Global bonds rallied and stock markets were muted Monday, as sharp declines in manufacturing and services gauges across Europe fanned concerns about economic growth.
Investors were wary of making big equity bets at the start of a week packed with major central bank policy decisions and corporate earnings. In Europe, advance readings of the Purchasing Managers’ Indexes showed the private-sector economy contracted more than anticipated in July in the euro area and slowed sharply in Britain.
The figures sent investors scurrying for the safety of bonds, with the yield on German 10-year notes, the euro-area benchmark, as much as seven basis points lower, while UK yields slid 8 basis points.
US Treasury 10-year yields edged down as much as 4 basis points ahead of US flash PMIs that are expected to show an economy still in expansion mode, thanks to the services sector.
The data highlights the quandary for policy-setters, with traders positioning for the Federal Reserve and the European Central Bank to raise interest rates this week and to signal whether more hikes are likely after record tightening campaigns.
Equity markets, meanwhile, are looking into their busiest earnings week this season, with more than 500 major companies worldwide due to report quarterly results, including US megacaps such as Alphabet Inc., and Meta Platforms Inc. The next few days will be crucial for investors, who will be watching to see if slowing economic momentum shows up on profit margins.
“Markets have entered a phase of anxious waiting, with two factors coming into play, central banks and earnings,” said Jeanne Asseraf-Bitton, head of research and strategy at BFT Investment Managers. “I’m not sure there will be a lot of surprises coming from the central banks so it’s really earnings that will be key.”
US stock-index futures posted modest gains. Among individual movers, Mattel Inc. rose as much as much as 2.5% in premarket trading, after Barbie became the top-grossing picture in US and Canadian cinemas, taking in $155 million in ticket sales. Warner Bros. Discovery Inc., the parent of the Hollywood studio that produced the movie, also advanced.
US mega-cap tech shares including Nvidia Corp. and Microsoft Corp also rose. The Nasdaq special rebalancing is unlikely to solve the problem of high market concentration, and the index will remain too concentrated to be considered an actively managed diversified fund, according to Goldman Sachs strategists.
Europe’s Stoxx 600 equity gauge came under pressure, as some European corporate results confirmed weakening consumer demand. Philips, for instance, plunged as much as 7.7% after reporting a drop in order intake and Ryanair Holdings Plc fell after lowering its traffic prediction.
In currency markets, the euro slipped across the board, losing as much as 0.5% to the dollar and 0.8% against the Japanese yen.
While the Bank of Japan is expected to stick to ultra-loose policy settings at its Friday meeting, the yen strengthened, with officials expected to consider sharply increasing their inflation forecast for this fiscal year.
Elsewhere, wheat futures rose as much as 6.9% on Monday, extending last week’s surge after Russia attacked one of Ukraine’s Danube river ports, ramping up the risks facing Kyiv’s last major grain export route and global food trade.
Key events this week:
Some of the main moves in markets:
Stocks
Currencies
Cryptocurrencies
Bonds
Commodities
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