European stock indexes opened slightly higher on Monday, with investors closely monitoring upcoming central bank meetings and economic data. The Bank of Japan, the U.S. Federal Reserve, and the Bank of England will all hold meetings this week, while Chinese manufacturing data and key U.S. jobs data will also be released. These events will be analyzed for any signs that central banks are addressing inflation and considering easing monetary policy. The ongoing earnings season, which includes reports from Apple, Airbnb, McDonald’s, Moderna, and Eli Lilly & Co., has been disappointing so far, contributing to the S&P 500’s decline into correction territory.
At 0834 GMT, the MSCI World Equity Index remained relatively unchanged, up 0.3 percent for the day but nearing its lowest level since late March. Asian stocks were subdued, while Europe’s STOXX 600 increased by 0.7 percent and London’s FTSE 100 rose by 0.8 percent.
Investors are seeking confirmation of the central banks’ policy on interest rates and any indications that they could consider rate cuts by mid-2022. Samy Chaar, chief economist at Lombard Odier, explained that the market is watching for signs of peak rate policy and the potential for central banks to cut rates in the future.
In Japan, the Nikkei fell 0.95 percent amid speculation that the Bank of Japan might modify its yield curve control policy. Analysts expect the central bank to raise its inflation forecast to 2.0 percent but are unsure if it will abandon yield curve control due to market pressure on bonds. Yields are currently at their highest level since 2013 at 0.89 percent.
Meanwhile, government bond yields in the eurozone were lower, with the benchmark 10-year German yield down 5 basis points at 2.787 percent. Despite falling inflation in Germany, investors still anticipate persistently high rates in the region. U.S. Treasury yields stood at 4.8602 percent, having risen around 28 basis points this month. The U.S. Treasury’s refunding plans, to be announced this week, are expected to result in further increases.
The recent surge in market borrowing costs has led analysts and markets to believe that the Federal Reserve will maintain its current policy stance at its meeting this week. The U.S. dollar index remained stable at around 106.650, while the euro slightly declined by less than 0.1 percent at $1.0556. The dollar was flat against the yen at 149.62, below last week’s peak of 150.78.
Risk appetite was somewhat dampened by Israel’s efforts to encircle Gaza’s main city in what it called the “second phase” of a three-week war against Iranian-backed Hamas terrorists. However, analysts noted that this was just one of several factors influencing market sentiment. Michael Hewson, chief market analyst at CMC Markets UK, highlighted that poor company updates and downgraded guidance also contributed to last week’s declines in equity markets.
Investors will closely monitor whether the conflict in the Middle East escalates beyond the region and disrupts oil markets. Samy Chaar of Lombard Odier stated that if the conflict remains localized and global oil supply remains unaffected, the market will primarily focus on interest rates, central banks, and global growth and inflation. However, there is still some premium on gold, which reached a five-month high of $2,009.29 on Friday.
Oil prices declined by over 1 percent due to concerns about demand outweighing risks to Middle East supplies.
More detail via www.theepochtimes.com here… ( Image via www.theepochtimes.com )