Indexes of global stocks stalled on the 16th. Investors questioned whether the year-to-date rally was overdone by the outlook for inflation, economic growth and corporate earnings. European stocks rose.
The MSCI/ACWI index posted its biggest gains since it began calculating in 1988 in the first two weeks of the year, but was little changed on the 16th. Futures on the S&P 500 and Nasdaq 100 each fell more than 0.2%. The dollar stopped declining for three consecutive trading days. US markets are closed for a holiday. European stocks were led by real estate stocks.
U.S. inflation appears to have peaked, but aggressive tightening by the U.S. Federal Reserve and other central banks could hit corporate earnings if it plunges the global economy into a recession. .The World Bank released its global growth forecast last week atCorrection belowwarned of “one of the steepest recessions in the last 50 years”.
“The question now is whether earnings season will fuel that new wishful thinking or ruin the party,” said Craig Earlam, senior market analyst at Oanda Europe. “This could undermine expectations of a soft landing, which is perceived as more likely than ever before.”
Corporate earnings are likely to be the focus of attention this week. Traders will wait to see if companies have weathered headwinds such as higher interest rates. Wall Street’s major financial institutions such as Goldman Sachs Group and Morgan Stanley will also announce their financial results.
Several U.S. Fed officials are due to speak out this week, which could hint at policy priorities. At the World Economic Forum (WEF) Annual Meeting (Davos Meeting), which opened on the 16th, European Central Bank (ECB) President Lagarde and International Monetary Fund (IMF) Managing Director Georgieva will take the podium.
Original title:European Stocks Rise as US Futures Signal Caution: Markets Wrap (excerpt)
