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Business

Shares and bonds nervy as rate-hike week looms

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  • Fed seen hiking 25 bps, ECB and BOE by 50 bps
  • Technology giants lead host of earnings results
  • Shares edge down after robust January rally

LONDON, Jan 30 (Reuters) – Stock markets worldwide halted their January rally on Monday, pausing for breath at the start of an agenda-setting week of central bank rate hikes and data releases that will clarify if progress has been made in the battle against inflation.

Investors expect the Federal Reserve will raise rates by 25 basis points on Wednesday, followed the day after by half-point hikes from the Bank of England and European Central Bank, and any deviation from that script would be a real shock.

Europe’s benchmark STOXX index fell 0.8% on Monday morning, echoing a slight dip in MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS), which has surged 11% in January so far as China’s reopening bolsters sentiment.

The U.S. Nasdaq index is likewise on course for its best January since 2001, a rally that will be tested by earnings updates from tech giants this week.

U.S. stocks were set to follow the nervous Monday mood with S&P 500 futures down 1% and Nasdaq futures falling 1.3%, as investors await guidance later in the week on the Federal Reserve’s policy.

Analysts expect a hawkish tone suggesting that more needs to be done to tame inflation. read more

“With U.S. labour markets still tight, core inflation elevated and financial conditions easing, Fed Chair Powell’s tone will be hawkish, stressing that a downshifting to a 25bp hike doesn’t mean a pause is coming,” said Bruce Kasman, chief economist at JPMorgan, who expects another rise in March.

“We also look for him to continue to push back against market pricing of rate cuts later this year.”

There is a lot of pushing to do given futures currently expect rates to peak at 5% in March and to fall back to 4.5% by year end.

Europe offered a brisk reminder that the fight against rising prices is far from over, as bond yields in the region rose sharply on Monday in the wake of stronger-than-expected Spanish inflation data.

The data showing inflation rose 5.8% year-on-year in January, against expectations of 4.7%, pushed up the zone’s benchmark German 10-year government bond yield 7 basis points (bps) to 2.3190%, its highest since Jan. 10.

Italian and Spanish yields also inched up.

The dollar index was flat ahead of the week’s key data, on course 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’S 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 data on U.S. payrolls, the employment cost index and various ISM surveys.

Reading on EU inflation could be important for whether the ECB signals a half-point rate rise for March, or opens the door to a slowdown in the pace of tightening. read more

As for Wall Street’s recent rally, much will depend on earnings from Apple Inc (AAPL.O), Amazon.com (AMZN.O), Alphabet Inc (GOOGL.O) and Meta Platforms (META.O), among many others.

“Apple will give a glimpse into the overall demand story for consumers globally and a snapshot of the China supply chain issues starting to slowly abate,” wrote analysts at Wedbush.

“Based on our recent Asia supply chain checks we believe iPhone 14 Pro demand is holding up firmer than expected,” they added. “Apple will likely cut some costs around the edges, but we do not expect mass layoffs.”

Market pricing of early Fed easing has been a burden for the dollar, which has lost 1.6% so far this month to stand at 101.85 against a basket of major currencies.

The euro is up 1.5% for January at $1.0878 and just off a nine-month top. The dollar has even lost 1.3% on the yen to 129.27 despite the Bank of Japan’s dogged defence of its ultra-easy policies.

The drop in the dollar and yields has 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 slew of key central bank moves and data releases.

China’s rapid reopening is seen as a windfall for commodities in general, supporting everything from copper to iron ore to oil prices.

Oil steadied on Monday after earlier losses, with prices bolstered by rising Middle East tension over a drone attack in Iran and hopes of higher Chinese demand.

Brent crude rose 10 cents, or 0.12%, to $86.76 a barrel by 1200 GMT while U.S. West Texas Intermediate crude added 4 cents, or 0.05%, to $79.72.

Reporting Lawrence White and Wayne Cole; Editing by Christopher Cushing, Arun Koyyur and Christina Fincher

Our Standards: The Thomson Reuters Trust Principles.

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Oil falls ahead of OPEC+, U.S. Federal Reserve meetings

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SINGAPORE, Jan 30 (Reuters) – Oil prices fell on Monday, giving up earlier gains, as global producers this week will likely keep output unchanged during a meeting this week and investors are cautious ahead of a U.S. Federal Reserve meeting that may spur market volatility.

Brent crude futures fell 20 cents, or 0.2%, to $86.46 a barrel by 0435 GMT while U.S. West Texas Intermediate crude was at $79.57 a barrel, down 11 cents, or 0.1%.

Ministers from the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, known collectively as OPEC+, are unlikely to tweak their current oil output policy when they meet virtually on Feb. 1.

Still, an indication of a rise in crude exports from Russia’s Baltic ports in early February caused Brent and WTI to post their first weekly loss in three last week.

“No change to the OPEC+ output is expected to be announced at this week’s meeting and we expect outlook commentary from the U.S. Fed to be the key driver of the outlook in the near term,” said National Australia Bank analysts in a research note.

Ahead of the Federal Reserve’s policy meeting scheduled on Jan. 31-Feb. 1, the market broadly expects the U.S. central bank to scale back rate hikes to 25 basis points (bps) from 50 bps announced in December, which may ease concerns of an economic slowdown that would curb fuel demand in the world’s biggest oil consumer.

Oil prices earlier gained amid tensions in the Middle East following a drone attack in oil producer Iran and as China, the world’s biggest crude importer, pledged over the weekend to promote a consumption recovery which would support fuel demand.

“It is not really clear yet what’s happening in Iran, but any escalation there has the potential to disrupt crude flow,” said Stefano Grasso, a senior portfolio manager at 8VantEdge in Singapore.

“We have Russia on the supply side and China on the demand side. Both can swing by more than 1 million barrels per day above or below expectation,” said Grasso, formerly an oil trader with Italy’s Eni.

“China seems to have surprised the market in terms of how fast they are coming out of zero COVID while Russia has surprised in terms of resilience of export volume despite the sanctions.”

China resumes business this week after its Lunar New Year holidays. The number of passengers travelling prior to the holidays rose above levels in the past two years but is still below 2019, Citi analysts said in a note, citing data from the Ministry of Transport.

“Overall international traffic recovery remains gradual, with high-single to low-teens digits to 2019 level, and we expect further recovery when outbound tour group travel resumes on Feb. 6,” the Citi note said.

Reporting by Florence Tan and Emily Chow; Editing by Muralikumar Anantharaman and Christian Schmollinger

Our Standards: The Thomson Reuters Trust Principles.

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Business

Wall Street totters after mixed earnings, trade halt glitch

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  • SEC investigating NYSE opening bell glitch
  • 3M slides on downbeat Q1 forecast
  • J&J falls on sales warning; GE down on weak profit view
  • Microsoft to report quarterly earnings after market close
  • Indexes: Dow up 0.18%, S&P 500 off 0.13%, Nasdaq down 0.25%

NEW YORK, Jan 24 (Reuters) – Wall Street was mixed on Tuesday as a raft of mixed earnings took some wind out of the sails of the recent rally.

The session got off to an rocky start, as a spate of NYSE-listed stocks were halted at the opening bell due to an apparent technical glitch, which caused initial price confusion and prompted an investigation by the U.S. Securities and Exchange Commission (SEC).

More than 80 stocks were affected by the glitch, which caused wide swings in opening prices in stocks, including Walmart Inc (WMT.N) and Nike Inc (NKE.N).

“It looks like NYSE got on it real early,” said Joseph Sroka, chief investment officer at NovaPoint in Atlanta. “Now they’re trying to determine what opening trade prices were.”

“Everyone involved in trade settlements is going to have a long day today.”

All three indexes sputtered near the starting line, with little apparent momentum in either direction.

Fourth quarter earnings season is in full swing, with 72 of the companies in the S&P 500 having reported. Of those, 65% have beaten consensus, just a hair below the 66% long-term average, according to Refinitiv.

On aggregate, analysts now expect S&P 500 earnings 2.9% below the year-ago quarter, down from the 1.6% year-on-year decline seen on Jan. 1, per Refinitiv.

“Earnings don’t make a bull or bear case for the market yet, but there’s an anxiousness among investors to be long when the Fed is done raising rates,” Sroka added. “We’re hitting a ramp in the earnings cycle, and by next week we’ll have a lot more information on the direction of the market.”

Economic data showed shallower-than-expected contraction in the manufacturing and services sector in the first weeks of the year, suggesting that the Federal Reserve’s restrictive interest rates are dampening demand.

The Dow Jones Industrial Average (.DJI) rose 60.69 points, or 0.18%, to 33,690.25, the S&P 500 (.SPX) lost 5.36 points, or 0.13%, to 4,014.45 and the Nasdaq Composite (.IXIC) dropped 28.39 points, or 0.25%, to 11,336.03.

Among the 11 major sectors of the S&P 500, industrials was down the most.

Intercontinental Exchange Inc (ICE.N), owner of the New York Stock Exchange, dropped 2.5% as SEC investigators searched for the cause of Tuesday’s opening bell confusion.

Alphabet Inc (GOOGL.O) shares dipped 1.8% after the Justice Department filed a lawsuit against Google for abusing its dominance of the digital advertising business.

Johnson & Johnson’s (JNJ.N) profit guidance came in above analyst expectations. Even so, its stock softened 0.3%.

Industrial conglomerates 3M Co (MMM.N) and General Electric Co (GE.N) both provided underwhelming forward guidance due to inflationary headwinds.

3M’s shares were off 5.1% while General Electric’s were modestly lower.

Aerospace/defense companies Lockheed Martin Corp (LMT.N) and Raytheon Technologies Corp (RTX.N) were a study in contrasts, with the former issuing a disappointing profit forecast and the latter beating estimates on solid travel demand.

Lockheed Martin and Raytheon were up 1.5% and 2.5%, respectively.

Railroad operator Union Pacific Corp missed profit estimates as labor shortages and severe weather delayed shipments. Its shares shed 2.7%.

Microsoft Corp (MSFT.O) is due to report after the bell.

Advancing issues outnumbered declining ones on the NYSE by a 1.16-to-1 ratio; on Nasdaq, a 1.06-to-1 ratio favored decliners.

The S&P 500 posted 27 new 52-week highs and 10 new lows; the Nasdaq Composite recorded 69 new highs and 21 new lows.

Reporting by Stephen Culp; Additional reporting by Shreyashi Sanyal and Johann M Cherian in Bengaluru; Editing by Aurora Ellis

Our Standards: The Thomson Reuters Trust Principles.

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Business

Oil settles mixed after hitting 7-week high on strong China outlook

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  • Brent, U.S. crude hit highest since early December
  • G7 seeks two price caps for Russian oil products
  • India’s crude imports hit 5-month high in December

NEW YORK, Jan 23 (Reuters) – Oil prices settled mixed on Monday, retreating as investors cashed in on a jump to a seven-week high on optimism about a possible recovery in demand of top oil importer China as the economy recovers this year from pandemic lockdowns.

Brent crude settled 56 cents higher at $88.19 a barrel. The session high was $89.09 a barrel, the highest since Dec. 1. U.S. West Texas Intermediate (WTI) crude settled 2 cents lower at $81.62 a barrel, off the session high $82.64 a barrel, the highest since Dec. 5.

Prices pulled back at the end of the session as investors took profits, said Phil Flynn, analyst at Price Futures Group.

Still, the market wants to preserve long positions in case Chinese growth resumes, said Sukrit Vijayakar, director of Mumbai-based energy consultancy Trifecta.

Data shows a solid pick-up in travel in China after COVID-19 curbs were eased, ANZ commodity analysts said in a note, pointing out that road traffic congestion in the country’s 15 key cities so far this month is up 22% from a year ago.

Crude oil prices in much of the world’s physical markets have started the year with a rally as China has shown signs of more buying and traders have worried that sanctions on Russia could tighten supply.

“While the (China) reopening itself will no doubt prove to be complicated, particularly over the holiday season, early indications suggest there has been a rise in activity, meaning the economy could perform better,” said OANDA analyst Craig Erlam.

Brent is expected to move back into a range between $90 and $100 as the oil market tightens, Erlam said.

Demand for products has lifted the oil market and refining margins, Flynn said. The 3-2-1 crack spread , a proxy for refining margins, rose to $42.18 per barrel on Monday, the highest since October.

The European Union and Group of Seven (G7) coalition will cap prices of Russian refined products from Feb. 5, in addition to the price cap on Russian crude in place since December and an EU embargo on imports of Russian crude by sea.

The G7 has agreed to delay a review of the level of the price cap on Russian oil to March, a month later than originally planned, to provide time to assess the impact of the oil products price cap.

In India, crude oil imports rose to a five-month high in December, government data showed on Monday, as refiners stocked up discounted Russian fuel amid a steady increase in consumption in the country.

Reporting by Stephanie Kelly in New York; additional reporting by Ron Bousso in London, Mohi Narayan in New Delhi and Sonali Paul in Melbourne
Editing by David Goodman, David Gregorio and Mark Potter

Our Standards: The Thomson Reuters Trust Principles.

Stephanie Kelly

Thomson Reuters

A New-York-based correspondent covering the U.S. crude market and member of the energy team since 2018 covering the oil and fuel markets as well as federal policy around renewable fuels.

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Business

Wall Street surges, powered by tech rebound

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  • Baker Hughes falls on missing Q4 profit estimates
  • Activist investor Elliott Management takes stake in Salesforce
  • Chips on track for biggest daily gain since Nov
  • Indexes up: Dow 0.98%, S&P 1.41%, Nasdaq 2.09%,

NEW YORK, Jan 23 (Reuters) – Wall Street surged on Monday, led higher by technology stocks as investors embarked on an earnings-heavy week with a renewed enthusiasm for market leading momentum stocks that were battered last year.

All three major stock indexes extended Friday’s rally, gaining momentum as the day progressed. The tech-heavy Nasdaq was out front, boosted by a 4.9% jump in semiconductor shares (.SOX).

“This is a remarkable rally in many of the names that did badly last year,” said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut. “No one wants to be watching from the sideline with a bunch a cash as the market gets away from them.”

The session marks a calm before the storm in a week jam-packed with high profile earnings reports and back-end loaded with crucial economic data.

Investors are all but certain the Federal Reserve implement a bite-sized interest rate hike next week even as the U.S. central bank remains committed to taming the hottest inflationary cycle in decades.

Financial markets have priced in a 99.8% likelihood of a 25 basis point hike to the Fed funds target rate at the conclusion of its two-day monetary policy meeting next Wednesday, according to CME’s FedWatch tool.

The Dow Jones Industrial Average (.DJI) rose 328.17 points, or 0.98%, to 33,703.66, the S&P 500 (.SPX) gained 55.93 points, or 1.41%, to 4,028.54 and the Nasdaq Composite (.IXIC) added 232.84 points, or 2.09%, to 11,373.28.

All 11 major sectors in the S&P 500 were higher, with tech (.SPLRCT) up the most, jumping 2.8%.

Fourth-quarter reporting season has shifted into overdrive, with 57 of the companies in the S&P 500 having posted results. Of those, 63% have delivered better than expected earnings, according to Refinitiv.

Analysts now see S&P 500 fourth quarter earnings, on aggregate, dropping 3% year-on-year, nearly twice as steep as the 1.6% annual drop seen at the beginning of the year, per Refinitiv.

This week, Microsoft Corp (MSFT.O) and Tesla Inc , along with a spate of heavy-hitting industrials including Boeing CO (BA.N), 3M Co (MMM.N), Union Pacific Corp (UNP.N) Dow Inc (DOW.N), Northrop Grumman Corp (NOC.N), are expected to post quarterly results.

Tesla Inc (TSLA.O) surged 7.8% as Chief Executive Elon Musk took the stand in his fraud trial related to a tweet saying he had backing to take the electric automaker private.

Baker Hughes Co (BKR.O) missed quarterly profit estimates due to inflation pressures and ongoing disruptions due to Russia’s war on Ukraine. The oilfield services company’s shares were off 0.9%.

Cloud-based software firm Salesforce Inc (CRM.N) jumped 3.1% following news that activist investor Elliot Management Corp has taken a multi-billion dollar stake in the company.

Spotify Technology SA (SPOT.N) joined the growing list of tech-related companies to announce impending job cuts, shedding 6% of its workforce as rising interest rates and the looming possibility of recession continue to pressure growth stocks. The music streaming company’s shares rose 2.1%.

On the economic front, the Commerce Department is expected to unveil its initial “advance” take on fourth-quarter GDP in Thursday, which analysts expect to land at 2.5%.

On Friday, the wide-ranging personal consumption expenditures (PCE) report is due to shed light on consumer spending, income growth, and crucially, inflation.

Advancing issues outnumbered declining ones on the NYSE by a 3.53-to-1 ratio; on Nasdaq, a 1.95-to-1 ratio favored advancers.

The S&P 500 posted 11 new 52-week highs and no new lows; the Nasdaq Composite recorded 66 new highs and 14 new lows.

Reporting by Stephen Culp; Additional reporting by Shreyashi Sanyal and Johann M Cherian in Bengaluru
Editing by Marguerita Choy

Our Standards: The Thomson Reuters Trust Principles.

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Business

Wall St slips as labor market data fuels Fed worry

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  • Procter & Gamble falls after commodity cost pressure warning
  • Netflix down ahead of quarterly results
  • Dow down 0.76%, S&P 500 down 0.76%, Nasdaq down 0.96%

NEW YORK, Jan 19 (Reuters) – U.S. stock indexes closed lower on Thursday after data pointing to a tight labor market renewed concerns the Federal Reserve will continue its aggressive path of rate hikes that could lead the economy into a recession.

A report from the Labor Department showed weekly jobless claims were lower than expected, indicating the labor market remains solid despite the Fed’s efforts to stifle demand for workers.

Expectations the central bank would further dial down the size of its interest rate increases at its policy announcement next month were unchanged by the report.

Investors have been looking for signs of weakness in the labor market as a key ingredient needed for the Fed to begin to slow its policy tightening measures.

Jobless claims

Other data showed manufacturing activity in the mid-Atlantic region was subdued again in January, while data from the commerce department confirmed the recession in the housing market persisted.

“What we are seeing is the market carving out a bottom in the uncertainty so the news is having less of an effect and what we are seeing today is really just a continuation of that,” said Brad McMillan, chief investment officer for Commonwealth Financial Network, an independent broker-dealer in Waltham, Massachusetts.

“The fact we are not seeing more of a reaction says a lot of the bad news is out there.”

The Dow Jones Industrial Average (.DJI) fell 252.4 points, or 0.76%, to 33,044.56, the S&P 500 (.SPX) lost 30.01 points, or 0.76%, to 3,898.85 and the Nasdaq Composite (.IXIC) dropped 104.74 points, or 0.96%, to 10,852.27.

Traders work at the post where Carvana Co. is traded on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., December 7, 2022. REUTERS/Brendan McDermid

Recent comments from Fed officials continue to highlight the disconnect between the central bank’s view of its terminal rate and market expectations.

Boston Fed President Susan Collins echoed comments from other policymakers to support the case for interest rates to rise beyond 5%.

But stocks moved off their session lows after Fed vice chair Lael Brainard said the Fed is still “probing” for the level of interest rates that will be necessary to control inflation.

Markets, however, see the terminal rate at 4.89% by June and have largely priced in a 25-basis point rate hike from the U.S. central bank in February, with rate cuts in the back half of the year. .

Both the S&P 500 and the Dow fell for a third straight session, their longest streak of declines in a month.

On the earnings front, Procter & Gamble Co (PG.N) declined 2.11% after warning of commodity costs pressuring profits, despite raising its full-year sales forecast.

Analysts now expect year-over-year earnings from S&P 500 companies to decline 2.8% for the fourth quarter, according to Refinitiv data, compared with a 1.6% decline in the beginning of the year.

Netflix Inc (NFLX.O) closed 3.23% lower ahead of its results scheduled for release after the closing bell on Thursday. But the stock rebounded to gain 3.33% after posting subscriber gains for the quarter and the departure of co-founder Reed Hastings as chief executive to an executive chairman role.

Declining issues outnumbered advancing ones on the NYSE by a 1.49-to-1 ratio; on Nasdaq, a 1.70-to-1 ratio favored decliners.

The S&P 500 posted 1 new 52-week highs and 3 new lows; the Nasdaq Composite recorded 46 new highs and 33 new lows.

Reporting by Chuck Mikolajczak, editing by Deepa Babington

Our Standards: The Thomson Reuters Trust Principles.

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Wall St stumbles after weak data, hawkish Fed comments

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  • Fed’s Bullard, Mester back rate increases
  • U.S. retail sales drop in December
  • Indexes down: Dow 1.28%, S&P 1.07%, Nasdaq 0.78%

Jan 18 (Reuters) – Wall Street’s main indexes fell on Wednesday after weak economic data and hawkish comments from Federal Reserve officials sparked worries that the central bank may not pause interest rate hikes any time soon.

Before the market opened, U.S. economic data showed retail sales and producer prices declined more than expected in December. Also production at U.S. factories fell more than expected in December and output in the prior month was weaker than previously thought.

With Wall Street’s major averages showing gains so far for 2023, Sam Stovall, chief investment strategist at CFRA research, said some investors saw the week data as an opportunity to take profits while others worried about the prospects for a recession.

“The market was overbought. Today’s economic data served as a trigger to initiate a profit taking spell and the groups with most profits to take have been the ones that have done best last year,” said Stovall.

By 2:14PM ET, the Dow Jones Industrial Average (.DJI) fell 434.27 points, or 1.28%, to 33,476.58, the S&P 500 (.SPX) lost 42.57 points, or 1.07%, to 3,948.4 and the Nasdaq Composite (.IXIC) dropped 87.02 points, or 0.78%, to 11,008.10.

The weakest sectors on the day are the defensive consumer staples (.SPLRCD), down more than 2%, and utilities (.SPLRCU), which was last down 1.8%.

The benchmark S&P and the blue-chip Dow were both on track for their second straight day of losses, while the Nasdaq, if it ends lower, would snap a seven-day winning streak.

U.S. stocks had started 2023 on a strong footing, with the S&P having closed up almost 4% year-to-date on Tuesday, on hopes that a moderation in inflationary pressures could give the Fed cover to dial down the size of its interest rate hikes.

Roughly halfway through January, the S&P was up 2.7% for the month so far while the Nasdaq was up more than 5% and the Dow, the best performer of the three for 2022, was up 0.9%.

Earlier, St. Louis Fed President James Bullard and Cleveland Fed President Loretta Mester stressed on the need to raise rates beyond 5% to bring inflation to heel.

The Fed commentary also highlighted the disparity between the U.S. central bank’s estimate of its terminal rate and market expectations, which were of the rate peaking at 4.88% by June. Traders are now betting on a 25-basis point rate hike in February.

“This market is very hopeful that we’re going to get a soft landing and every time you have hawkish comments from the Fed, it feels you’re not going to get that,” Dennis Dick, trader at Triple D Trading.

Investors are also focused on the fourth-quarter earnings season as a window into how corporate America is doing against the backdrop of higher interest rates.

Analysts now expect year-over-year earnings from S&P 500 companies to decline 2.6% for the quarter, according to Refinitiv data, compared with a 1.6% decline in the beginning of the year.

IBM Corp (IBM.N) was down 2.6% after Morgan Stanley downgraded the company’s shares to “equal weight” from “overweight”.

Early gainers Microsoft Corp (MSFT.O) and Tesla Inc (TSLA.O) erased gains by late afternoon trading with Microsoft down 1.2% and Tesla off 2.7%.

Moderna Inc (MRNA.O) rose 3.6% after reporting data which demonstrated the effectiveness of its respiratory syncytial virus (RSV) vaccine.

PNC Financial Services Group Inc (PNC.N) was down 5.4% after the company missed estimates for fourth-quarter profit.

Declining issues outnumbered advancing ones on the NYSE by a 1.38-to-1 ratio; on Nasdaq, a 1.66-to-1 ratio favored decliners.

The S&P 500 posted 9 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 71 new highs and 14 new lows.

Reporting by Sinéad Carew in New York, Shreyashi Sanyal and Amruta Khandekar in Bengaluru; Additional reporting by Shubham Batra; Editing by Shounak Dasgupta and David Gregorio

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Shares slip as China data stokes economic slowdown fears

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  • Euro STOXX 600 down 0.2%
  • China reports weak Q4 data
  • Asia shares slip 0.4%
  • Yen close to 7-month highs

LONDON/HONG KONG, Jan 17 (Reuters) – European shares paused their new year rally and Asian equities slipped after China reported weak fourth-quarter economic data on Tuesday, keeping investors on edge over the prospects of a global recession.

The Euro STOXX 600 (.STOXX) lost 0.2%, slipping from its nine-month high hit on Monday. Global equities have enjoyed a rally so far in 2022, spurred by hopes of a rebound in China’s economy and an easing of prices pressures in the United States and Europe.

But the Chinese data showed that the world’s second-biggest economy grew 2.9% in the fourth quarter of last year, beating expectations but underscoring the toll exacted by Beijing’s stringent “zero-COVID” policy.

China’s growth for 2022 of 3% was far below the official target of about 5.5%. Excluding a 2.2% expansion after COVID-19 first hit in 2020, it was the worst showing in nearly half a century.

Asia Pacific shares outside Japan (.MIAPJ0000PUS) widened losses in response, and were last down 0.4%. Shares in Hong Kong’s (.HSI) dropped 0.8% and China’s benchmark CSI300 Index (.CSI300) clawed back losses to close flat.

In Europe, China-exposed financials HSBC (HSBA.L) and Prudential (PRU.L) fell 1% and 0.4% respectively. Economy-sensitive consumer staples such as Unilever and Danone (DANO.PA) also fell more than 1% each.

Market players said investors were taking stock of how economies would expand as inflation peaks and central bank tightening of monetary policy slows, with the China data underscoring doubts over whether it could act as a spur.

“What will be the thing that reinvigorates growth?” said Gaël Combes, head of fundamental research at Unigestion. “China is probably unlikely to provide the lift is has provided in the past, like during the global financial crisis.”

Wall Street was set to open slightly lower after a public holiday on Monday, with E-mini futures for the S&P 500 down 0.3%.

BOJ UNDER PRESSURE

The dollar index bounced from a seven-month low of 101.77 made a day ago, holding at 102.30, while the Japanese yen stayed close to seven-month highs as investors held their breath for a potential policy shift at the Bank of Japan (BOJ).

The yen steadied around 128.51 on Tuesday after hitting a top of 127.22 per dollar on Monday, with traders braced for sharp moves when the Bank of Japan (BOJ) concludes a two-day meeting on Wednesday.

The BOJ is under pressure to change its interest rate policy as soon as Wednesday, after its attempt to buy itself breathing room backfired, emboldening bond investors to test its resolve.

Euro zone bond yields inched up from month lows hit late last week, but trading in bonds globally was cautious ahead of the result of the BOJ meeting.

Across the world, the R-word continues to loom large.

Two-thirds of private and public sector chief economists surveyed by the World Economic Forum in Davos expected a global recession this year, with some 18% considering it “extremely likely” – more than twice as many as in the previous survey conducted in September 2022.

As equities rallied this year, other riskier assets also gained. The No.1 cryptocurrency bitcoin has clocked a gain of about a quarter in January, leaping over 20% in the past week alone, putting in on course for its best month since October 2021. It was last trading flat at $21,208.

Spot gold was down 0.5% at $1909.23 per ounce.

Reporting by Tom Wilson in London and Kane Wu in Hong Kong; Editing by Gerry Doyle, Neil Fullick and Alex Richardson

Our Standards: The Thomson Reuters Trust Principles.

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Business

Shares rise, yen climbs as BOJ battles bond bears

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  • BOJ under intense pressure as it defends yield policy
  • Yen hits 7-mth high, yuan climbs as dollar eases
  • More earnings ahead, many central bank speakers
  • Britain’s FTSE flirts with record high

SYDNEY/LONDON, Jan 16 (Reuters) – Shares firmed on Monday as optimism over corporate earnings and China’s reopening offset concerns the Bank of Japan (BOJ) might temper its super-sized stimulus policy at a pivotal meeting this week, while a holiday in U.S. markets made for thin trading.

The yen climbed to its highest since May after rumours swirled the BOJ might hold an emergency meeting on Monday as it struggles to defend its new yield ceiling in the face of massive selling. read more

That had local markets in an anxious mood, and Japan’s Nikkei (.N225) slipped 1.3% to a two-week low.

Yet MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) added 0.27%, with hopes for a speedy Chinese reopening giving it a gain of 4.2% last week.

And European shares opened positively with the STOXX 600 (.STOXX) up 0.1% by 0850 GMT driven by healthcare stocks (.SXDP) which gained 0.6%.

Britain’s benchmark FTSE index (.FTSE) edged close to the record high of 7903.50 it hit in 2018, with banks and life insurance companies among the top gainers.

Earnings season gathers steam this week with Goldman Sachs (GS.N), Morgan Stanley (MS.N) and Netflix (NFLX.O) among those reporting.

World leaders, policy makers and top corporate chiefs will be attending the World Economic Forum in Davos, and there are a host of central bankers speaking, including no fewer than nine members of the U.S. Federal Reserve.

The BOJ’s official two-day meeting ends on Wednesday and speculation is rife it will make changes to its yield curve control (YCC) policy given the market has pushed 10-year yields above its new ceiling of 0.5%. read more

The BOJ bought almost 5 trillion yen ($39.12 billion) of bonds on Friday in its largest daily operation on record, yet 10-year yields still ended the session up at 0.51%.

Early on Monday, the bank offered to buy another 1.3 trillion yen of JGBs, but the yield stuck at 0.51%.

“There is still some possibility that market pressure will force the BOJ to further adjust or exit the YCC,” JPMorgan analysts said in a note. “We can’t ignore this possibility, but at this stage we do not consider it a main scenario.”

“Although domestic demand has started to recover and inflation continues to rise, the economy is not heating up to the extent that a sharp rise in interest rates and potential risk of large yen appreciation can be tolerated,” they added.

THE YEN UN-ANCHORED

The BOJ’s uber-easy policy has acted as a sort of anchor for yields globally, while dragging down the yen. Were it to abandon the policy, it would put upward pressure on yields across developed markets and most likely see the yen surge.

The dollar has been undermined by falling U.S. bond yields as investors wager the Federal Reserve can be less aggressive in raising rates given inflation has clearly turned the corner.

The Japanese yen rose to a more than seven-month peak against the dollar on Monday, as market sentiment was dominated by expectations that the BOJ would make further tweaks to, or fully abandon, its yield control policy.

The yen jumped roughly 0.5% to a high of 127.215 per dollar, before easing to 128.6 by 0915 GMT.

The dollar index, which measures the U.S. unit against a basket of major currencies, recovered from a 7-month low touched earlier in the session to be at 102.6 .

Futures now imply almost no chance the Fed will raise rates by half a point in February, with a quarter-point move seen as a 94% probability.

Yields on 10-year Treasuries are down at 3.498%, having fallen 6 basis points last week, close to its December trough, and major chart target of 3.402%.

Alan Ruskin, global head of G10 FX Strategy at Deutsche Securities, said the loosening of global supply bottlenecks in recent months was proving to be a disinflationary shock, which increases the chance of a soft landing for the U.S. economy.

“The lower inflation itself encourages a soft landing through real wage gains, by allowing the Fed to more readily pause and encouraging a better behaved bond market, with favourable spillovers to financial conditions,” Ruskin said.

“A soft landing also reduces the tail risk of much higher U.S. rates, and this reduced risk premia helps global risk appetite,” Ruskin added.

Commodities prices which had rallied last week, dipped on Monday.

The drop in yields and the dollar had benefited the gold price, which jumped 2.9% last week, but the precious metal slipped 0.4% to $1,911 an ounce in early trading on Monday .

Oil prices slid as a rise in COVID cases clouded the prospects for a surge in demand as China reopens its economy.

Brent crude fell 73 cents, or 0.83%, to $84.57 a barrel by 0857 GMT, while U.S. West Texas Intermediate crude CLc1 was down 61 cents, or 0.6%, at $79.24 a barrel.

($1 = 127.8000 yen)

Reporting by Wayne Cole and Lawrence White;
Editing by Shri Navaratnam and Emelia Sithole-Matarise

Our Standards: The Thomson Reuters Trust Principles.

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S&P 500 ends at highest in month, indexes gain for week as earnings kick off

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  • JPMorgan, Wells Fargo shares jump
  • U.S. consumers’ inflation expectations ease – survey
  • Tesla falls after price cuts on electric vehicles
  • Indexes: Dow up 0.3%, S&P 500 up 0.4%, Nasdaq up 0.7%

NEW YORK, Jan 13 (Reuters) – The S&P 500 and Nasdaq finished at their highest levels in a month on Friday, with shares of JPMorgan Chase and other banks rising following their quarterly results, which kicked off the earnings season.

All three major indexes also registered strong gains for the week, leaving the S&P 500 up 4.2% so far in 2023, and the Cboe Volatility index (.VIX) – Wall Street’s fear gauge – closed at a one-year low.

On Friday, financials (.SPSY) were among sectors that gave the S&P 500 the most support.

JPMorgan Chase & Co (JPM.N) and Bank of America Corp (BAC.N) beat quarterly earnings estimates, while Wells Fargo & Co (WFC.N) and Citigroup Inc (C.N) fell short of quarterly profit estimates.

But shares of all four firms rose, along with the S&P 500 banks index (.SPXBK), which ended up 1.6%. JPMorgan shares climbed 2.5%.

Still, Wall Street’s biggest banks stockpiled more rainy-day funds to prepare for a possible recession and reported weak investment banking results while showing caution about forecasting income growth. They said higher rates helped to boost profits.

Strategists said investors will be watching for further guidance from company executives in the coming weeks.

“This has shifted the focus back to earnings,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.

“Even though the earnings were basically OK, people are just kind of stepping back, and you’re going to see a wait-and-see attitude with stocks” as investors hear more from company executives.

Year-over-year earnings from S&P 500 companies are expected to have declined 2.2% for the quarter, according to Refinitiv data.

Also giving some support to the market Friday, the University of Michigan’s survey showed an improvement in U.S. consumer sentiment, with the one-year inflation outlook falling in January to the lowest level since the spring of 2021.

The Dow Jones Industrial Average (.DJI) rose 112.64 points, or 0.33%, to 34,302.61, the S&P 500 (.SPX) gained 15.92 points, or 0.40%, to 3,999.09 and the Nasdaq Composite (.IXIC) added 78.05 points, or 0.71%, to 11,079.16.

The S&P 500 closed at its highest level since Dec. 13, while the Nasdaq closed at its highest level since Dec. 14.

For the week, the S&P 500 gained 2.7% and the Dow rose 2%. The Nasdaq increased 4.8% in its biggest weekly percentage gain since Nov. 11.

The U.S. stock market will be closed Monday for the Martin Luther King Jr. Day holiday.

Thursday’s Consumer Price Index and other recent data have bolstered hopes that a sustained downward trend in inflation could give the Federal Reserve room to dial back on its interest rate hikes.

Money market participants now see a 91.6% chance the Fed will hike the benchmark rate by 25 basis points in February.

Among the day’s decliners, Tesla (TSLA.O) shares fell 0.9% after it slashed prices on its electric vehicles in the United States and Europe by as much as 20% after missing 2022 deliveries estimates.

In other earnings news, UnitedHealth Group Inc (UNH.N) shares rose after it beat Wall Street expectations for fourth-quarter profit but the stock ended down on the day.

Shares of Delta Air Lines Inc (DAL.N) dropped 3.5% as the company forecast first-quarter profit below expectations.

Volume on U.S. exchanges was 10.77 billion shares, compared with the 10.81 billion average for the full session over the last 20 trading days.

Advancing issues outnumbered declining ones on the NYSE by a 1.79-to-1 ratio; on Nasdaq, a 1.78-to-1 ratio favored advancers.

The S&P 500 posted 12 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 105 new highs and 8 new lows.

Additional reporting by Shubham Batra, Ankika Biswas and Amruta Khandekar in Bengaluru; Editing by Subhranshu Sahu, Shounak Dasgupta and Grant McCool

Our Standards: The Thomson Reuters Trust Principles.

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