Stocks Fall With Eyes on Rate Hikes; Bonds Decline: Markets Wrap

(Bloomberg) — Shares in Europe declined on Monday along with US equity futures as a note of caution crept in at the start of a week marked by interest-rate decisions and big-name company earnings on both sides of the Atlantic.

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The Stoxx Europe 600 index dropped about 0.4%, taking some of the luster off what was shaping to be the biggest January gain on record. Technology stocks led the decline as Prosus NV slumped more than 5% after a rout in Hong Kong’s tech sector. Royal Philips NV climbed after the medical-equipment maker announced a new round of job cuts.

European bonds fell, with yields on benchmark German securities up six basis points, after Spanish inflation unexpectedly quickened, prompting traders to boost bets on how high the the European Central Bank will raise interest rates. The euro gained.

Contracts on the S&P 500 and Nasdaq 100 declined following the advance on Wall Street Friday as traders brushed off disappointing outlooks from some of the world’s largest technology companies to push the Nasdaq 100 up 1%, heading for its best start to the year since 1999.

Federal Reserve officials are expected to raise rates by a quarter percentage point on Wednesday, dialing back the size of the increase for a second straight meeting, after recent data suggested the central bank’s aggressive campaign to slow inflation is working. Signs of earnings pressure, however, are raising concerns about the health of the economy and the outlook for equities.

“Better price action in stocks has started to convince many investors they are missing something — compelling them to participate more actively,” a team led by Michael Wilson wrote in a note. “We think the recent price action is more a reflection of the seasonal January effect and short covering after a tough end to December and a brutal year.”

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Asian benchmarks were mixed. Indian shares underperformed as the rout in Adani Group stocks swelled to $71 billion amid a fight with short seller Hindenburg Research. The Shanghai Shenzhen CSI 300 Index slid from intraday highs, coming in just short of entering a bull market as onshore exchanges resumed after the week-long Lunar New Year holiday.

Central Banks

By midweek central banks are likely to dominate the agenda, beginning on Wednesday with the Fed, which is expected to downshift to a 25 basis points increase in interest rates amid signs of cooling inflation.

A report Friday showed the Fed’s preferred inflation measures eased in December to the slowest annual pace in over a year and spending fell. Separate data from the University of Michigan showed US inflation expectations continued to retreat in late January, helping boost consumer sentiment.

The ECB and the Bank of England are each projected to hike by half a percentage point when they deliver decisions a day after the Fed.

Elsewhere in markets, a gauge of dollar strength was little changed on Monday and Group-of-10 currencies mostly traded in relatively narrow ranges. Treasury yields rose.

Meanwhile, hedge funds are betting this year’s stellar start for Treasuries is too good to last, quietly building up the biggest bearish bet on bond futures on record.

An aggregate measure of net-short non-commercial positions across all Treasuries maturities has hit 2.4 million contracts, according to the latest data from the Commodity Futures Trading Commission as of Jan. 24.

Oil fell as traders parsed signals on demand from China while tracking an uptick in tensions in the Middle East after Israel was reported to have carried out a drone strike against a target in Iran.

Key events this week:

  • International Monetary Fund’s world economic outlook, Monday

  • China industrial profits, PMIs, Tuesday

  • Eurozone GDP, Tuesday

  • US Conference Board consumer confidence, Tuesday

  • Earnings Tuesday include: UBS, Unicredit, Snap and Advanced Micro Devices

  • Eurozone Manufacturing PMI, CPI, unemployment, Wednesday

  • US construction spending, ISM Manufacturing, light vehicle sales, Wednesday

  • FOMC rate decision, Fed Chair Jerome Powell press conference, Wednesday

  • Earnings Wednesday include: Meta Platforms and Peloton Interactive

  • Eurozone ECB rate decision, President Christine Lagarde press conference, Thursday

  • UK BOE rate decision, Thursday

  • US factory orders, initial jobless claims, US durable goods, Thursday

  • Earnings Thursday include: Alphabet, Apple, Amazon, Qualcomm and Deutsche Bank and Santander

  • Eurozone S&P Global Eurozone Services PMI, PPI, Friday

  • US unemployment, nonfarm payrolls, Friday

Some of the main moves in markets:


  • The Stoxx Europe 600 fell 0.4% as of 8:47 a.m. London time

  • S&P 500 futures fell 0.7%

  • Nasdaq 100 futures fell 1%

  • Futures on the Dow Jones Industrial Average fell 0.5%

  • The MSCI Asia Pacific Index fell 0.5%

  • The MSCI Emerging Markets Index fell 0.7%


  • The Bloomberg Dollar Spot Index was little changed

  • The euro rose 0.2% to $1.0886

  • The Japanese yen fell 0.1% to 130.06 per dollar

  • The offshore yuan was little changed at 6.7526 per dollar

  • The British pound was little changed at $1.2385


  • Bitcoin fell 0.9% to $23,577.09

  • Ether fell 1.3% to $1,621.41


  • The yield on 10-year Treasuries advanced two basis points to 3.53%

  • Germany’s 10-year yield advanced six basis points to 2.29%

  • Britain’s 10-year yield advanced four basis points to 3.36%


  • Brent crude fell 0.7% to $86.03 a barrel

  • Spot gold fell 0.3% to $1,922.55 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Sagarika Jaisinghani, Michael Msika and Farah Elbahrawy.

(An earlier version of this wrap was corrected to fix the unit of measurement for forecast hikes by the BOE and ECB.)

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