LONDON (Reuters) – Global stock markets sank on Monday as investors waited to see if US earnings would justify sky-high valuations, while an increase in bonds could be tested on the strong readings for US inflation and retail sales this week.
MSCI’s All Country World Index, which tracks equities in 49 countries, fell 0.25% after the start of European trading, less than Friday’s record high.
European equities lowered record highs because investors did not make big bets before the earnings season. The pan-European STOXX 600 index fell 0.3% at 0813 GMT.
The UK-based FTSE Home Index declined 0.6%, but was below a record high when stores, bars, gyms and hairdressers reopened after three months of closure.
The UK’s more export – oriented FTSE 100 fell by 0.9%, the German DAX fell by 0.1% and the French CAC 40 by 0.2%. The FTSE MIB of Italy was the only gain, with 0.05% higher.
The VIX volatility index, also known as Wall Street’s “fear meter”, rose slightly to 17.44, after reaching its lowest level since March 2020 on Friday.
“The decline indicates that investor sentiment is improving amid the perception of declining market risk,” BCA Research strategists said in a note to clients. “This progress is in line with other market developments: the S&P 500 is delivering an all-time high and Treasury bond yields have been rising since August, threatened by the improved economic outlook.”
Earlier in Asia, the Nikkei from Tokyo decreased by 0.6%. South Korean shares were almost flat.
The Nifty 50 index declined by 2.4% as India overtook Brazil to become the country with the second most COVID-19 cases.
Chinese blue chips lost 1.5% ahead of a series of economic figures from the country.
Shares in Alibaba Group Holding Ltd rose 16% after China imposed a record fine of 18 billion yuan ($ 2.75 billion) on the e-commerce giant. US investors own more than a third of the shares and make up more than 8% of the MSCI EM index.
Nasdaq futures market slipped 0.1% on Monday. S&P 500 futures fell 0.2%.
Growth and technology stocks had something of a revival last week as US Treasury yields fell from ten years to 1.65%, from a 14-month high of 1.776%.
Over the weekend, Federal Reserve Chairman Jerome Powell said the economy was on track to start growing faster, although the coronavirus remains a threat.
Data from this week is expected to show that US inflation jumped in March. Retail sales are rising, perhaps even with a double-digit profit. The Treasury will also test demand with offers of $ 100 billion in debt this week.
“Recent U.S. economic data has boosted the reflection story, with the strongest ISM Services survey since 1997 and positive signals from the labor market,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.
‘We also expect an increase in European growth as vaccination programs increase. As pent-up demand meets supply constraints, an increase in inflation may make investors uneasy. ”
U.S. banks open their first-quarter earnings season this week with Goldman Sachs, JPMorgan and Wells Fargo reporting on Wednesday.
Analysts expect profits for S&P 500 companies to show a 25% jump from a year earlier, according to the Refinitiv IBES data. This would be the strongest performance for the quarter since 2018.
The yield in returns was enough to see the dollar come down from the boiling point last week. It was last at 92,254 against a basket of currencies, against a high of 93,439.
It was lower against the yen at 109.39. The euro held $ 1.1879 and higher than its recent trough of $ 1.1702.
Gold prices were at $ 1,737 per ounce, up from a peak of $ 1,758 last week.
Oil prices fell by about 2% last week as production increased and the renewed COVID-19 closure in some countries offset the optimism about a recovery in fuel demand.
Brent was 0.1% lower on Monday at $ 62.93 a barrel. U.S. crude oil fell 0.2 percent to $ 59.22.
Reporting by Ritvik Carvalho; additional reporting by Wayne Cole in Sydney; Edited by Larry King