Shares shaky as rate-hike week looms

  • Fed sees 25 bps hike, ECB and BoE 50 bps each
  • Technology giants lead a host of earnings results
  • Shares fall after January rally

SYDNEY/LONDON, Jan 30 (Reuters) – Shares fell on Monday at the start of an agenda-setting week for markets, with concerns over possible interest rate hikes in Europe and the United States as well as worries from US jobs and wages data. Will get benefit. Latest update on fight against inflation.

Investors expect the Federal Reserve to hike rates by 25 basis points on Wednesday, following half-point hikes from the Bank of England and the European Central Bank, and any deviation from that script would be a real blow.

The tech giant’s earnings will also test the mettle of Wall Street bulls, who are looking to lead the Nasdaq to its best January since 2001.

Europe’s benchmark STOXX index fell 0.5% on Monday morning, a marginal drop in MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS), which has gained 11% so far in January as China’s economy reopens. Has opened.

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Meanwhile, US stocks were set to follow the jittery Monday mood, with S&P 500 futures and Nasdaq futures down about 1% each, as investors await guidance on the Federal Reserve’s policy later in the week.

Analysts expect more efforts are needed to control inflation. read more

“With US labor markets still tight, core inflation elevated and financial conditions easing, Fed Chair Powell’s tone will be louder,” said Bruce Kassman, chief economist at JP Morgan, stressing that a 25 bp hike Doesn’t mean the break is coming.” , which expects another increase in March.

“We’re also looking for him to continue to push back against the market pricing in a rate cut later this year.”

There is a lot of pressure to perform given futures are currently expected to reach 5% in March, only to drop to 4.5% by the end of the year.

The dollar index was flat ahead of 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.

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apple core

The yield on 10-year notes has fallen 33 basis points to 3.50% so far this month, essentially due to easing financial conditions, even as the Fed talks about tightening.

The dovish outlook will also be tested by data on US payrolls, the Employment Cost Index and various ISM surveys.

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

As far as Wall Street’s recent rally goes, many including Apple Inc (AAPL.O), (AMZN.O), Alphabet Inc (GOOGL.O) and Meta Platforms (META.O) Will depend on other’s earnings.

“Apple will give a snapshot of the overall demand story for consumers globally and China’s supply chain issues,” wrote analysts at Weinbush.

“Based on our recent Asia supply chain investigation, we believe demand for the iPhone 14 Pro is stronger than expected,” he added. “Apple may cut some costs around the edges, but we don’t expect massive layoffs.”

Market pricing of early Fed easing has been a drag for the dollar, which has lost 1.6% against a basket of major currencies so far this month to stand at 101.790.

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The euro is up 1.5% for January at $1.0878 and is at a nine-month top. The dollar also fell 1.3% to 129.27 on the yen, despite the Bank of Japan’s dogged defense of ultra-easy policies.

The fall in the 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 key central bank moves and data releases.

China’s rapid reopening is generally seen as a big drag for commodities, supporting everything from copper to iron ore to oil prices.

Oil markets were hesitant amid concerns that a possible Fed rate hike could weigh on fuel demand, with Brent down nearly 1% at $85.88 a barrel, while US crude fell 87 cents to $78.8.

Reporting by Wayne Cole and Lawrence White; Editing by Christopher Cushing and Arun Coeur

Our Standards: The Thomson Reuters Trust Principles.


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