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Earnings, Fed this week; Evergrande ordered to liquidate - what's moving markets

Published 29/01/2024, 11:36
Updated 29/01/2024, 11:36
© Reuters -- U.S. stock futures were subdued on Monday, with markets preparing for a busy week of major earnings and central bank policy announcements. Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT) are among many of the tech giants due to report results this week, while the Federal Reserve will unveil its latest policy decision and deliver closely-watched commentary that could help determine the path ahead for interest rates. China Evergrande (HK:3333) is ordered to liquidate, starting a new and possibly lengthy chapter for the heavily indebted property developer.

1. Futures mixed

U.S. stock futures hovered around both sides of the flatline on Monday, as traders geared up for a week of key corporate earnings and central bank decisions.

By 05:07 ET (10:07 GMT), the Dow futures contract had shed 55 points or 0.1%, S&P 500 futures had dipped by 3 points or 0.1%, and Nasdaq 100 futures had added 19 points or 0.1%.

A solid start to the new year for the main averages on Wall Street will likely face a stern exam in the coming days. Investors will be parsing through numbers from some of America's largest businesses and digesting influential commentary from the Federal Reserve, both of which may help clarify the outlook for the broader economy (see below).

The S&P 500 dipped by 0.1% on Friday, leaving the benchmark index near all-time highs, a move that reflects market hopes that inflation may be cooling without a meltdown in growth -- a scenario commonly referred to as a "soft landing." The tech-heavy Nasdaq Composite also fell by 0.4% to end the prior trading week, while the 30-stock Dow Jones Industrial Average gained 0.2%.

2. Big-name earnings ahead

A parade of high-profile and possibly market-moving results are due out from a string of companies this week, including many of the so-called "Magnificent Seven" stocks that have powered a recent surge in equities.

On Tuesday, Microsoft will report after the bell, only days after the tech giant's market capitalization surpassed $3 trillion. Google-parent Alphabet (NASDAQ:GOOGL), which like Microsoft has been a beneficiary of a wave of hype around artificial intelligence, will also unveil its latest numbers following the close of markets.

Wednesday will feature semiconductor manufacturer Qualcomm (NASDAQ:QCOM), with investors on the lookout for the San Diego-based group's view of the year ahead for chipmaking. Quarterly figures are also due from Boeing (NYSE:BA), the embattled planemaker who has come under fresh scrutiny following a dangerous mid-flight blowout on one of its 737 Max 9 models earlier this month, as well as Novo Nordisk (NYSE:NVO), the Danish drugmaker behind the popular weight loss medication Wegovy.

More megacap tech firms are set to step into the limelight on Thursday, including iPhone-maker Apple, e-commerce behemoth Amazon and Facebook-owner Meta Platforms (NASDAQ:META).

3. Fed decision in focus

Markets will also be keeping their eye on the Federal Reserve, as the world's most influential central bank holds its latest two-day policy meeting.

Fed officials are tipped to keep interest rates on hold at more than two-decade highs following the gathering on Wednesday, placing extra focus on any comments regarding the outlook for borrowing costs in the near term.

In December, the Fed signaled that it could reduce rates six times this year, fueling hopes for a cut as early as March. But several policymakers have moved to temper these expectations, indicating that worries remain that a rapid loosening in financial conditions could reignite cooling inflationary pressures.

A stronger-than-expected advance estimate of fourth-quarter U.S. growth last week also bolstered the case for the Fed to hold off on lowering rates any time soon. Meanwhile, economists expect January nonfarm payrolls on Friday to show ongoing resilience in the U.S. labor market -- although the Fed will not be able to factor this particular piece of data into its latest projections.

How the Fed sees price gains and economic activity evolving in 2024 will likely influence bets over the timing of the first cut. According to's Fed Rate Monitor Tool, there is an almost 50% chance the bank will roll it out in May.

4. China Evergrande ordered to liquidate

China Evergrande has been ordered to be wound up by a Hong Kong court after the world's most indebted property developer failed to secure a restructuring agreement with its creditors.

The group, which has over $300 billion in total liabilities, has been attempting to secure the deal for more than two years in the wake of a bond repayment and a series of court hearings.

But Justice Linda Chan on Monday appointed management consultancy Alvarez & Marsal to liquidate Evergrande, arguing that the move will provide some certainty to creditors. "It is time for the court to say enough is enough," Chan said in the morning court session, Reuters reported.

Evergrande's Chief Executive Siu Shawn told Chinese media that the decision will not impact the operations of its onshore and offshore units. But analysts have flagged that the liquidation process could be complicated and lengthy, as well as damaging to already downbeat sentiment around the state of China's property market.

Shares in Evergrande slumped by just under 21% after the announcement.

5. Crude volatile amid Middle East turmoil

Oil prices were choppy on Monday, as traders fretted over increased disruptions to supply in the Middle East following a drone attack on U.S. forces in Jordan over the weekend.

By 05:08 ET, the U.S. crude futures contract traded 0.4% lower at $77.73 a barrel, while the Brent contract fell 0.3% to $82.68 per barrel. Both contracts had risen earlier in the day.

The attack, which U.S. President Joe Biden said was carried out by Iran-backed militants, resulted in the death of three American service members. It was the first deadly strike against U.S. forces since the Israel-Hamas war erupted.

Iran has denied involvement in the attack, but it does raise concerns over a more direct confrontation between the two countries, potentially resulting in regional energy supply disruptions in the oil-rich Middle East.

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