news/AMZN/2023.01.30/Shares and bonds nervy as rate-hike week looms.txt

*Fed seen hiking 25 bps, ECB and BOE by 50 bps*Technology giants lead host of earnings results*Shares edge down after robust January rallyLONDON, Jan 30 (Reuters) - Stock markets worldwide
halted their January rally on Monday, pausing for breath at the
start of an agenda-setting week of central bank rate hikes and
data releases that will clarify if progress has been made in the
battle against inflation.Investors expect the Federal Reserve will raise rates by 25
basis points on Wednesday, followed the day after by half-point
hikes from the Bank of England and European Central Bank, and
any deviation from that script would be a real shock.Europe's benchmark STOXX index fell 0.8% on Monday morning,
echoing a slight dip in MSCI's broadest index of Asia-Pacific
shares outside Japan, which has surged 11% in
January so far as China's reopening bolsters sentiment.The U.S. Nasdaq index is likewise on course for its best
January since 2001, a rally that will be tested by earnings
updates from tech giants this week.U.S. stocks were set to follow the nervous Monday mood
with S&P 500 futures down 1% and Nasdaq futures
falling 1.3%, as investors await guidance later in the week on
the Federal Reserve's policy.Analysts expect a hawkish tone suggesting that more needs to
be done to tame inflation."With U.S. labour markets still tight, core inflation
elevated and financial conditions easing, Fed Chair Powell's
tone will be hawkish, stressing that a downshifting to a 25bp
hike doesn't mean a pause is coming," said Bruce Kasman, chief
economist at JPMorgan, who expects another rise in March."We also look for him to continue to push back against
market pricing of rate cuts later this year."There is a lot of pushing to do given futures
currently expect rates to peak at 5% in March and to fall back
to 4.5% by year end.Europe offered a brisk reminder that the fight against
rising prices is far from over, as bond yields in the region
rose sharply on Monday in the wake of stronger-than-expected
Spanish inflation data.The data showing inflation rose 5.8% year-on-year in
January, against expectations of 4.7%, pushed up the zone's
benchmark German 10-year government bond yield 7
basis points (bps) to 2.3190%, its highest since Jan. 10.Italian and Spanish yields also inched up.The dollar index was flat ahead of the week's key
data, on course for a fourth straight monthly loss of more than
1.5% on growing expectations that the Fed is nearing the end of
its rate-hike cycle.APPLE'S COREYields on 10-year notes have fallen 33 basis
points so far this month to 3.50%, essentially due to easing
financial conditions even as the Fed talks tough on tightening.That dovish outlook will also be tested by data on U.S.
payrolls, the employment cost index and various ISM surveys.Reading on EU inflation could be important for whether the
ECB signals a half-point rate rise for March, or opens the door
to a slowdown in the pace of tightening.As for Wall Street's recent rally, much will depend on
earnings from Apple Inc, Amazon.com, Alphabet
Inc and Meta Platforms, among many others."Apple will give a glimpse into the overall demand story for
consumers globally and a snapshot of the China supply chain
issues starting to slowly abate," wrote analysts at Wedbush."Based on our recent Asia supply chain checks we believe
iPhone 14 Pro demand is holding up firmer than expected," they
added. "Apple will likely cut some costs around the edges, but
we do not expect mass layoffs."Market pricing of early Fed easing has been a burden for the
dollar, which has lost 1.6% so far this month to stand at
101.85 against a basket of major currencies.The euro is up 1.5% for January at $1.0878 and
just off a nine-month top. The dollar has even lost 1.3% on the
yen to 129.27 despite the Bank of Japan's dogged
defence of its ultra-easy policies.The drop in the dollar and yields has been a boon for gold,
which is up 5.8% for the month so far at $1,930 an ounce.The precious metal was flat on Monday ahead of the slew of
key central bank moves and data releases.China's rapid reopening is seen as a windfall for
commodities in general, supporting everything from copper to
iron ore to oil prices.Oil steadied on Monday after earlier losses, with prices
bolstered by rising Middle East tension over a drone attack in
Iran and hopes of higher Chinese demand.Brent crude rose 10 cents, or 0.12%, to $86.76 a
barrel by 1200 GMT while U.S. West Texas Intermediate crude
added 4 cents, or 0.05%, to $79.72.(Reporting Lawrence White and Wayne Cole; Editing by
Christopher Cushing, Arun Koyyur and Christina Fincher)