Wall Street shares finished broadly lower, while European stocks rose following five straight weeks of declines and European bond yields soared on speculation of monetary tightening. Markets are on alert for rate rises in both the euro zone. The United States reported stronger-than-expected jobs and earnings data.
European Central Bank President Christine Lagarde calmed some of those jitters by stating that there were no signs that measurable monetary policy tightening would be required. Major Wall Street stock indexes were mixed throughout the session, and that too mainly before ending down. Because the markets digested mixed quarterly results from megacaps Amazon.com Inc and Facebook owner Meta Platforms.
The Dow Jones Industrial Average remained unchanged to end at 35,091.13 points. And the S&P 500 lost 0.37% to 4,483.87. The Nasdaq Composite dropped 0.58% to 14,015.67. Meta shares fell more than 5% by extending losses for the third session. And that is after its record plunge. Peloton jumped over 20% on media reports of interest from potential buyers including Amazon. The market’s inability to rally on payroll data and generally poor stock reactions to Q4 results despite healthy earnings delivery, illustrate the overly bearish market sentiment at the moment. They see volatility moderating and expect strong equity inflows from systematic investors.
In Europe, shares rose after a multi-week rout as gains in mining stocks and positive earnings outweighed worries of a looming policy tightening cycle and geopolitical tensions. The pan-European STOXX 600 rose 0.7%. Mining stocks rising 1.7%. Britain’s FTSE gained 0.76%. The MSCI world equities index ended up about 0.4%. Euro zone bond yields rose, with Germany’s 10-year government bond yield, the benchmark of the euro zone, up 2 basis points to 0.22%.
Italy’s 10-year bond yield rose 5.5 bps to 1.814%. They gave back some gains as the sell-off slowed. Italy and Greece continue to have buffers in place to protect them from rising borrowing costs. Also, there is a reasonable chance that Greece’s credit rating could be upgraded soon. Matthias Scheiber, global head of portfolio management at Allspring Global Investments stated that the most dominant thing is still central banks. The tightening has led to the volatility.
ECB policymaker Martins Kazaks pushed back against market expectations for a rate hike. He said that the bank could end its stimulus programme earlier than planned. Klaas Knot, the Dutch Central Bank President and a member of the ECB’s governing council, said that he expects a hike in the fourth quarter of this year. The benchmark U.S. 10-year Treasury yield retreated. The two-year U.S. Treasury yield typically moves in step with interest rate expectations, was also down. The U.S. January payrolls report showed annual growth in average hourly earnings climbed to 5.7%, from 4.9%.
The euro inched down 0.1%, having shot up 2.7%. The U.S. dollar index edged higher, after shedding 1.8%. U.S. consumer price figures for January are due and could show core inflation accelerating to the fastest pace since 1982 at 5.9%. Markets moved to price in a one-in-three chance the Fed might hike by a full 50 basis points in March and the prospect of rates reaching 1.5% by year end. Oil prices fell from seven-year highs. Brent crude settled down 58 cents, or 0.6%, at $92.69 after earlier touching $94. U.S. crude fell 99 cents, or 1.3%, to settle at $91.32 after touching $92.73.
Gold climbed to a more than one-week high. Spot prices rose 0.73% and U.S. gold futures settled 0.8% higher at $1,821.80. China returned from the Lunar New Year break with jumps in equities and commodities: the blue-chip CSI300 and Shanghai Composite were up 1.54% and 2%, respectively.