July 21, 2024
Finance

European Stocks Slip as Traders Weigh Rate Outlook: Markets Wrap


(Bloomberg) — European stocks fell as traders weighed the outlook for monetary policy ahead of a raft of speeches by policy makers at the World Economic Forum in Davos this week.

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The Stoxx Europe 600 index slipped 0.2%, extending a lackluster start to the year after a 13% rise in 2023. Basic resources and carmakers led the decline after Germany’s economy dodged a recession, though the latest data showed it contracted for the first time since the pandemic last year. Germany’s 10-year yield rose about three basis points as bonds across the euro region fell.

The European Central Bank will lower interest rates four times this year as inflation retreats more quickly than previously anticipated, according to a Bloomberg poll of economists. But ECB Chief Economist Philip Lane dampened expectations of rapid easing when he said in an interview published at the weekend that cutting rates too early would be “self-defeating.” ECB Governing Council member Robert Holzmann may add to the picture when he speaks at Davos later today.

“With lingering uncertainties regarding the outlook for monetary policies in both the US and the European Union, reasons to buy the market are hard to find,” said Pierre Veyret, a technical analyst at ActivTrades. “Hopes of a quick dovish switch have been regularly undermined by both macro data and hawkish semantics from central bank officials.”

Among individual stock moves in Europe, Dassault Aviation SA slumped as much as 10% after the French aircraft maker reported a decline in 2023 jet orders. Just East Takeaway.com N.V. and HelloFresh SE dropped after Exane analysts recommend steering clear of Europe’s food delivery sector.

US equity-index futures were flat, with cash stock and Treasury markets closed on Monday for a public holiday. A gauge of the dollar gained after a surprise decline in US producer prices Friday reinforced bets the Federal Reserve will lower borrowing costs in coming months.

The MSCI Asia Pacific share index climbed for a third session. Stocks advanced in Taiwan after the Democratic Progressive Party won the presidential election and the more China-friendly Kuomintang gained too few seats to control the assembly.

China’s CSI 300 Index swung between gains and losses amid speculation officials may lower the required reserve ratio after the People’s Bank of China unexpectedly left the rate on its one-year policy loans at 2.5% Monday. That was contrary to expectations among economists that it would trim the so-called medium-term lending facility by 10 basis points.

“Rate cuts are likely still on the cards, but China looks to be taking a more measured approach to policy easing,” said Marvin Chen, an analyst at Bloomberg Intelligence in Hong Kong.

Along with more US earnings reports, investors this week will be focused on inflation readings in Germany and the UK, as well as a swath of political leaders and officials including Chinese Premier Li Qiang attending the annual WEF. A speech by Federal Reserve Governor Christopher Waller, after officials last week attempted to temper any expectation of a looming rate cut, will also be closely watched.

In commodities, oil declined as the risk that air strikes by the US and allies against the Houthis would ignite a wider conflict and disrupt crude flows from the Middle East was balanced by soft fundamentals.

Some key events in markets this week:

  • World Economic Forum in Davos begins, with this year’s theme “Rebuilding Trust,” Monday

  • Iowa Republican caucuses, the first nominating contests for the 2024 US presidential election, Monday

  • Japan PPI, Tuesday

  • Germany CPI, ZEW survey expectations, Tuesday

  • UK unemployment, Tuesday

  • US Empire Manufacturing, Tuesday

  • Goldman Sachs Group Inc., Morgan Stanley to report earnings, Tuesday

  • Federal Reserve Governor Christopher Waller speaks, Tuesday

  • China GDP, property prices, retail sales and industrial production, Wednesday

  • Eurozone CPI, Wednesday

  • UK CPI, Wednesday

  • US retail sales, industrial production, business inventories, Wednesday

  • Federal Reserve issues Beige Book survey, Wednesday

  • European Central Bank President Christine Lagarde speaks at Davos, Wednesday

  • New York Fed President John Williams speaks, Wednesday

  • Australia unemployment, Thursday

  • Japan industrial production, Thursday

  • European Central Bank publishes account of December policy meeting, Thursday

  • US housing starts, initial jobless claims, Thursday

  • Atlanta Fed President Raphael Bostic speaks, Thursday

  • Japan CPI, Friday

  • US existing home sales, University of Michigan consumer sentiment, Friday

  • US Congress faces deadline to pass spending agreement before part of federal government shuts down, Friday

  • San Francisco Fed President Mary Daly speaks, Friday

Here are some of the main moves in markets:

Stocks

  • The Stoxx Europe 600 fell 0.2% as of 10:28 a.m. London time

  • S&P 500 futures were little changed

  • Nasdaq 100 futures were little changed

  • Futures on the Dow Jones Industrial Average fell 0.1%

  • The MSCI Asia Pacific Index was little changed

  • The MSCI Emerging Markets Index was little changed

Currencies

  • The Bloomberg Dollar Spot Index rose 0.2%

  • The euro fell 0.1% to $1.0936

  • The Japanese yen fell 0.6% to 145.73 per dollar

  • The offshore yuan was little changed at 7.1908 per dollar

  • The British pound fell 0.3% to $1.2717

Cryptocurrencies

  • Bitcoin rose 0.2% to $42,610.51

  • Ether was little changed at $2,524.9

Bonds

  • The yield on 10-year Treasuries was little changed at 3.94%

  • Germany’s 10-year yield advanced two basis points to 2.21%

  • Britain’s 10-year yield was little changed at 3.80%

Commodities

  • Brent crude fell 0.7% to $77.77 a barrel

  • Spot gold rose 0.2% to $2,052.90 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Michael Msika and Tassia Sipahutar.

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©2024 Bloomberg L.P.



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