Poor start for equities ahead of rate decisions, earnings

investmentnews.com:

European bonds gained and the euro plunged versus the dollar after a sharp decline in manufacturing and services gauges from the common-currency region fanned concerns about the faltering global economy.  

Stocks were lackluster at the start of a week packed with major central bank policy decisions and corporate earnings, as investors fretted about the magnitude of further interest rate increases and their effect on economic growth. In the euro area, the private-sector economy contracted more than anticipated in July, highlighting the quandary for the European Central Bank as it prepares to raise interest rates later this week. 

The data pressured the euro which fell to a two-week low against the dollar, while the yield on German 10-year bonds, the euro-area benchmark, slid as much as seven basis points. Europe’s Stoxx 600 equity gauge fluctuated, with Spanish equities underperforming after an inconclusive outcome in the election on Sunday. 

Traders are positioning for the Fed and the ECB to raise interest rates this week and to signal whether more hikes are likely after record tightening campaigns.

“Market have entered a phase of anxious waiting with two factors coming into play, central banks and earnings,” said Jeanne Asseraf-Bitton, head of research and strategy at BFT IM. “I’m not sure there will be a lot of surprises coming from the central banks so it’s really earnings that will be key. Valuations are expensive so earnings need to hold, margins need to hold.”

Treasury yields edged lower, while US stock-index futures posted modest gains after the S&P 500 closed flat on Friday and the Nasdaq 100 saw continued selling in technology companies following a disappointing batch of results. 

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