Why this portfolio manager says market is rotating in favour of biotech
Stocks were mixed Monday as traders weighed a global advance in sovereign bond yields and corporate developments.
Europe’s Stoxx 600 Index gained, while U.S. futures were mixed and Asian shares fell. A dollar gauge ticked higher, as did oil prices. U.S. stock and bond markets are shut Monday for a holiday.
Bond yields rose around the world after U.S. Treasuries tumbled Friday on concerns about more hawkish Federal Reserve policy to fight inflation. JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon said Friday the central bank could raise rates as many as seven times and traders are reconsidering an earlier kickoff for the first European Central Bank rate increase in more than a decade.
The advance of the omicron virus strain, the start of the earnings season and a boom in mergers and acquisitions are also coloring sentiment. Investors are looking for signs that companies can sustain profit growth despite rising risks from inflation, rates, supply chain bottlenecks and slowing economic growth following last year’s blockbuster earnings.
Wall Street banks kicked off the earnings season with mixed results last week, disappointing investors and tamping down some profit expectations for this year.
“Given the record inflation backdrop and historically tight labor market, investor focus is on margins -- demonstrating pricing power, passing on rising costs to the customer,” Julian Emanuel, chief equity and quantitative strategist at Evercore ISI, wrote in a note.
Among individual movers on Monday, Unilever Plc shares tumbled, while GlaxoSmithKline Plc rose, as the consumer-products company considers making a higher offer for Glaxo’s consumer unit -- a deal widely denounced by analysts. Equipment maker BE Semiconductor rose to the highest since the stock’s 1995 listing after Oddo and Deutsche Bank boosted their price targets.
Credit Suisse Group AG replaced Chairman Antonio Horta-Osorio, who was forced to resign following quarantine breaks after just nine months in charge.
In Brazil, the controlling shareholders of Braskem SA are seeking to raise about US$1.5 billion by selling shares in the petrochemical firm in what is expected to be one of the country’s largest equity offerings this year.
Meanwhile, China’s central bank cut interest rates on Monday to counter an economic slowdown. A real-estate slump and partial COVID shutdowns are among the challenges for the world’s second-largest economy. The move contrasts with the shift toward tighter monetary policy in the U.S. and elsewhere to contain price pressures.
“The PBOC really has started the New Year in a different position to, let’s say, other global banks and we do expect to see further easing or supportive measures, both monetary-wise as well as from a fiscal stance,” Catherine Yeung, investment director at Fidelity International, said on Bloomberg Television.
What to watch this week:
- Goldman Sachs, Morgan Stanley, Bank of America, UnitedHealth Group and Netflix are among companies publishing earnings during the week
- U.S. data includes Empire manufacturing Tuesday, housing starts Wednesday and jobless claims Thursday
- Bank of Japan monetary policy decision, Tuesday
- Interest-rate decisions due from nations including Indonesia, Malaysia, Norway, Turkey and Ukraine, Thursday
- EIA crude oil inventory report, Thursday
Some of the main moves in markets:
- Futures on the S&P 500 were little changed as of 2:19 p.m. New York time
- Futures on the Nasdaq 100 slid 0.2 per cent
- Futures on the Dow Jones Industrial Average rose 0.1 per cent
- The MSCI World index was little changed
- The Bloomberg Dollar Spot Index rose 0.1 per cent to the highest since Jan. 11
- The euro was little changed at US$1.1407
- The British pound fell 0.2 per cent to US$1.3647
- The Japanese yen slipped 0.4 per cent, more than any closing loss since Jan. 4
- Germany’s 10-year yield advanced two basis points to the highest in almost three years
- Britain’s 10-year yield advanced four basis points to 1.19 per cent
- West Texas Intermediate crude rose 0.6 per cent to US$84.30 a barrel
- Gold futures rose 0.1 per cent to US$1,818.40 an ounce