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(Bloomberg) — Global stocks fell and the dollar rose to a one-month high as central bankers pushed back on expectations of aggressive interest rate cuts.
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US futures fell and the STOXX Europe 600 Index headed for a five-week low. The MSCI Asia-Pacific Index fell 1.5%, the biggest decline in three months. The two-year Treasury yield rose 6 basis points to 4.2%. The dollar index rose 0.6%.
Banks led the decline in European stocks as analysts at JPMorgan Chase & Co. said a peak in interest rates would limit loan income. Goldman Sachs Group Inc. and Morgan Stanley are scheduled to report earnings later today.
European Central Bank board member François Villeroy de Galhau said in Davos, Switzerland, that it was too early to declare victory on inflation. Traders are awaiting a speech from Fed Governor Christopher Waller later on Tuesday for clues about when the Fed will cut interest rates, with money markets seeing a two-thirds chance of a rate cut in March. ing.
“Central banks are pushing back on rate cuts, but they’re not helping risk assets,” said Mohit Kumar, chief European economist at Jefferies International. He said: “The market is a little ahead of the curve.”
Stocks fell below losses after the ECB’s monthly survey showed consumer expectations for euro zone inflation fell in November to their lowest level in more than a year and a half. Money markets have largely stabilized the chances of a rate cut following the ECB’s data, with the first quarter-point cut by April and around five quarter-point cuts expected by the end of the year.
ECB Governing Council member Robert Holzmann said on Monday that interest rate cuts were not a certainty this year, given lingering inflation and geopolitical risks. His sentiments echo earlier comments from ECB President Lagarde, who warned that it was too early to talk about cutting borrowing costs. Wednesday’s WEF roster includes a number of ECB speakers.
Meanwhile, economic data in the UK showed wage growth slowing at the fastest pace on record, confirming the Bank of England’s case for interest rate cuts in coming months. The pound fell by as much as 0.8% against the dollar, and gold yields also fell slightly.
Read: A pessimist’s guide to global economic risks in 2024
Morgan Stanley and Goldman Sachs Group Inc. are among the companies reporting earnings on Tuesday, with investment banking operations continuing as high borrowing costs, geopolitical tensions and recession risks hamper deal-making. It is expected that a lull will become apparent.
Elsewhere, oil prices were firm, offset by a volatile global economic outlook and a stronger dollar, despite continued Houthi attacks on ships in the Red Sea, raising tensions in the region. Brent, the global benchmark, hovered above $78 a barrel, while West Texas Intermediate traded around $73.
Here are the main events on the market this week:
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US Empire Manufacturing, Tuesday
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Goldman Sachs Group and Morgan Stanley will report earnings on Tuesday.
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Federal Reserve President Christopher Waller speaks on Tuesday
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China’s GDP, real estate prices, retail sales, industrial production, Wednesday
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Eurozone CPI, Wednesday
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UK CPI, Wednesday
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US retail sales, industrial production, business inventories, Wednesday
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Fed releases Beige Book survey on Wednesday
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European Central Bank President Christine Lagarde speaks at Davos on Wednesday
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New York Fed President John Williams speaks on Wednesday
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Australian unemployment rate Thursday
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Japan’s industrial production Thursday
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European Central Bank releases report of December policy meeting on Thursday
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U.S. housing starts, new unemployment insurance claims, Thursday
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Atlanta Fed President Rafael Bostic speaks Thursday
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Japan CPI, Friday
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U.S. existing home sales, University of Michigan consumer sentiment, Friday
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Congress faces deadline Friday to pass spending deal before partial federal government shutdown
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San Francisco Fed President Mary Daley speaks on Friday
The main movements in the market are:
stock
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As of 5:52 a.m. New York time, S&P 500 futures were down 0.6%.
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Nasdaq 100 futures fell 0.7%
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Dow Jones Industrial Average futures fell 0.5%
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Stoxx European 600 falls 0.6%
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MSCI World Index falls 0.5%
currency
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Bloomberg Dollar Spot Index rose 0.6%
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The euro fell 0.6% to $1.0883.
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The British pound fell 0.8% to $1.2629.
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The Japanese yen fell 0.7% to 146.71 yen to the dollar.
cryptocurrency
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Bitcoin rose 0.4% to $42,842.26
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Ether rose 0.5% to $2,532.29
bond
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The 10-year Treasury yield rose 6 basis points to 4.00%.
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Germany’s 10-year bond yield fell 1 basis point to 2.22%.
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UK 10-year bond yields fell 2 basis points to 3.77%.
merchandise
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West Texas Intermediate crude rose 0.6% to $73.09 per barrel.
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Spot gold fell 0.8% to $2,040.62 an ounce.
This article was produced in partnership with Bloomberg Automation.
–With assistance from Divya Patil, Lynn Thomasson, and Jan-Patrick Barnert.
(An earlier version corrected the first paragraph of the heading to say the dollar heads for a one-month high.)
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