European stocks rise as earnings season gets underway
European shares rose on Monday as traders weighed recent data showing U.S. inflation stubbornly high and looked ahead to a recovery in corporate earnings this week.
The regional Stoxx 600 was up 0.6% in early trade after falling 1% last week. London’s FTSE 100 gained 0.7%, Germany’s Dax gained 0.5% and France’s Cac 40 gained 0.7%.
Across the Atlantic, markets will remain closed on Monday for Martin Luther King Jr., as investors have been assessing the impact of rising wages, falling unemployment and record inflation and the question of whether Fed officials will tighten monetary policy more and more. Policies are faster than plans.
Data last week showed U.S. consumer prices rose at an annual rate of 7% last month, the fastest pace in nearly 40 years.
The Fed is expected to raise rates at least three times in 2022. However, some central bank officials said further rate hikes may be necessary this year if inflation continues to soar.
So-called “speculative” tech stocks have been hit especially hard, with the Nasdaq Composite down 4.8% so far this year. Wall Street’s broad-based S&P 500 fell 2.2% over the same period.
JPMorgan shares fell more than 6% after the bank closed on a disappointing start to the U.S. earnings season on Friday Say Although the company posted a record $48.3 billion in full-year earnings, rising costs will reduce profits in 2022. Banks including Goldman Sachs, Morgan Stanley and Bank of America are due to report fourth-quarter data later this week.
Data on Friday also showed U.S. retail sales fell 1.9% in December, the biggest drop in 10 months.
Steve Blitz, chief U.S. economist at TS Lombard, said in a note that the December data showed the U.S. economy was “transitioning from a strong Covid-19 cycle to something that finally looks more ‘normal’.”
He added: “The challenge for investors is to see this shift from the Covid-19 cycle, this slump in economic activity, and maintain confidence that the economy is moving towards a very different (better) economy than it was before the Covid-19 outbreak. Economic Transformation.”
In government debt markets, the yield on the two-year U.S. Treasury note, which closely tracks interest rate expectations, rose to 0.97% on Friday, its highest level since February 2020. Bond yields are inversely proportional to their prices.
The 10-year German Bund yield rose 0.02 percentage point to minus 0.03% on Monday.
In Asia, Hong Kong’s Hang Seng fell 0.7% and Tokyo’s Nikkei 225 gained 0.7%. The Bank of Japan’s latest two-day monetary policy meeting began on Monday, decision on tuesday.
South Korea’s tech-heavy Kospi fell 1 percent, while Australia’s S&P/ASX 200 gained 0.3 percent.
The mixed move came after China’s National Bureau of Statistics said on Monday that the economy was expanding. 4% year-on-year increase The fourth quarter beat economists’ expectations but posted the slowest growth rate in 18 months.
The People’s Bank of China on Monday also cut the one-year policy loan rate by 10 basis points to 2.85% and the seven-day reverse repo rate to 2.1%.
Oil benchmark Brent was flat at $86.07 a barrel on Monday, not far from a 2021 peak of $86.70 and a 2018 high of $86.74.