Global stocks hold monthly gain before Fed, ECB: markets wrap

Equities benchmarks for Hong Kong, mainland China and Japan fluctuated. Futures for US indexes edged up in the wake of a torrid session on Wall Street that saw the Nasdaq 100 suffer its worst day since Dec. 22 as Apple Inc. and Microsoft Corp. weighed on the market.

Samsung Electronics fell as much as 3% in Seoul, weighing on South Korea’s Kospi gauge, after profit slumped on poor demand for semiconductors and weakness in smartphones and memory chips.

A measure of dollar strength slipped marginally after the greenback climbed versus all its Group-of-10 counterparts on Monday. The yield on 10-year Treasuries was also little changed around 3.54%. 

Traders in Asia are also focused on developments surrounding India’s Adani Group, and economic data from China, where January purchasing managers’ surveys beat expectations, reflecting a recovery in demand that should support the nation’s asset prices.  

Abu Dhabi’s International Holding Co. has agreed to invest about $400 million in Adani Enterprises’s follow-on share sale, providing a positive contrast to the onslaught that wiped almost $70-billion from the market value of Gautam Adani’s business empire. Adani bonds rebounded from record lows. 

Hanging over everything is Wednesday’s Fed decision, with the US central bank widely expected to raise rates by a quarter percentage point. Investors will be watching for the tone officials set for future meetings after Fed Chair Jerome Powell’s consistent efforts to push back against traders anticipating rate cuts later this year.

The rally in stocks this month suggests the market has so far brushed off Powell’s warning of “higher-for-longer” interest rates. 

Those adding to the rally will be disappointed if they’re in direct defiance of the Fed, a team of Morgan Stanley strategists led by Mike Wilson said in a note. Citi Global Wealth’s Kristen Bitterly echoed this, saying that January’s rally was technical as it was largely driven by 2022’s “laggards and losers”.

“Even after they’ve stopped the rate hikes, there is still the quantitative tightening that still poses a threat for a lot of risk assets,” Mary Nicola, a global multi-asset portfolio manager for PineBridge Investments, said in an interview with Bloomberg Radio.

Elsewhere in markets, oil steadied after slipping to a three-week low on Monday. Traders are waiting for more clues on Chinese demand, the Fed decision and the latest guidance from OPEC+.

Also on the agenda for the week are policy meetings in Europe and the UK on Thursday, and the US jobs report on Friday. A less tight labour market is a key goal for the Fed. BM/DM