Equity Retreat Resumes With Earnings And Upcoming China Data In Focus

A broad-based selloff in global equity markets has been underway overnight and into this morning. Asia Pacific markets led the way downward with Hong Kong losing 2.1%, Sydney and Seoul losing about 1.1% and Tokyo slipping 0.8%. Major European markets are down across the board with Frankfurt, London, Paris and Milan all down 0.2%-0.4%. Downward momentum appears to be continuing into North America with US index futures falling 0.3%-0.6% as Americans return to trading from a long weekend.

The US 10-year treasury note yield has climbed back up above 4.00%, while the 10-year German bund yield has climbed back up above 2.20%. A series of comments from European Central Bank officials at Davos and elsewhere this week have suggested that while central banks appear to be shifting from hawkish to neutral, the shift to dovish (rate cuts) may not come as quickly as investors had hoped at the end of 2023. The US Dollar has also been on the rebound, gaining 0.5%-0.8% against the Euro, Pound, Yen, and Gold. The Loonie is down 0.2% against the Greenback. Commodity action is mixed today with US Crude Oil up 0.5%, but Natural Gas down 8.7%. Copper is up 0.8% this morning.

Today’s economic data appears indecisive and troubling at the same time. In the US, the Empire State Manufacturing Index fell off a cliff (-43.7 vs street -5.0 and previous -14.5). Canada housing starts beat expectations (249K vs street 243K) Canada consumer prices sent mixed signals with headline inflation increasing as expected  (3.4% in-line vs  previous 3.1%), while Core CPI continued to ease (2.6% vs previous 2.8%).  Tomorrow is a busy day for economic reports headlined by retail sales reports for the US and China, plus China GDP and UK inflation.  

Earnings season resumed today, headlined by mixed results from investment banks as Goldman Sachs ($5.48 vs street $3.62) soundly beat expectations while Morgan Stanley ($0.85 vs street $1.07) missed significantly. A number of US regional banks also report over the next few days including a miss from PNC Financial ($1.85 vs street $2.12) this morning.  

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