European stocks got off to a mild start to the week as traders eagerly awaited a flurry of corporate earnings reports that would shed additional light on the health of the global economy.
The regional Stoxx 600 added 0.2% in early trades on Monday, the German Dax index was flat and the FTSE 100 added 0.3%. In Asia, Japan’s Topix index fell 1%, while Hong Kong’s Hang Seng lost 0.3%.
Traders will pay close attention to any evidence of companies struggling with higher prices and rising borrowing costs as more corporate earnings reports are announced this week. Bank of America will report on Monday, after peers JPMorgan Chase and Goldman Sachs reported lower earnings on Friday.
On Wall Street, the broad S&P 500 lost 2.3% on Friday and the tech-heavy Nasdaq Composite lost 3.1% after a survey of inflation expectations sparked fresh concerns over rising prices. Federal Reserve interest rate in a slowing economy.
The University of Michigan’s monthly survey of US consumers showed Americans expect inflation to remain high over the coming year, expectations for higher prices over the next 12 month from 4.7% last month to 5.1% this month.
Expectations of higher inflation are raising concerns among policymakers that workers will demand higher wages, which will exacerbate rising prices. This has led investors to anticipate further aggressive interest rate hikes from the Fed, making borrowing more expensive for businesses and weighing on stock prices.
Stock futures following the S&P 500 and Nasdaq 100 both rose 0.8% on Monday morning, indicating a more bullish start to the week on Wall Street.
Elsewhere, new data on Wednesday from the UK is expected to show a further rise in headline inflation, with economists pricing a 10% year-on-year increase in consumer price index data from 9.9 % the preceding month.
A higher CPI reading would add a new challenge to UK government bond markets.
Gilts rallied on Monday after signs of further action by new UK Chancellor Jeremy Hunt to calm markets. He will present plans at 11 a.m. to tackle the government’s deficit, with expectations that other tax measures in the UK’s ‘mini’ budget will be scrapped.
As gilt prices rose, 10-year yields fell 0.25 percentage points to 4.076%, while 30-year gilt yields fell 0.29 percentage points to trade at 4 .49%.
It came despite the Bank of England ending its bond-buying program to prop up UK pension funds on Friday and Governor Andrew Bailey signaling over the weekend that the bank would hike rates. more aggressively to fight inflation.
“Market functioning is impaired and the BoE may still need to step in to bring calm,” ING analysts warned. “Except that, maintaining gains below 4% for [10-year] golden returns is a pipe dream.
The pound rose 0.8% in early trading to trade at $1.260, after falling 1.4% on Friday as markets deemed British Prime Minister Liz Truss’ decision to sack Chancellor Kwasi Kwarteng insufficient. and backtracking on corporate tax cut plans. Against the euro, the pound rose 0.7% to 86.2p
