(Bloomberg) — European stocks extended gains on Monday as investors weighed expectations for easing inflation that have fueled January’s rally in riskier assets.
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The Stoxx Europe 600 index climbed for a fourth straight session after posting its best first two weeks in a year on record as easing inflation pressures, China’s reopening and mild weather supported equities. The UK’s FTSE 100 traded within a whisker of a record high.
US futures fluctuated after stocks on Wall Street closed at the strongest level in a month on Friday. The Bloomberg Dollar Spot Index hovered near a seven-month low. Bond yields were steady across Europe. There was no trading in Treasuries, with US financial markets closed for a holiday. The 10-year US yield climbed back to 3.50% on Friday.
Earnings will be a key catalyst moving forward as traders assess whether companies were able to navigate headwinds including higher interest rates. The busy week will also be punctuated by corporate earnings, including Wall Street heavyweights Goldman Sachs Group Inc. and Morgan Stanley.
Markets may see another downshift in the Federal Reserve’s pace of rate hikes in February as the latest inflation print shows that “we are certainly on the right path,” according to Skylar Montgomery Koning, senior global macro strategist at TS Lombard.
TS Lombard does not expect the Fed’s terminal rates to reach very high levels and actually sees an increasing risk that the central bank fails to defeat inflation, she said on Bloomberg Television.
A host of Fed officials will be speaking this week, providing more clues for investors. The World Economic Forum’s annual meeting kicks off in Davos, Switzerland, with speakers there including European Central Bank President Christine Lagarde and the International Monetary Fund’s Kristalina Georgieva.
Meanwhile, Japanese markets continued to be driven by speculation of a shift in monetary policy, with the Topix index trading lower as the yen’s rebound 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 pushed above the top of the BOJ’s ceiling for a second day.
Bitcoin traded above $21,000 following a rebound over the weekend, when it surged amid optimism that it may have bottomed.
Elsewhere in markets, iron ore tumbled after China pledged to tighten supervision on pricing after the metal’s surge in recent months. Oil and gold slid.
Key events this week:
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Earnings this week 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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World Economic Forum’s kicks off in Davos, 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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Fed’s John Williams to speak, 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 investment, Wednesday
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Bank of Japan rate decision, Wednesday
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Federal Reserve releases Beige Book, Wednesday
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Fed speakers include Raphael Bostic, Lorie Logan and Patrick Harker, Wednesday
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US housing starts, initial jobless claims, Philadelphia Fed index, Thursday
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ECB account of its December policy meeting and President Christine Lagarde on a panel in Davos, Thursday
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Fed speakers include Susan Collins and John Williams, Thursday
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Japan CPI, Friday
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China loan 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, Friday
Some of the main moves in markets:
Stocks
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The Stoxx Europe 600 rose 0.2% as of 8:19 a.m. London time
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S&P 500 futures slipped 0.2%
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Nasdaq 100 futures fell 0.3%
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Futures on the Dow Jones Industrial Average fell 0.2%
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The MSCI Asia Pacific Index fell 0.2%
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The MSCI Emerging Markets Index rose 0.1%
Currencies
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The Bloomberg Dollar Spot Index rose 0.1%
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The euro was little changed at $1.0822
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The Japanese yen fell 0.4% to 128.41 per dollar
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The offshore yuan fell 0.2% to 6.7294 per dollar
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The British pound fell 0.1% to $1.2210
Cryptocurrencies
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Bitcoin fell 0.4% to $20,824.72
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Ether fell 0.7% to $1,541.94
Bonds
Commodities
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Brent crude fell 1.1% to $84.33 a barrel
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Spot gold fell 0.3% to $1,914.61 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Richard Henderson.
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