Meta weighs on US stocks, European stocks rally after rout

WASHINGTON/LONDON (Reuters) – Wall Street stocks ended lower overall on Monday as European stocks rose after five straight weeks of declines and European bond yields soared on speculation of monetary tightening .

Markets are on high alert for rate hikes in both the euro zone and the United States after the ECB was seen last week as having adopted a more hawkish tone. The United States released stronger-than-expected employment and earnings data.

On Monday, European Central Bank President Christine Lagarde eased some of those worries, saying there were no signs that a measurable tightening of monetary policy would be needed.

Wall Street’s major stock indexes were mixed throughout Monday’s session before ending as markets digested mixed quarterly results from megacaps Amazon.com Inc and Facebook owner Meta Platforms.

The Dow Jones Industrial Average was flat to end at 35,091.13 points, while the S&P 500 fell 0.37% to 4,483.87. The Nasdaq Composite fell 0.58% to 14,015.67.

Meta shares fell more than 5%, extending losses for the third session after their record drop last week. Peloton jumped more than 20% on compelling media stories from potential buyers, including Amazon.

“The market’s inability to rally on Friday’s strong payrolls data and generally lackluster equity reactions to fourth quarter results despite strong results illustrates the market’s overly bearish sentiment at the moment,” said JP Morgan analysts in a market note.

“However, we see volatility moderating and expect strong equity inflows from systematic investors (e.g. risk parity, volatility targeting), as well as corporate buyouts that rise after recent profit-related blackouts.

In Europe, stocks rose after a weeks-long rout, with gains in mining stocks and positive earnings outweighing fears of an impending policy crunch cycle and geopolitical tensions.

The pan-European STOXX 600 rose 0.7% after falling more than 5% this year, following sharp declines in tech stocks as broad inflationary pressures prompted hawkish comments from major central banks.

Mining stocks were among the best performers on the day, rising 1.7% after positive comments from major commodity importer China sent metal prices higher.

Britain’s FTSE gained 0.76%. After a bumpy run last week, the MSCI Global Equity Index finished up about 0.4%.

Eurozone bond yields rose, with Germany’s 10-year government bond yield, the eurozone benchmark, up 2 basis points to 0.22%, its all-time high. since January 2019. [GVD/EUR]

The yield on Italian 10-year bonds rose 5.5 basis points to 1.814%, after hitting a new high since May 2020 at 1.901%, as traders positioned themselves for faster-than-expected monetary tightening that would hurt more of bonds in the most indebted countries. They gave back some gains as the selling slowed.

Italy and Greece continue to have “buffers” in place to protect them from rising borrowing costs and there is a reasonable chance that Greece’s credit rating will soon be upgraded, the report told Monday. Reuters one of S&P Global’s leading analysts.

“The most dominant thing is still central banks and the tightening we see there, which has led to volatility,” said Matthias Scheiber, global head of portfolio management at Allspring Global Investments.

ECB policymaker Martins Kazaks pushed back on market expectations for a rate hike as early as July in an interview with Reuters. He said the bank could end its stimulus program sooner than expected, but was unlikely to raise its main interest rate as quickly.

Klaas Knot, president of the Dutch central bank and member of the ECB’s governing council, said on Sunday that he expects a rise in the fourth quarter of this year.

The benchmark 10-year US Treasury yield fell, coming to a halt after a jump seen on Friday amid stronger-than-expected US data. The two-year US Treasury yield, which generally moves in line with interest rate expectations, also fell.[US/]

The US payrolls report for January showed on Friday that annual growth in average hourly wages rose to 5.7% from 4.9%, while payrolls in previous months were revised up by 709 000 to radically change the hiring trend.

The euro edged down 0.1% at 4:33 p.m. EST, after jumping 2.7% last week in its best performance since the start of 2020 on tightening expectations.

The US dollar index rose slightly after losing 1.8% last week.

US consumer price figures for January are due on Thursday and could show core inflation accelerating at the fastest pace since 1982 to 5.9%.

As a result, markets moved to price-fix with a one-in-three chance that the Fed could hike 50 basis points in March and the rate outlook hitting 1.5% by the end of the year.

Oil prices fell from seven-year highs on Monday as worries about tight supplies were offset by signs of progress in nuclear talks between the United States and Iran, which could lead to the US sanctions on Iranian oil sales lifted. [O/R]

Brent crude stood 58 cents, or 0.6%, at $92.69 after earlier touching $94, the highest since October 2014.

U.S. crude fell 99 cents, or 1.3%, to settle at $91.32 after touching $92.73.

Elsewhere in commodities, gold hit more than a week high, supported by inflation concerns and lingering geopolitical risks. Spot prices rose 0.73% and US gold futures rose 0.8% to $1,821.80.

China returned from the Lunar New Year pause with jumps in stocks and commodities: the blue-chip CSI300 and the Shanghai Composite rose 1.54% and 2% respectively, and metals and ore iron rebounded in Shanghai. [IRONORE/][MET/L]

(Reporting by Chris Prentice; editing by Philippa Fletcher, Nick Zieminski and Bernard Orr)

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