The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, January 27, 2022. REUTERS/Staff
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WASHINGTON, Feb 1 (Reuters) - Global equity markets began the new month in choppy trade after a volatile January, as investors weighed strong earnings from big-name U.S. companies against mixed economic data and inflation worries.
While U.S. job openings increased to near record highs in December, a measure of U.S. manufacturing activity fell to a 14-month low in January amid an outbreak of COVID-19 infections, supporting views that economic growth lost steam at the start of the year. read more [ read more ]
A pan-European equity index (.STOXX) rose 1% while Japan's blue-chip Nikkei (.N225) rose 0.3%, with MSCI's world stock index up 0.24% after hitting its highest in over a week.
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But U.S. indexes all turned negative after moving higher at the opening bell, with the Dow Jones Industrial Average (.DJI) down 0.03%, the S&P 500 (.SPX) 0.19% lower and the tech-heavy Nasdaq Composite (.IXIC) down 0.37% after it ended January on a strong note and narrowly avoided a worst-ever start to a year.
Fed policymakers appeared to confirm on Monday that interest rates would rise in March, but spoke cautiously about what might follow. read more
Australia's central bank also weighed in on Tuesday. It ended its A$275 billion ($194.40 billion) bond-buying campaign as expected, but pushed back hard on market rate-hike bets. read more
World markets have been rattled by shifting expectations for monetary policy after the U.S. central bank signaled swifter rate-hikes than earlier expected. Global equities in January had their worst month since March 2020, at the height of the initial wave of the pandemic, Deutsche Bank research showed.
Money markets price roughly five quarter-point Fed rate increases this year, but the latest comments have sown some doubt.
"The volatility of the stock market and bond yields is due to the lack of transparency and clarity from the Fed," Eric Vanraes, a portfolio manager at Eric Sturdza Investments, said.
Although the Fed had abandoned the message that high inflation is transitory, he said it was at risk of falling behind the curve.
"They should be more aggressive short-term and less aggressive later," Vanraes said.
The Institute for Supply Management (ISM) said on Tuesday that its index of national factory activity dropped to 57.6 last month and its lowest since November 2020. read more
In Asia, a number of markets including China were closed for the Lunar New Year holidays.
Major bourses from London to Paris and Frankfurt were up as much as 1% with the biggest boost from Swiss lender UBS on strong fourth-quarter earnings.
"The equity market sell-off is overdone in our view, and we reiterate our call to buy the dip, particularly in cyclicals and small caps," JPMorgan analysts said in a note.
OIL RETREATS
Oil slipped on Tuesday from seven-year highs, pressured by speculation that producer group OPEC+ could decide to boost supply by more than flagged previously as well as expectations of a rise in U.S. inventories.
While the Organization of the Petroleum Exporting Countries (OPEC) and allies, together known as OPEC+, has been expected to maintain its policy of gradual production increases at a meeting on Wednesday, Goldman Sachs said there was a chance of further steps.
U.S. crude was down 0.14% at $88.03 per barrel and Brent at $89.20, down 0.07% on the day.
After shooting higher on Monday, government borrowing costs dipped.
Germany's 10-year Bund yield held just above 0% , while benchmark 10-year Treasury yields hovered near their lowest levels in a week.
Money markets price in two 10 basis point rates hikes by the European Central Bank by year-end, with a chance of a third move.
That poses a potential headache for ECB policymakers meeting on Thursday since they had said rates are unlikely to rise in 2022.
In currency markets, the Australian dollar rebounded after an initial hit from the Reserve Bank of Australia's dovish message.
The U.S. dollar, however, was generally weaker against other major currencies as the edge came off aggressive Fed rate hike bets. The dollar index was down 0.302%, with the euro up 0.22% at $1.1258.
Russia's rouble firmed to about 77 against the dollar , recovering further from last month's heavy sell-off caused by increased tensions between Moscow and the West. read more
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Reporting by Dhara Ranasinghe and Katanga Johnson Editing by Raissa Kasolowsky, Barbara Lewis and Tomasz Janowski
Our Standards: The Thomson Reuters Trust Principles.
After volatile January, choppy start of new month for world stocks - Reuters
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