean-Francois Paren wrote in a note. “The market is a little bit ahead at the moment.”

Earnings will be the main catalyst ahead as traders assess whether companies have been able to navigate headwinds, including higher interest rates. The busy week will also be punctuated by corporate earnings, including Wall Street heavyweights Goldman Sachs Group Inc. and Morgan Stanley.

A number of Fed officials will be speaking this week, providing more clues for investors. The World Economic Forum’s annual meeting kicks off in Davos, Switzerland, with speeches by Christine Lagarde, President of the European Central Bank, and Kristalina Georgieva of the International Monetary Fund.

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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 wary of another surprise from the Bank of Japan when it sets policy on Wednesday. The yen strengthened to levels seen in May and Japan’s benchmark 10-year bond yield rose above the BOJ’s ceiling for a second day.

Bitcoin fell below $21,000 after rallying over the weekend as it rallied amid optimism it could bottom out.

Elsewhere in the markets, iron ore fell after China vowed to tighten controls on pricing following a rally in the metal in recent months. Oil and gold have fallen.

This week’s main events:

• This week’s earnings are expected 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 kicks off in Davos on Monday

• US markets are closed for Martin Luther King Jr. Day on 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 exchange rate decision on Wednesday

• The Federal Reserve releases the Beige Book on Wednesday

• Fed speakers include Rafael Bostic, Lori Logan and Patrick Harker, Wednesday

• US Housing Starts, Initial Jobless Claims, Philadelphia Fed Index, Thursday

• A report from her and President Christine Lagarde’s ECB policy meeting in Davos on Thursday

• Fed speakers include Susan Collins and John Williams, Thursday

• Japan CPI, Friday

• China’s key lending rates, Friday

• US Existing Home Sales, Friday

• International Monetary Fund Kristalina Georgieva and ECB President Lagarde speak in Davos on Friday

Some major movements in the markets.

Shares

• As of 11:47 a.m. London time, the Stoxx Europe 600 was up 0.3%

• Nasdaq 100 futures were down 0.3%

• S&P 500 futures were down 0.2%

• Dow Jones Industrial Average futures were down less than 0.1%

• The MSCI Asia Pacific Index was down 0.2%

• The MSCI Emerging Markets Index rose 0.1%

Currencies

• The Bloomberg Dollar Spot Index rose 0.1%

• The euro is unchanged at $1.0830

• The Japanese yen fell 0.3% to 128.24 per dollar.

• The offshore yuan fell 0.4% to 6.7430 per dollar

• The British pound was down 0.1% at $1.2211

Cryptocurrencies

• Bitcoin fell 0.3% to $20,837.78

• Ether fell 0.5% to $1,544.76

Bonds

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

• Germany’s 10-year yield rose two basis points to 2.18%

• UK 10-year yields rose three basis points to 3.40%

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This story was produced with the help of Bloomberg Automation.

— with assistance from Tasia Sipahutar and Richard Henderson.

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