LONDON (Reuters) – Global stock markets fell Monday as investors waited to see if US gains would warrant skyrocketing valuations, while a rise in bonds could be tested by what should be strong US inflation data this week and retail sales.
MSCI’s All Country World Index, which tracks stocks in 49 countries, fell 0.25% after the start of European trading, following Friday’s record high.
European stocks fell from record highs as investors held back from making big bets for the earnings season. The pan-European STOXX 600 index fell 0.3% against 0813 GMT.
Britain’s domestically focused FTSE mid 250 index fell 0.6% but remained below a record high as shops, pubs, gyms and hairdressers reopened after three months of lockdown.
The more export-oriented FTSE 100 in the UK fell by 0.9%, the German DAX by 0.1% and the CAC 40 in France by 0.2%. Italy’s FTSE MIB was the only asset, up 0.05%.
The VIX volatility index, also known as the Wall Street “fear meter”, tipped slightly higher to 17.44 after hitting its lowest since March 2020 on Friday.
“The decline indicates that investor sentiment is improving with a perception of declining market risk,” strategists at BCA Research said in a note to clients. “This progress is in line with other market developments: the S&P 500 has hit record highs and government bond yields have been rising since August, supported by the improving economic outlook.”
Earlier in Asia, the Nikkei in Tokyo fell 0.6%. South Korean stocks were pretty much the same.
The Nifty 50 index fell 2.4% as India overtook Brazil, becoming the country with the second most COVID-19 cases.
Chinese blue chips lost 1.5% ahead of a string of economic data out of the country.
Shares in Alibaba Group Holding Ltd were up 16% after China imposed a record fine of 18 billion yuan ($ 2.75 billion) on the e-commerce giant. More than a third of the shares are owned by US investors and make up more than 8% of the MSCI EM index.
Nasdaq futures are down 0.1% on Monday. S&P 500 futures were down 0.2%.
Growth and technology stocks saw some sort of rebound last week as the US 10-year yield on US Treasuries fell to 1.65% from a 14-month high of 1.776%.
Over the weekend, Federal Reserve Chairman Jerome Powell said the economy was on the verge of accelerating growth, although the coronavirus remained a threat.
This week’s data is expected to show that US inflation rose in March. Retail sales are on the rise, perhaps even at double-digit gains. Treasury will also test demand this week with offers of $ 100 billion in debt.
“Recent US economic data has bolstered the reflation story, with the strongest ISM Services survey since 1997 and positive signs from the job market,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.
“We also expect a revival in European growth as vaccination programs increase. However, as pent-up demand is accompanied by supply constraints, rising inflation can make investors uneasy. “
US banks are opening first quarter earnings season this week. Goldman Sachs, JPMorgan and Wells Fargo will report on Wednesday.
Analysts expect earnings for S&P 500 companies to show a 25% jump from a year earlier, according to data from Refinitiv IBES. That would be the strongest performance in the quarter since 2018.
The drop in revenues was enough to see the dollar come off boiling last week. It last traded at 92,254 against a basket of currencies, after peaking at 93,439.
It was lower against the yen at 109.39. The euro was at $ 1.1879 and above its recent low of $ 1.1702.
Gold prices remained at $ 1,737 an ounce after failing to hit $ 1,758 last week.
Oil prices fell about 2% last week as production increased and renewed COVID-19 lockdowns in some countries offset optimism about a recovery in fuel demand.
Brent was down 0.1% on Monday at $ 62.93 a barrel. US crude oil fell 0.2% to $ 59.22.
Reporting by Ritvik Carvalho; additional reporting by Wayne Cole in Sydney; edited by Larry King