Sat. Jan 22nd, 2022


European stock markets were subdued earlier this week as investors held back strong bets ahead of US inflation data later in the week that could bolster the argument for tighter monetary policy in the world’s largest economy.

The local Stoxx Europe 600 stock index opened 0.3 percent higher before its profits were cut to trade flat. London’s FTSE 100 was steady and futures markets tilted Wall Street’s broad-based S&P 500 share meter to rise 0.2 percent.

European financial services stocks, which are seen to benefit from higher interest rates boosting lending margins, rose 0.1 percent. The Stoxx’s travel and leisure sub-sector grew by 0.9 per cent as investors responded signs that the highly transmissible Omicron coronavirus variant may be softer than previous strains.

This followed a turbulent week over global financial markets thereafter. minute of the US Federal Reserve’s latest meeting and an unexpected strong job report increased expectations of the world’s most influential central bank rapidly shutting down its pandemic-era stimulus and raising borrowing costs.

On Wednesday, inflation data for the US is expected to show that consumer prices rose at an annual rate of 7 percent last month, according to a Reuters poll, from 6.8 percent in November and far exceeded the Fed’s average 2 percent target. Eurozone inflation achieved a record of 5 percent in December, put pressure on the European Central Bank to speed up the withdrawal of its own emergency asset purchase program.

Strategists at Goldman Sachs expect the Fed to raise rates four times this year, after tying it close to zero in March 2020 to isolate markets and the economy from the shocks of coronavirus, in a move that has reduced businesses’ financing costs and gave world stocks a boost. .

“We continue to see hikes in March, June and September, and have now added a hike in December for a total of four in 2022,” Goldman’s Jan Hatzius said in a note to customers.

“Declining labor market sluggishness has made Fed officials more sensitive to upward inflation risks and less sensitive to downward growth risks.”

In Asia, Chinese technology stocks Achieved Monday. Hong Kong’s Hang Seng Tech index rose as much as 2.5 percent, with Alibaba Health Information Technology rising as much as 14 percent and the short video platform Kuaishou’s Hong Kong-listed stocks rising 12.2 percent.

The index lost nearly 3 percent last week as traders around the world sold technology stocks in anticipation of Fed rate hikes.

In debt markets, the yield on the 10-year Treasury bond benchmark rose 0.03 percentage points to 1,798 percent, about the highest since January 2020. This key debt yield, which rises as the price of the debt instrument falls and supports borrowing costs and company valuations worldwide, climbed from about 1.53 percent at the beginning of the month.

Additional post by William Langley in Hong Kong



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