Stocks paused their rally as the euphoria over a potential dovish pivot by central banks faded and investor attention turned to the latest corporate earnings and deals news. Europe’s Stoxx 600 Index steadied after three days of gains. Burberry Group Plc dropped 6.7% as it warned that this year’s revenue target may be out of reach. HelloFresh SE sank 18% after the meal-kit company surprised investors with a profit warning.
Siemens AG climbed as analysts said the industrial conglomerate’s fourth-quarter report was strong overall.
Hotel Chocolat Group Plc soared after Mars Inc agreed to buy it for £534 million ($662 million). US equity futures were little changed, while Asian shares retreated.
The rally on Wall Street and in Treasuries this week following a soft inflation print in the US has prompted some to ponder whether the market is jumping the gun on expectations of a dovish pivot by the Federal Reserve. The S&P 500 has gained more than 7% this month. The focus in the outlook for rates turns next to US initial jobless claims and industrial production figures which were due on Thursday, with a line-up of Fed speakers for investors to also tune into. Earnings from Walmart Inc will provide a further insight into the state of the economy.
“US equity markets are approaching overbought levels, so it feels like we have the makings of a pullback,” said Tony Sycamore, a market analyst at IG Australia.
Sycamore said the Fed “won’t be thrilled by the recent easing in financial conditions, undermining its higher-for-longer message.” Treasuries climbed after a selloff, where the 10-year rate rose eight basis points to above 4.5%. The greenback pulled back slightly from the day’s high and was trading 0.1% higher.
The MSCI Asia Pacific Index trimmed declines of as much as 0.8%, halting a three-day winning run. Chinese shares in Hong Kong led losses among major Asia equity gauges after home prices fell at the fastest clip since 2015, and as traders were left unimpressed by the outcome of the Xi-Biden summit. A Bloomberg gauge of China property stocks erased losses after falling 1.4% following the weak housing data. Technology stocks in Hong Kong fell over 2% weighed down by selloff in Xiaomi and Tencent erasing its gains of as much as 2%.
Investors were also looking ahead to corporate earnings from Alibaba Group Holding Ltd and NetEase Inc following encouraging results from JD.com Inc and Tencent Holdings Ltd.
Traders also assessed China president Xi Jinping’s comment that his country will not fight a cold, or a hot, war with the US as a sign Beijing is intent on repairing recently soured relationship with the US.
There’s “not much so far” from the talks between the two leaders, but “the tone from both sides seems conciliatory and that is good,” said Redmond Wong, a market strategist at Saxo Capital Markets in Hong Kong. Oil extended its slide as a rise in US inventories pointed to looser near-term market conditions, with prices at risk of a fourth weekly drop.