European stocks pause rally as earnings take focus: Markets Wrap

(Bloomberg) — Stocks paused their rally as euphoria over a potential policy shift by central banks faded and investors’ attention turned to the latest corporate earnings and business news.

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The European Stoxx 600 index stabilized after three days of gains. Burberry Group Plc fell 6.7% as it warned that this year’s sales target may be out of reach. HelloFresh SE fell 18% after the meal kit maker surprised investors with a profit warning.

Siemens AG shares rose as analysts said the industrial group’s overall fourth-quarter report was strong. Hotel Chocolat Group Plc soared after Mars Inc. agreed to buy it for 534 million pounds ($662 million). U.S. stock futures were little changed, while Asian stocks fell.

The rally on Wall Street and Treasury bonds this week following weak U.S. inflation pressures has led some to consider whether the market is being too hasty on expectations of a dovish turn from the Federal Reserve. The S&P 500 has gained more than 7% this month.

The focus of the interest rate outlook will be alongside initial US jobless claims and industrial production numbers expected later on Thursday, with a range of Fed speakers for investors to also take note of. Walmart Inc.’s results will provide further insight into the state of the economy.

“US stock markets are approaching overbought levels, so it feels like we have the makings of a pullback,” said Tony Sycamore, market analyst at IG Australia. Sycamore said the Fed “will not be enthusiastic about the recent easing of financial conditions, undermining its message to stay higher for longer.”

Treasury bonds rose after a sell-off on Wednesday that saw the 10-year Treasury rate rise eight basis points to above 4.5%. The greenback fell slightly from the day’s high and was 0.1% higher.

The story goes on

The MSCI Asia Pacific index pared declines of as much as 0.8%, halting a three-day winning streak. Chinese shares in Hong Kong led losses among key Asian stock gauges after property prices fell by the most since 2015 and traders were unimpressed with the outcome of the Xi-Biden summit.

A Bloomberg gauge of Chinese real estate stocks erased losses after falling 1.4% on weak real estate data. Technology stocks in Hong Kong fell over 2%, weighed down by selloffs at Xiaomi and Tencent, erasing gains of up to 2%. Investors also looked forward to Alibaba Group Holding Ltd.’s corporate earnings. and NetEase Inc. later today, following encouraging results from JD.com Inc and Tencent Holdings Ltd.

Traders also viewed Chinese President Xi Jinping’s statement that his country would fight neither a cold nor a hot war with the United States as a sign that Beijing wants to repair recently frayed relations with the United States. There has been “not much” of talks between the two leaders so far, but “the tone on both sides seems to be conciliatory, and that’s good,” said Redmond Wong, market strategist at Saxo Capital Markets in Hong Kong.

Oil prices continued their decline as a rise in U.S. inventories pointed to looser near-term market conditions and prices risk falling for a fourth week.

Important events this week:

• US initial jobless claims, industrial production, Thursday

• Walmart earnings, Thursday

• Cleveland Fed President Loretta Mester, New York Fed President John Williams and Fed Vice Chairman for Supervision Michael Barr speak Thursday

• Bank of England Deputy Governor Dave Ramsden and ECB President Christine Lagarde speak at Thursday’s event

• US housing construction begins on Friday

• The U.S. Congress faces a midnight deadline Friday to pass a federal spending measure

• ECB President Christine Lagarde speaks on Friday

• Chicago Fed President Austan Goolsbee, Boston Fed President Susan Collins and San Francisco Fed President Mary Daly speak Friday

Some of the key moves in the markets:

Shares

• The Stoxx Europe 600 was little changed at 8:21 a.m. London time

• S&P 500 futures were little changed

• Nasdaq 100 futures fell 0.2%

• The futures on the Dow Jones Industrial Average hardly changed

• The MSCI Asia Pacific Index fell 0.3%

• The MSCI Emerging Markets Index was hardly changed

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was unchanged at $1.0848

• The Japanese yen was little changed at 151.39 per dollar

• The offshore yuan was little changed at 7.2577 per dollar

• The British pound fell 0.3% to $1.2384

Cryptocurrencies

• Bitcoin fell 0.7% to $37,371.56

• Ether was little changed at $2,048.73

Tie up

• The 10-year Treasury yield fell three basis points to 4.50%

• The yield on 10-year German government bonds fell three basis points to 2.61%

• The 10-year UK government bond yield fell five basis points to 4.18%

raw materials

• Brent crude fell 1% to $80.36 a barrel

• Spot gold rose 0.3% to $1,965.68 an ounce

This story was produced with support from Bloomberg Automation.

– With support from Tassia Sipahutar.

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