(Bloomberg) — European stocks were volatile as investors reset their expectations for when the Federal Reserve will start cutting interest rates and took stock of surging corporate profits.
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Europe's Stoxx 600 index erased early losses on a busy day on the region's reporting calendar. Adidas fell 7% after reporting a weaker-than-expected profit outlook, while BNP Paribas fell 8% after lowering its 2025 performance target. Deutsche Bank rallied after announcing share buybacks and targets for higher revenue.
A benchmark for Asian stocks fell 0.4%. Aozora Bank fell 21% in Tokyo after announcing losses related to US commercial real estate, mirroring the woes of New York Community Bancorp in the US. U.S. stock futures showed a partial rebound after the S&P 500 index fell 1.6% on Wednesday, its steepest decline since September.
Chairman Jerome Powell said after Wednesday's decision that he thought it was unlikely the Fed would cut rates in March. In a sign that officials were in no hurry to cut rates, the central bank said it did not think it would be appropriate to lower the target range until there was greater confidence that inflation was on a sustained path towards 2%. He also said that The Bank of England's interest rate announcement is also expected soon.
“Markets have been proactive in recent months,” said Chief Investment's Justin Onukwusi. “As interest rate cuts start to be priced in and central banks are increasingly saying they want to cut rates, we're looking at a breather.” “We're going to see similar rhetoric from the BOE in that too many interest rate cuts are priced in,” said a director at asset management firm St. James's Place Management S.V.S. Ltd.
The BoE is expected to leave its key lending rate unchanged at a 16-year high late on Thursday while offering a positive outlook for the UK economy, potentially lowering its inflation outlook for this year and paving the way for policy easing. There is. The Riksbank left interest rates unchanged and said it could reduce borrowing costs as early as the first half of this year, mainly through a tightening campaign. The Swedish krona depreciated as a result of this decision.
U.S. Treasuries pared some of Wednesday's gains following Chairman Powell's comments and amid renewed concerns about regional financial institutions. Indicators of dollar strength rose further, with the yen the only G10 country to gain against the dollar.
The market's focus then returns to US mega-cap earnings, with earnings reports from Apple, Amazon.com and Meta Platforms. Their latest information will provide new insight into how the companies at the center of Wall Street's recent stock rally are meeting tough expectations from investors.
January barometer
Despite Wednesday's decline, the S&P 500 and global stock indexes rose for the third consecutive month last month.
As January passes, another year passes. This is the theory behind the phenomenon known as the “January Barometer.” Wall Street folklore assumes that if stocks rise that month, they are likely to end the year even higher, and vice versa. Since 1938, the barometer has been accurate about 74% of the time, and rose 67% of the time in the following 11 months, according to the Stock Traders Almanac.
Oil prices rebounded from their biggest drop in three weeks on Wednesday as investors weighed the risk of U.S. retaliation over a deadly attack in Jordan against signs of solid U.S. supplies.
Corporate highlights
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Deutsche Bank plans to cut 3,500 jobs over the next few years as Chief Executive Officer Christian Sewing seeks to meet pledges to increase profitability and return more money to shareholders. ing.
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Shell maintained its share buyback pace as strong performance from Gastrader offset the impact of lower commodity prices in the fourth quarter.
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Glencore has lowered its cobalt production target for this year due to weak market conditions, causing miners to stockpile the metal that is difficult to sell.
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ING Group warned that passing on higher interest rates to depositors would weaken its main source of income.
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BNP Paribas lowered its 2025 performance target due to factors including the end of reserve payments by the European Central Bank, and posted a drop in fourth-quarter profit due in part to legal provisions.
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Julius Baer Group announced it would exit the private debt business after canceling all loans to bankrupt Cigna, and CEO Philip Rickenbacker resigned in the wake of the scandal. admitted.
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Roche Holding AG expects a slow recovery in sales and profits this year as it emerges from a difficult 2023 and a series of research setbacks.
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BT Group's third-quarter profits rose as expected, providing a boost to incoming chief executive Alison Kirkby as she seeks to establish stable growth after years of turmoil.
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Adidas AG said this year's profits will be hit by unfavorable currency fluctuations, but it expects to offset some of the damage by continuing to sell inventory left over from its defunct Yeezy partnership with rapper Ye. He said he plans to reduce the amount.
This week's main events include:
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Eurozone S&P World Manufacturing PMI, CPI, Unemployment Rate, Thursday
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US productivity, construction spending, ISM manufacturing, new unemployment claims, Thursday
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Apple, Amazon, Meta Earnings, Thursday
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Bank of England interest rate decision Thursday
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US employment statistics, University of Michigan consumer sentiment, factory orders, Friday
The main movements in the market are:
stock
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Stoxx Europe 600 little changed as of 9:34 a.m. London time
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S&P 500 futures rose 0.3%
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Nasdaq 100 futures rose 0.6%
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Dow Jones Industrial Average futures rose 0.1%.
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MSCI Asia Pacific Index falls 0.4%
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MSCI Emerging Markets Index rose 0.4%
currency
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Bloomberg Dollar Spot Index little changed
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The euro fell 0.2% to $1.0798.
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The Japanese yen remained almost unchanged at 146.79 yen to the dollar.
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The offshore yuan was almost unchanged at 7.1936 yuan to the dollar.
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The British pound fell 0.3% to $1.2653.
cryptocurrency
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Bitcoin fell 0.7% to $42,163.45.
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Ether fell 0.4% to $2,268.12.
bond
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The 10-year Treasury yield rose 3 basis points to 3.94%.
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Germany's 10-year bond yield rose 3 basis points to 2.20%.
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The UK 10-year bond yield rose 2 basis points to 3.82%.
merchandise
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Brent crude rose 0.7% to $81.13 per barrel.
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Spot gold rose 0.1% to $2,042.25 an ounce.
This article was produced in partnership with Bloomberg Automation.
–With assistance from Yujing Liu, Joanna Ossinger, and Pearl Liu.
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