Monday saw US equity futures wavering and stocks slipping on the outlook for a dim economy. Also, the expectations of peak interest rates cooling off and support of sovereign bonds have added to the market effect.
Nasdaq 100 futures and S&P 500 index struggled to stay above the red zone while Europe Stoxx 600 declined. The decline in Chinese tech shares and Japan also weighed on Asian stocks.
China’s Real estate shares bucked the trend and pushed higher. Reports of officials planning a fund to support struggling developers helped. The crisis in China’s real estate sector has significantly cracked the world economy.
Investors are betting on a possible recession and slowing of economic expansion. They expect high inflation to moderate and a softer monetary policing tightening roiled the world market in 2022. Investors continue to monitor economic data as the Federal Reserve is expected to hike more to control inflation.
Crucial Earnings and Fed Meeting This Week
Earnings from Alphabet Inc. and Apple Inc. this week, along Fed policy decision, will clear the stock market outlook, which has been on a rebound for a month.
Chief Strategist at Standard Chartered Bank, Eric Robertsen, said the further downside is expected for risky assets. The recession’s fears increase while the central bank fights inflation at the cost of growth.
Swaps linked to the Federal Reserve meeting on Wednesday hint at another 75-basis point hike. The peak is expected to be around 3.4% by year-end, and cuts are expected in 2023.
Effects of Bear Market
Senior Equity Strategist at UBS Global Wealth Management, Nadia Lovell, said on Bloomberg Radio that the bearish market would continue. A dovish stand by Fed or economic data that points to bottoming out can end the bear market.
US shares were in the red on Friday after reports of mixed earnings of large firms and slowing business activity. Janet Yellen, Treasury Secretary of State Department, said that she does not foresee the US in recession, and Lawrence Summer, former treasury secretary, said it was unlikely to have a soft landing.
In the meantime, wheat prices surged commodity market reacted to a Russian Missile attack on Odesa Seaport. The strike threatened to test a new agreement to unblock Ukraine’s grain export via the Black Sea.
This week’s key events:
- Apple, Alphabet, Amazon, Meta, and Microsoft earnings
- Bank of Japan meeting Tuesday
- Federal Reserve policy decision, Wednesday
- IMF outlook update on the global economy, Tuesday
- University of Michigan consumer sentiment, US consumer income, Friday
- US GDP, Thursday
Main Market Moves
- Futures on S&P 500 and Nasdaq 100 were little changed
- Dow Jones Industrial Average futures, little changed
- Bloomberg Dollar Spot Index little changed
- Japanese yen fell to 136.37 per dollar, down 0.2%
- Offshore yuan rose to 6.7576 per dollar, up 0.1%
- 10-Year treasuries yield increased to 2.79%, up four basis points.
- Brent crude fell to $102.23 a barrel, down 0.9%
- Spot gold remained little changed.
