- The Nikkei index fell, and US stock futures are heading higher
- Oil prices decline despite the Israeli attack on Gaza
- The Federal Reserve, Bank of England and Bank of Japan hold meetings this week
- Apple’s profits outpace US payrolls
LONDON (Reuters) – European stock indexes opened slightly higher on Monday as investors focused on interest rate expectations ahead of a busy week of central bank meetings and economic data.
Investors are awaiting the results of the meetings of the Bank of Japan on Tuesday, the US Federal Reserve on Wednesday, and the Bank of England on Thursday, in addition to Chinese manufacturing data on Tuesday and key US jobs data on Tuesday. On Friday, they will all be scrutinized for any evidence that central banks have raised interest rates enough to combat inflation and can look to ease monetary policy again.
Earnings season also continues with Apple, Airbnb, McDonald’s, Moderna, and Eli Lilly & Co among several reporting this week. The results so far have been disappointing, contributing to the S&P 500 falling into correction territory (.SPX).
At 0834 GMT, the MSCI world equity index was little changed, up 0.3% on the day but still near its lowest level since late March (.MIWD00000PUS).
Stocks were weak in Asian trading, with MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) up just 0.1%, after hitting a one-year low last week.
The European STOXX 600 rose 0.7% (.STOXX) and London’s FTSE 100 rose 0.8% (.FTSE).
Sami Char, head of the market, said that the market is looking forward to “central banks’ confirmation of the interest rate peak policy and any indication that may lead to the belief that central banks may be in a position to cut (interest rates) by the middle of next year.” Economist at Lombard Odier.
Japan’s Nikkei (.N225) fell 0.95% amid speculation that the Bank of Japan may adjust its yield curve control policy when it concludes its two-day policy meeting on Tuesday.
Many analysts expect the central bank to raise its inflation forecast to 2.0%, but are unsure whether it will finally relinquish control of the yield curve in the face of market pressures on bonds. Yields have already reached their highest levels since 2013 at 0.89%.
In the euro zone, government bond yields fell, with Germany’s benchmark 10-year yield falling 5 basis points to 2.787%.
Investors are betting that interest rates in the region will remain persistently high, despite new data showing lower inflation in Germany.
The yield on 10-year Treasury bonds reached 4.8602%, after rising by about 28 basis points this month. Sentiment will be further tested this week when the US Treasury announces its refund plans, with further increases likely.
The sharp rise in market borrowing costs has convinced analysts and markets that the Fed will not change its mind at this week’s policy meeting.
The US dollar index stabilized at around 106.650, and the euro fell by less than 0.1% to $1.0556.
The dollar stabilized against the yen at 149.62 yen, below its highest level last week at 150.78.
Risk appetite has been dampened somewhat as Israel seeks to besiege Gaza’s main city in its self-declared “second phase” of a three-week war against Iran-backed Hamas militants. But analysts said this is just one of a number of factors affecting sentiment.
“It is easy to blame the declines seen in stock markets last week on the unpredictable nature of events unfolding in the Middle East, and while that is part of that, we have also seen disappointment on several fronts due to weak company updates, and guidance cuts that have seen Some changes.“Big moves lower,” Michael Hewson, chief market analyst at CMC Markets UK, wrote in a note to clients.
Lombard Odier’s Char said investors will be watching whether the conflict escalates beyond the region and whether it disrupts oil markets.
“If the conflict remains local and global oil supplies are not affected, the market will remain more focused fundamentally on what is happening with interest rates and what is happening with central banks, and what is happening with global growth and inflation,” he said.
But he added that there was some premium for gold, which touched a five-month high of $2,009.29 on Friday.
Oil prices fell by more than 1%, as concerns about demand outweighed the risks to Middle East supplies.
(Reporting by Elizabeth Howcroft) Additional reporting by Wayne Cole in Sydney (Editing by Mark Potter)
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