US equity-index futures slipped, European stocks wavered and the dollar snapped a three-day losing streak as investors assessed whether a rally in risk assets may be overdone given the outlook for inflation and economic growth.
The Stoxx Europe 600 index was little changed after posting its best first two weeks in a year on record as easing inflation pressures, China’s reopening and mild weather supported equities. Futures on the S&P 500 and Nasdaq 100 fell more than 0.5% after stocks on Wall Street closed at the strongest level in a month on Friday.
The Bloomberg Dollar Spot Index rebounded from a seven-month low. Bond yields across Europe climbed. There was no trading in Treasuries, with US financial markets closed for a holiday.
While inflation in the US appears to have peaked, aggressive policy tightening by the Federal Reserve and other central banks risks pushing the global economy into a recession that will hurt corporate profits. The World Bank last week added to the gloomy outlook, warning of “one of the sharpest slowdowns we have seen in the past five decades.”
“Fear of missing out currently represents a key driver for equities,” Credit Agricole CIB strategists led by Jean-François Paren wrote in a note. “The market is getting a bit ahead of itself right now.”
Earnings will be a key catalyst moving forward as traders assess whether companies were 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 host 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 speakers there including European Central Bank President Christine Lagarde and the International Monetary Fund’s Kristalina Georgieva.
Meanwhile, Japanese markets continued to be driven by speculation of a shift in monetary policy, with the Topix index trading lower as the yen’s rebound weighed on exporters.
Investors are on guard for another surprise from the Bank of Japan when it sets policy on Wednesday. The yen strengthened to levels last seen in May and Japan’s benchmark 10-year bond yield pushed above the top of the BOJ’s ceiling for a second day.
Bitcoin traded above $21,000 following a rebound over the weekend, when it surged amid optimism that it may have bottomed.
Elsewhere in markets, iron ore tumbled after China pledged to tighten supervision on pricing after the metal’s surge in recent months. Oil and gold slid.
Key events this week:
Some of the main moves in markets:
Stocks
Currencies
Cryptocurrencies
Bonds
Commodities
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