(Bloomberg) — A gauge of global stocks stalled after their best start to the year in a generation as investors weighed whether the rally had gone too far given the outlook for inflation, growth and earnings. European stocks rose.
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The MSCI ACWI index was little changed after posting the biggest gain for the first two weeks in data going back to 1988. Futures for the S&P 500 and Nasdaq 100 indexes each fell at least 0.2%. The dollar broke a three-day losing streak. US spot markets were closed for the holidays. European stocks were boosted by gains in real estate companies.
While inflation in the US appears to have peaked, aggressive tightening by the Federal Reserve and other central banks risks pushing the global economy into a recession that could hurt earnings corporate. Last week, the World Bank added to the gloomy outlook, warning of “one of the steepest slowdowns we’ve seen in the last five decades.”
“It has been quite a hectic start to the year so investors may be taking the opportunity to catch their breath,” Craig Erlam, senior market analyst at Oanda Europe Ltd., wrote in a note. “The question now is whether the season of profit will either boost that newfound sense of hope or crash the party before it really gets started. A bad earnings season could undermine hopes of a soft landing that looks more possible now than it has for many months.”
Earnings will be a key catalyst this week as traders assess whether companies were able to weather headwinds, including higher interest rates. The busy period will also be marked by corporate earnings, including Wall Street heavyweights Goldman Sachs Group Inc. and Morgan Stanley.
Several Fed officials will speak this week and provide more clues about their policy priorities. The annual meeting of the World Economic Forum kicks off in Davos, Switzerland, with speakers including European Central Bank President Christine Lagarde and Kristalina Georgieva of the International Monetary Fund.
Meanwhile, the Japanese continued to be buoyed by speculation of a change in monetary policy from the markets, with the Topix Index trading lower as the yen’s rally 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 topped the BOJ ceiling for a second day.
Bitcoin fluctuated between gains and losses on Monday, following a rally over the weekend, when it rose amid optimism that it may have bottomed out.
Elsewhere, iron ore slumped after China vowed to tighten price surveillance following the metal’s rise in recent months. Oil and gold fell.
Key events this week:
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This week’s earnings are scheduled to include: Charles Schwab, Discover Financial, Goldman Sachs, HDFC Bank, Interactive Brokers, Investor AB, Morgan Stanley, Netflix, Procter & Gamble, Prologis, State Street
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The World Economic Forum kicks off in Davos on Monday
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US markets closed for Martin Luther King Jr. day, Monday
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China Retail Sales, Industrial Production, GDP, Tuesday
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US Empire State Manufacturing Survey, Tuesday
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The Fed’s John Williams will speak on Tuesday
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Eurozone CPI, Wednesday
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US Retail Sales, PPI, Industrial Production, Business Inventories, MBA Mortgage Applications, Cross Border Investing, Wednesday
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Bank of Japan rate decision Thursday
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The Federal Reserve publishes the Beige Book on Wednesday
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Fed speakers include Raphael Bostic, Lorie Logan and Patrick Harker on Wednesday
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US Home Construction, Initial Jobless Claims, Philadelphia Fed Index, Thursday
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ECB account of their December monetary policy meeting and President Christine Lagarde at a panel in Davos on Thursday
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Fed speakers include Susan Collins and John Williams on Thursday
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Japan CPI Friday
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China lending prime rates, Friday
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US Existing Home Sales, Friday
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IMF’s Kristalina Georgieva and ECB’s Lagarde speak in Davos on Friday
Some of the main movements in the markets:
Stocks
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S&P 500 futures fell 0.2% as of 2:05 p.m. New York time.
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The Stoxx Europe 600 rose 0.5%
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Dow Jones Industrial Average futures fell 0.1%
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The MSCI World Index was little changed
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Nasdaq 100 futures fell 0.4%
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The MSCI Asia Pacific Index fell 0.3%
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The MSCI Emerging Markets Index fell 0.1%
coins
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The Bloomberg Dollar Spot Index rose 0.2%
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The euro fell 0.1% to $1.0814
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The British pound fell 0.3% to $1.2190
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The Japanese yen fell 0.6% to 128.60 per dollar
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The offshore yuan fell 0.5% to 6.7469 per dollar
CRYPTOCURRENCIES
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Bitcoin rose 2.3% to $21,380.85
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Ether rose 2.2% to $1,586.55
Captivity
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The 10-year Treasury yield was little changed at 3.50%
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Germany’s 10-year bond yield was little changed at 2.17%
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The UK 10-year yield rose two basis points to 3.38%.
raw Materials
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West Texas Intermediate crude fell 1.3% to $78.84 a barrel
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Gold futures fell 0.2% to $1,917.30 an ounce.
This story was produced with the assistance of Bloomberg Automation.
–With the assistance of Tassia Sipahutar, Richard Henderson and Sebastian Boyd.
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