European and Asian stock markets diverged on Wednesday on the eve of key US inflation data and the latest earnings season.
Global shares have weakened largely since the start of the year as investors worry they may have been too hasty in late 2023 to price in a series of US rate cuts for this year.
The Federal Reserve said at its December meeting that it saw three cuts in 2024, while analysts had forecast twice that amount.
But the release of minutes from that meeting last week and a U.S. jobs report that beat forecasts forced lawmakers to scale back expectations for a rate cut, even as inflation eases.
Traders closed last year optimistic that the Fed would start cutting rates in March, but analysts are now predicting June.
Analysts said Thursday’s US consumer price index data will be critical to how markets perform in the near term.
Asian markets fall again as traders prepare for CPI, earnings
Meanwhile, the short release of annual earnings from some of the biggest companies will show the impact that several rate hikes have had on performance.
“Attention is gradually turning to the upcoming earnings season to gain insight into companies’ growth trajectories,” noted SPI Asset Management’s Stephen Innes.
In the US, “large-cap technology companies … are under close scrutiny because of their significant influence and significant weighting in the S&P 500,” he said.
Wall Street’s S&P 500 and Dow ended lower on Tuesday, although the Nasdaq edged up slightly, with sentiment also dampened by the World Bank’s decision to cut its global growth outlook for 2024, partly due to weaker activity in the United States and China.
Much of Asia fared no better, having enjoyed a much-needed bounce on Tuesday.
Cubans fear worsening inflation as fuel price soars 500%
Tokyo, however, extended gains on Wednesday to hit a new 34-year high, boosted by slowing wage growth. This, along with the outlook for Fed interest rates, weighed on gen.
“With market expectation of an early Fed rate cut easing after the start of the new year, Japanese stocks were flat on expectations that the yen’s depreciation against the dollar will support corporate earnings,” said Rie Nishihara of JPMorgan.
London had fallen close to half a stage, while Paris and Frankfurt stabilized.
Elsewhere, bitcoin was lower after choppy trading on Tuesday, when an unauthorized message posted on the US Securities and Exchange Commission’s official X account said it had approved wider trading of the world’s largest cryptocurrency.
The message sent bitcoin to a 22-month high near $48,000, but sank when SEC Chairman Gary Gensler took to his own X account to warn that the market account had been “hacked” and that a “non- authorized tweet’.
Asian markets enjoy healthy bounce after Wall St rally
It was about $45,000 on Wednesday.
Traders have speculated for weeks that the SEC would give the go-ahead for bitcoin exchange-traded funds, which for the first time would replicate the performance of the token without having to hold the unit directly.
Keys around 1115 GMT
London – FTSE 100: Down 0.3% to 7,663.11 points
Paris – CAC 40: FLAT at 7,425.69
Frankfurt – DAX: UP 0.1 percent at 16,702.91
EURO STOXX 50: UP 0.1 percent at 4,469.85
Tokyo – Nikkei 225: UP 2.0 percent at 34,441.72 (close)
Hong Kong – Hang Seng Index: DOWN 0.5 percent at 16,097.28 (close)
Shanghai Composite: DOWN 0.5 percent at 2,877.70 (close)
New York – Dow: DOWN 0.4 percent at 37,525.16 (close)
Dollar/yen: UP to 144.96 yen from 144.48 yen on Tuesday
EUR/USD: UP at $1.0954 from $1.0934
GBP/USD: UP at $1.2730 from $1.2710
Euro/pound: UP to 86.06 pence from 86.00 pence
Stocks fall as chances of an early US rate cut recede
West Texas Intermediate: FLAT at $72.21 a barrel
North Sea Brent crude: FLAT at $77.57 a barrel
Source: AFP