Global shares inch down before economic data and Bank meetings

London — Global shares eased on Monday before a week packed with economic data and central bank meetings, with earnings from the tech giants that have kept the S&P 500 afloat this year.

The most recent data on global business activity shows a broad-based pickup in the services sector that, in the US at least, strengthens the case for interest rates to keep rising.

S&P 500 futures and Nasdaq futures fell 0.4% before a busy week of earnings, while in Europe, the Stoxx 600 was mostly flat in early trading.

The MSCI all-world index eased 0.1%. But it’s still up almost 1% in April and not far off one-year highs, thanks largely to the strength in US tech stocks.

Apple and Microsoft alone have accounted for nearly half of the S&P 500’s gains in the past month, so there is much riding on their outlooks.

“Having seen off largely better-than-expected numbers from the US banks last week, it’s now the turn of Big Tech, which has driven most of the US market rebound so far this year,” said Michael Hewson, chief market strategist at CMC Markets.

“With the likes of Microsoft, Alphabet, Meta Platforms and Amazon all set to report this week, the outperformance that we’ve seen in the Nasdaq 100 so far this year is likely to face a key test,” he said.

The US House of Representatives could this week vote on a Republican plan to raise the debt ceiling in exchange for spending cuts. Weak tax receipts mean the government could run out of money earlier than expected, and the cost of insuring against a US sovereign default is thus at its highest in well more than a decade.

Most attention

Markets are pricing in an 86% chance the Federal Reserve will increase rates by a quarter point in May, and fully expect a similar rise from the European Central Bank with some risk of a half-point move.

Central banks in Canada and Sweden meet this week, but most attention will be on the Bank of Japan for the first meeting chaired by its new governor, Kazuo Ueda.

Ueda on Monday said policy easing has to be continued since inflation is still under 2% in trend terms.

Only three out of 27 economists polled by Reuters expect the BOJ to start to scale-back its yield curve control policy (YCC) this soon.

“The consensus expects it is too early to see any adjustments yet to the BoJ’s yield curve control policy — though changes may be forthcoming at the June meeting,” strategists at ING said in a daily note.

Meanwhile, the head of Belgium’s central bank said in an FT article on Monday that investors are underestimating how much eurozone borrowing costs will rise.

Pierre Wunsch, an ECB policymaker, said he will only agree to pausing rate rises once there is evidence that wage growth is slowing.

“A hawkish start to the week on that front,” Deutsche Bank strategist Jim Reid said.

The euro was largely flat against the dollar at $1.09795 and against the yen at 147.42. The dollar was last up 0.1% against the Japanese currency at 134.21.

Chicago wheat gained almost 1% after Russia threatened to terminate a grain deal allowing Ukrainian exports, raising concern over world supplies.

The confidence in the equity market hasn’t translated into optimism in the oil market, where crude prices struggled to remain above $80 a barrel.

Brent crude fell almost 1% to $80.88 a barrel, as investors fretted about the outlook for energy demand in an environment of high interest rates and persistent inflation.

Reuters