Asian shares edged down and bonds nursed small losses on Tuesday as investors braced for an eventful week that will include central bank meetings, a slew of earnings reports and key U.S. economic data.
Investors broadly expect the U.S. Federal Reserve to raise interest rates by 25 basis points (bps) on Wednesday. Interest rate announcements are due on Thursday from both the Bank of England and the European Central Bank – and both are expected to hike rates by 50 bps. read more
Meanwhile, more than 100 S&P 500 companies, including Apple (AAPL.O), Amazon.com (AMZN.O) and Google parent Alphabet (GOOGL.O), are expected to report results this week, which also will see the publication of closely watched U.S. employment numbers.
“It’s a big week for both central banks and U.S. equities, with … some of the household names due to make earnings announcements that will provide a micro overview of the macro economy,” ANZ analysts said in a note.
“We expect a 25 bps (U.S.) rate rise and anticipate that the Fed will caution against an early pause in the tightening cycle …. Risk appetite could be vulnerable to a correction.”
European markets were set for a lower open, with pan-region Euro Stoxx 50 futures down 0.48%, German DAX futures falling 0.47% and FTSE futures dropping 0.29%. U.S. stock futures, the S&P 500 e-minis , were down 0.06%.
In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) was 1.1% lower. The index is up 9.9% so far this month and is on course for its best January performance since 2012.
Japan’s Nikkei stock index (.N225) slid 0.23% while Australian shares (.AXJO) were down 0.15%.
China’s economic activity swung back to growth in January, after a wave of COVID-19 infections passed through the country faster than expected following abandonment of pandemic controls. The official purchasing managers’ index, which measures manufacturing activity, rose to 50.1 from 47.0 in December. read more
Investors remained cautious, however, looking for more signs of recovery in the pandemic-hit economy. China’s blue-chip CSI300 index (.CSI300) was down 1% in afternoon trade after reaching a half-year high on Monday.
While Hong Kong’s Hang Seng index (.HSI) dropped 1.23% on Tuesday, it was still set to post its best January performance since 1989.
On Monday, U.S. stocks lost ground, with the major indexes sinking, weighed down by declines in technology and other giant corporations’ shares.
The Dow Jones Industrial Average (.DJI) fell 0.8% to 33,717.09, the S&P 500 (.SPX) lost 1.3% to 4,017.77 and the Nasdaq Composite (.IXIC) dropped 2.0% to 11,393.81.
Despite Monday’s declines, the S&P 500 remained on track to post its biggest January gain since 2019.
At the end of the Fed’s two-day policy meeting on Wednesday, investors will be glued to Chair Jerome Powell’s news conference for clues on whether the rate-hiking cycle may be coming to a close, and for signs of how long rates could stay elevated.
Markets will also grapple with a flood of U.S. economic data, culminating in Friday’s payrolls report for January. Investors see signs of weakening in the labour market as a key factor in bringing down high inflation.
U.S. Treasury yields remained firm ahead of the central bank meetings and economic data, with the yield on benchmark 10-year Treasury notes US10YT=RR standing at 3.5457% compared with its U.S. close of 3.551% on Monday.
The two-year yield , which rises with traders’ expectations of higher Fed fund rates, touched 4.2424% compared with a U.S. close of 4.261%.
In currencies, the U.S. dollar, which was poised for its fourth month of declines, was slightly up at 102.29 against a basket of other major currencies.
The European single currency was largely unchanged on the day at $1.0841, having gained 1.3% in a month.
In the energy market, oil prices fell ahead of the expected hikes by central banks and signals of strong Russian exports.
U.S. crude dipped 0.44% to $77.56 a barrel. Brent crude fell to $84.85 per barrel.
Gold was slightly lower. Spot gold was traded at $1920.84 per ounce.