Stocks drop record high ahead of US bank profits

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NEW YORK (Reuters) – The dollar slipped on Monday and a gauge of global equity markets slipped from record highs last week as investors wait to see if an expected rise in U.S. profits will justify already traded stock prices at very high premiums.

The soft auction of $ 96 billion of new three- and ten-year U.S. Treasuries helped control rising yields as the market bent over key data released this week, including a reading of the US consumer price inflation and retail sales.

The dollar slipped to a three-week low as Treasury yields remained just above recent lows, while oil prices rose on optimism about a rebound in the US economy as coronavirus vaccinations were accelerating.

The MSCI All Country World Index, a measure of the performance of equities in 49 countries, fell 0.21% from Friday’s record high. The price-to-earnings ratio of the global benchmark is at its highest level since early 2010.

The 12-month forward S&P 500 P / E ratio is 23.5, a premium of over 40% over its 20-year average, according to the CFRA.

Traders want to see results and to know whether business forecasts support expectations of a rebound in the US economy, said Fiona Cincotta, senior financial markets analyst at City Index, the retail division of StoneX Financial.

“There is some optimism,” Cincotta said of general market sentiment. “Slightly more optimistic advice from the big banks will help,” she said.

JPMorgan Chase & Co, America’s largest bank by assets, reports results Wednesday, as do Goldman Sachs Group Inc and Wells Fargo & Co. S&P financial sector hit record high on Monday before pulling back in anticipation of results banking, which begin to generate profits season.

On Wall Street, the Dow Jones Industrial Average fell 0.3%, the S&P 500 lost 0.12%, and the Nasdaq Composite fell 0.39%.

Stock prices are likely to rise if estimates continue to turn into better-than-expected results and forecasts, said Sam Stovall, CFRA’s chief investment strategist.

Analysts expect corporate profits in the S&P 500 to jump 25% from the previous year, according to IBES data from Refinitiv. It would be the best performance of the quarter since 2018.

Optimism about immunization programs and the rebound that follows spur action. The total market capitalization of global stocks reached $ 90 trillion last week, according to data from Refinitiv.

European stocks retreated from record highs as investors refrained from making big bets ahead of earnings season. The European broad index FTSEurofirst 300 closed down 0.43%.

The more export-oriented UK FTSE 100 fell 0.3%, the German DAX and French CAC 40 were little changed, while the Italian FTSE MIB gained 0.19%.

Earlier in Asia, the Tokyo Nikkei edged down 0.77% and South Korean stocks rose 0.12%.

India’s Nifty 50 index fell 2.4% as the country overtook Brazil with the world’s second-highest number of COVID-19 cases.

Chinese blue chips lost 1.5% before the release of a series of economic data from China.

Shares of Alibaba Group Holding Ltd jumped 8.6%, relieved that the record fine of 18 billion yuan ($ 2.75 billion) imposed by China on the e-commerce giant, which represents more than 8 % of the MSCI Emerging Markets Index, was not more expensive.

China has forced a radical restructuring on Jack Ma’s Ant Group, the fintech conglomerate whose record initial public offering of $ 37 billion was derailed by regulators in November. Alibaba is a subsidiary of the Ant group.

US growth and tech stocks rallied last week as 10-year US Treasury yields fell to 1.66%, from a 14-month high of 1.776%.

The 10-year US Treasury bill rose 0.5 basis points to 1.6764%.

“Low inflation and accommodating central banks should limit the rise in bond yields during the recovery,” said Andrew Pease, global head of investment strategy at Russell Investments.

Tuesday’s data should show US inflation jumped in March. Retail sales data is expected to show an increase, possibly with a double-digit gain, when a report is released on Thursday.

The dollar weakened after Treasury yields fell.

The dollar index fell 0.16%, the euro up 0.17% to $ 1.1916. The Japanese yen strengthened 0.31% against the greenback to 109.39 per dollar.

Gold fell on Monday as the slight rise in Treasury yields dampened the appeal of bullion.

Spot gold prices fell 0.62% to $ 1,732.23 an ounce.

Crude prices have remained limited as rising expectations of increased economic activity in the United States are offset by the low vaccination rate in Europe and the anticipation of additional supply from Iran in the coming months.

Brent crude futures rose $ 0.39 to $ 63.34 per barrel. US crude futures gained $ 0.41 to $ 59.73 per barrel.

Reporting by Herbert Lash, additional reporting by Ritvik Carvalho in London, Wayne Cole in Sydney; edited by Larry King, Susan Fenton and Dan Grebler

Disclaimer: The opinions expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is for informational purposes only. This is not a solicitation to trade in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article accept no responsibility for any loss and / or damage resulting from the use of this publication.


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