European equities and Wall Street equities futures took a break on Monday after breaking records last week amid positive economic data, strong quarterly earnings and major central banks keeping borrowing costs at record lows.
The Stoxx Europe 600 stock index opened flat after peaking last week. London’s FTSE 100 drifted 0.1 percent lower on Monday morning while futures contracts that watch the US S&P 500 stock index lost 0.1 percent.
According to Goldman Sachs, total quarterly earnings by Stoxx-listed companies have beaten analysts’ forecasts so far by 7 percent, raising concerns that high global inflation rates will hurt profit margins.
Wall Street’s major stock indices also ended at record highs last week after monthly labor market data exceeds analysts’ forecasts, Pfizer reported positive late-stage trials for his antiviral Covid-19 pill and the Federal Reserve promised “patience” in the direction of interest rate increases.
By Friday, the S&P 500 had closed for seven consecutive trading sessions at all times. It is now 25 percent higher this year and has more than doubled since the coronavirus-induced market route of March 2020.
“We are probably not going to see the same type of returns in 2022,” says Zehrid Osmani, manager of Martin Currie’s global portfolio trust. “Next year is clearly a much lower forecast year for earnings, as this year was one of recovery,” he said, after companies shook off the 2020 economic shocks. “Also, monetary policy will shift from accommodating to normalizing.”
Yields on the 10-year U.S. Treasury note, a measure of borrowing costs worldwide, rose 0.03 percentage points to 1,479 percent as the price of debt fell. However, this key debt yield fell from almost 1.7 percent at the end of October, as traders became more relaxed about the timing and pace of future interest rate hikes.
Government bonds rose last week when the Fed took a well-counted step to reduce its $ 120 billion monthly bond purchase, which has reduced borrowing costs since March 2020, while chairman Jay Powell said “We do not think it is time yet” to increase borrowing costs as well.
The Bank of England surprised markets last Thursday by keeping its key interest rate at 0.1 per cent thereafter indicates that it is ready to increase it. Yields on 10-year gold were steady at 0.845 percent on Monday, after climbing as high as 1.2 percent ahead of the BoE’s monetary policy decision.
In Asia, Hong Kong’s Hang Seng index fell 0.4 percent and Tokyo’s Nikkei 225 closed 0.4 percent lower as traders became cautious at the start of the sixth plenary session of China’s ruling party, which is expected to will be increased for President Xi Jinping to an unprecedented third term.
In recent years, Xi’s administration has cracked down about fast-growing Chinese technology companies as well as excessive speculation in the real estate sector, which was a major economic growth driver for the country but was hit by challenges, including the liquidity crisis at real estate developer Evergrande.
Brent crude, the oil benchmark, added 0.8 percent to $ 83.55 a barrel as sentiment in commodity markets was boosted by U.S. President Joe Biden’s $ 1.2tn infrastructure spending bill approved by the House of Representatives late Friday.
The dollar index, which measures the US currency against six others, traded flat.