Stocks Make Cautious Start to Event-Packed Week: Markets Wrap

(Bloomberg) — Global equities posted modest moves at the start of a busy week of data and central bank meetings that will test optimism among investors that interest rates will soon head lower.

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European stocks and US futures contracts were little changed. In company news, Germany’s MorphoSys AG jumped 12% after positive results from a drug study. Miners were Europe’s biggest decliners as iron ore fell after disappointing economic data from China.

In Asia, Chinese stocks swung to a gain with a spike in volumes for an exchange-traded fund tracking state-owned shares fueling speculation of buying by state funds. Sentiment may also have been boosted after local media reported a Chinese macro hedge fund said the nation’s stock market is now offering a “once-in-20-year opportunity.”

Traders are looking ahead to an event-heavy week that features US inflation data on Tuesday, a Federal Reserve policy decision Wednesday and retail sales numbers Thursday. Policy decisions at the European Central Bank and Bank of England add to the busy calendar.

The dollar strengthened against most of its major peers, while Treasury 10-year yields rose four basis points to 4.26%. The yen extended its losses to 1% after Bloomberg News reported that Bank of Japan officials see little need to rush into scrapping the world’s last negative interest rate this month. The BOJ has to see enough evidence of wage growth that would support sustainable inflation, according to people familiar with the matter.

China’s shares had dropped earlier after a report published Saturday showed consumer prices fell at the steepest pace in three years while producer costs dropped even further into negative territory, underscoring the challenges facing the economic recovery.

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“China’s deflation situation is deepening with the triple whammy from domestic food prices, international oil price corrections and weak domestic demand,” Citigroup Inc. economists led by Xinyu Ji wrote in a note to clients. “There is no time for policy hesitation to prevent a vicious loop between deflation, confidence and activities” and there’s rising risk of an imminent reserve-requirement ratio and/or rate cuts, they wrote.

Avoiding Recession

The S&P 500 capped a sixth week of gains Friday, its longest winning run since November 2019, after solid payroll data backed speculation the world’s largest economy will be able to avoid a recession. Swap contracts now show a 40% probability the Fed will cut rates in March, down from more than 50% prior to the economic data.

Softening US inflation and employment data in the past month have convinced investors that the Fed is done raising rates and ignited bets that cuts of at least 125 basis points were in store over the next 12 months. Traders scaled back those wagers to about 110 basis points of easing after the nonfarm payrolls data.

Oil extended gains from Friday when it rallied on the US jobs report and plans to refill the Strategic Petroleum Reserve, but still closed out the longest weekly losing streak since late 2018 amid signs that supply is starting to run ahead of demand.

Key events this week:

• Argentina new President Javier Milei expected to call congress into extraordinary session, Monday

• UK’s CBI publishes latest economic forecast, Monday

• RBA Governor Michele Bullock speaks, Tuesday

• Japan producer prices, Tuesday

• India inflation, Tuesday

• Brazil inflation, Tuesday

• UK unemployment, Tuesday

• US inflation, Tuesday

• Eurozone industrial production, Wednesday

• Brazil rate decision, Wednesday

• Federal Reserve rate decision, Wednesday

• Australian unemployment, Thursday

• ECB rate decision, Thursday

• BOE rate decision, Thursday

• Norway rate decision, Thursday

• US retail sales, Thursday

• China 1-year MLF, Friday

• China retail sales, industrial production and jobless rate, Friday

• Eurozone PMIs, Friday

• UK manufacturing PMI, Friday

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 was little changed as of 8:14 a.m. London time

• S&P 500 futures fell 0.1%

• Nasdaq 100 futures fell 0.2%

• Futures on the Dow Jones Industrial Average were little changed

• The MSCI Asia Pacific Index fell 0.2%

• The MSCI Emerging Markets Index fell 0.2%

Currencies

• The Bloomberg Dollar Spot Index rose 0.2%

• The euro was little changed at $1.0757

• The Japanese yen fell 1% to 146.34 per dollar

• The offshore yuan was little changed at 7.1941 per dollar

• The British pound was little changed at $1.2547

Cryptocurrencies

• Bitcoin fell 4.1% to $42,028.31

• Ether fell 5.4% to $2,233.74

Bonds

• The yield on 10-year Treasuries advanced four basis points to 4.26%

• Germany’s 10-year yield was little changed at 2.27%

• Britain’s 10-year yield advanced two basis points to 4.06%

Commodities

• Brent crude rose 0.7% to $76.35 a barrel

• Spot gold fell 0.5% to $1,994.72 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Matthew Burgess.

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