Rate hikes on my mind

A look at the day ahead from Danilo Masoni.

It’s been a turbulent start of the year for world markets with the prospect of interest rate hikes in the U.S. starting to skim the froth off global equity valuations and leaving investors wondering for how long the bull run would continue.

Talk about the Federal Reserve turning off the tap on massive stimulus is here to stay but with the earnings season kicking off on Wall Street risk sentiment could find some comfort as corporates report double digit profit increases.

And for the coming week investors will be also spared hawkish speeches from Fed officials now in blackout mode before a policy meeting on Jan 26.

S&P 500 earnings are expected to have grown 23.1% in the last three months of 2021 and STOXX 600 earnings are seen up 48.5%. Yet the bar is high and management teams might find it harder to please markets accustomed to stellar corporate growth.

Shares in most big Wall Street banks fell on disappointing numbers last week, leading to two consecutive weekly losses for the U.S.’s main equity benchmark (.SPX). Today it will be quieter as Wall Street is closed for Martin Luther King Day.

Meantime, European index futures pointed to slight gains at the open. In Asia, China’s central bank unexpectedly cut the borrowing costs of its medium-term loans for the first time since April 2020 to cushion an economic slowdown. read more And Chinese stocks advanced.

Finally, Credit Suisse Chairman Antonio Horta-Osorio has quit following an internal probe into his personal conduct, raising questions over the embattled lender’s new strategy. read more  Its shares rose 2% ahead of the cash market open.

Key developments that should provide more direction to markets on Monday:

• China’s economy rebounded in 2021 from its pandemic-induced slump but the pace slowed further in Q4 off the back of weak consumption and a property downturn read more
• GlaxoSmithKline rejected a 50-billion-pound offer from Unilever for its consumer goods arm, saying it undervalued the business read more
• ECB speaker: President Christine Lagarde
• Davos WEF starts
• EU finance ministers meet
• German foreign min Baerbock visits Ukraine
• UK Rightmove House prices Jan

Reporting by Danilo Masoni; Editing by Saikat Chatterjee

This article was originally published by Reuters.