European stocks fell for the fourth straight day Monday and US equity index futures ticked down as concerns mounted that central bank policy-tightening was set to take a heavy toll on the global economy and company earnings.
(Bloomberg) — European stocks fell for the fourth straight day Monday and US equity index futures ticked down as concerns mounted that central bank policy-tightening was set to take a heavy toll on the global economy and company earnings.
Europe’s Stoxx 600 index and S&P 500 futures both sliped 0.4%.
The semiconductor sector saw an across-the-board hit from Washington’s decision to further restrict China’s access to US technology and signs that chip demand is slowing. Europe-listed Infineon, STMicro and OSRAM dropped, while in premarket New York trade, chipmakers Nvidia and Advanced Micro Devices shed more than 1% each.
An eventful week lies ahead, with inflation data due Thursday and the third-quarter earnings season kicking off in earnest.
Hotter-than-expected consumer price growth would heap pressure on policy makers to extend 75 basis-point rate hikes beyond this year.
Minutes of the latest Fed policy meeting on Wednesday may provide insight into where the pain threshold lies for Fed officials, who are so far resolutely hawkish in their message that neither financial-market volatility nor the threat of an economic downturn will deter them from raising rates.
Investors are also bracing for disappointment from the earnings season, with more than 60% of the 724 respondents to Bloomberg’s latest MLIV Pulse survey predicting the season would push the S&P 500 Index lower.
The poll underscores Wall Street’s fear that even after this year’s brutal selloff, stocks have not priced all the risks stemming from central banks’ aggressive tightening and stubbornly high inflation.
While JPMorgan Chase & Co., Citigroup Inc. and other big banks report this week, iPhone maker Apple is in particular focus as its report is expected to offer insight into themes ranging from global consumer demand to the impact of dollar strength.
Stocks Face Brutal Earnings With Apple in Focus: MLIV Pulse
“The narrative will start changing from central banks and inflation, to one of weaker growth and downward earnings revisions that is going to weigh on risk sentiment over coming weeks,” Jefferies strategist Mohit Kumar wrote in a note.
Similarly, Morgan Stanley strategists warned that the bear market in US stocks won’t be over until earnings forecasts are cut further or share valuations better reflect the risks.
Earlier, a gauge of Asian equities dropped by more than 1%.
In Britain, the Bank of England stepped up its measures to support market functioning as its emergency gilt buying measures entered their final week.
The UK central bank said it will increase the size of its buying operations for the next five days to a maximum of £10 billion ($10.8 billion), from £5 billion previously.
However, UK long-dated bonds shrugged off the news, with 10-year yields rising 6 basis points.
Focus is also training on Italy where the yield premium demanded by investors to hold Italian debt compared to Germany has surged to the highest since 2020, after ratings agency Moody’s warned of the need to keep national debt on a sustainable path.
The dollar firmed against its Group-of-10 counterparts.
Goldman Sachs Group Inc. strategists warned the strength of the US currency — up 15% already this year — posed a risk to the earnings of American companies which generate 30% of revenues overseas.
Fears for the slowing world economy stalled an oil price rally triggered by OPEC+’s decision to cut supply.
US crude futures slipped 0.7% after last week’s 17% gain.
Key events this week:
- Earnings this week include: JPMorgan Chase & Co., Citigroup Inc., Morgan Stanley, BlackRock, Delta Air Lines, Fast Retailing, Infosys, PepsiCo, TSMC, Tata Consultancy, UnitedHealth, U.S.
Bancorp, Walgreens Boots, Wells Fargo, Wipro
- Fed’s Lael Brainard and Charles Evans speak, Monday
- IMF’s World Economic Outlook and Global Financial Stability Report, Tuesday
- Fed’s Loretta Mester speaks, Tuesday
- BOE’s Andrew Bailey speaks, Tuesday
- FOMC minutes for September meeting, Wednesday
- US PPI, mortgage applications, Wednesday
- OPEC Monthly Oil Market Report, Wednesday
- Fed’s Michelle Bowman and Neel Kashkari speak
- ECB’s Christine Lagarde speaks
- US CPI, initial jobless claims, Thursday
- G-20 finance ministers and central bankers meet, Thursday
- China CPI, PPI, trade, Friday
- US retail sales, business inventories, University of Michigan consumer sentiment, Friday
- BOE emergency bond buying is set to end, Friday
Some of the main moves in markets:
Stocks
- Futures on the S&P 500 fell 0.4% as of 5:21 a.m.
New York time
- Futures on the Nasdaq 100 fell 0.5%
- Futures on the Dow Jones Industrial Average fell 0.2%
- The Stoxx Europe 600 fell 0.4%
- The MSCI World index fell 0.4%
Currencies
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro fell 0.4% to $0.9703
- The British pound fell 0.1% to $1.1074
- The Japanese yen fell 0.1% to 145.46 per dollar
Cryptocurrencies
- Bitcoin fell 1.1% to $19,280.3
- Ether fell 1% to $1,307.47
Bonds
- Germany’s 10-year yield declined three basis points to 2.16%
- Britain’s 10-year yield advanced seven basis points to 4.31%
Commodities
- West Texas Intermediate crude fell 0.7% to $92.03 a barrel
- Gold futures fell 1.1% to $1,690.70 an ounce
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