Stocks take a breather as focus shifts to earnings: Market Wrap

(Bloomberg) – European stock markets firmed Thursday after their biggest three-day decline since October as traders readjusted their bets on the timing and extent of interest rate cuts.

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Signs that European policymakers are converging on interest rate cuts in June brought calm to markets, and signs that Chinese state funds are bailing out stocks hit by signs of economic weakness. There were signs. This allowed investors to shift their focus to positive earnings news on Thursday.

The Stoxx Europe 600 index was little changed, falling about 2% in the first three days of the week. China’s benchmark CSI 300 index rose as much as 1.4%, erasing an intraday drop of 1.8%, after a surge in ETF trading pointed to the involvement of state funds. S&P 500 futures were flat, while the Nasdaq 100 rose slightly.

“The question now is whether repricing will continue, and if so, for how long,” said Evelyn Gomez Lichti, a strategist at Mizuho International. “We think the market could continue to rebound on the 2023 Santa Rally, but only if the data and central bankers encourage it.”

Among European retail investors, shares soared more than 10% after betting group Flutter Entertainment reported results that were broadly in line with analysts’ expectations. Cartier owner Richemont’s sales soared 7%, beating analysts’ expectations.

Tech stocks outperformed after Taiwan Semiconductor Manufacturing Co., the main chip maker for Apple and Nvidia, said it expected a return to solid growth this quarter. ASML Holding NV rose about 2.3% and ASM International NV rose more than 3%.

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U.S. Treasuries rose on Wednesday after further selling focused on the short end of the curve. The yield on the policy-sensitive two-year Treasury note fell 4 basis points after rising 14 basis points on Wednesday, the biggest single-day increase since June. The dollar fell slightly against major currencies, ending a four-day rally.

The decline in bond prices reflected a change in investors’ expectations for a Fed rate cut in March. Based on swap pricing, the probability of a rate cut on Wednesday fell below 60% for the first time since mid-December. That’s down from 80% on Friday.

The decline followed comments from Fed officials this week that contradicted market expectations about an impending rate cut and Wednesday’s higher-than-expected retail sales. The Fed said in its Beige Book survey that strong consumer spending in recent weeks helped boost the economy.

Meanwhile, European Central Bank President Christine Lagarde and several of her colleagues have signaled the possibility of a rate cut around mid-year, when we will know more about inflation, wages, the stagnant economy and the damage to Yemen’s supply chains. . Houthi rebels.

Elsewhere, geopolitical tensions spooked investors as Pakistan’s military carried out targeted attacks against militant hideouts inside Iran, after the Iranian government launched similar attacks a day earlier. . Pakistan’s stock index fell by up to 1.6%.

Gold rose after falling more than 1% on Wednesday. On Thursday, West Texas Intermediate traded above $73 per barrel and Bitcoin reversed losses to trade above $42,700.

This week’s main events:

• U.S. housing starts, new unemployment insurance claims, Thursday

• Republican presidential primary debate Thursday in New Hampshire

• ECB President Christine Lagarde participates in panel discussion in Davos on Thursday

• ECB releases report of December policy meeting on Thursday

• Atlanta Fed President Rafael Bostic speaks Thursday

• Canadian retail sales Friday

• Japanese CPI, tertiary index, Friday

• U.S. existing home sales, University of Michigan consumer sentiment, Friday

• ECB President Christine Lagarde and IMF Managing Director Kristalina Georgieva will speak in Davos on Friday.

• San Francisco Fed President Mary Daley speaks on Friday

The main movements in the market are:

stock

• Stoxx Europe 600 little changed as of 8:28 a.m. London time

• S&P500 futures little changed

• Nasdaq 100 futures rose 0.2%

• Dow Jones Industrial Average futures little changed

• MSCI Asia Pacific Index rose 0.3%

• MSCI Emerging Markets Index rose 0.4%

currency

• The Bloomberg Dollar Spot Index fell 0.1%.

• The euro was almost unchanged at $1.0885.

• The Japanese yen rose 0.2% to 147.79 yen to the dollar.

• The offshore yuan was little changed at 7.2158 yuan to the dollar.

• Sterling rose 0.1% to $1.2694.

cryptocurrency

• Bitcoin rose 0.4% to $42,806.95

• Ether rose 0.6% to $2,538.54

bond

• The 10-year Treasury yield fell 2 basis points to 4.08%.

• German 10-year bond yield remains unchanged at 2.32%

• UK 10-year bond yields fell 2 basis points to 3.97%.

merchandise

• Brent crude rose 0.2% to $78.04 per barrel.

• Spot gold rose 0.3% to $2,011.82 an ounce.

This article was produced in partnership with Bloomberg Automation.

—With contributions from Richard Henderson and Michael Musica.

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