Euro stocks erase gains as bonds stabilize

EUROPEAN stocks erased initial gains as the global sovereign-bond selloff paused and investors turned their focus to corporate earnings.

Europe’s Stoxx 600 Index was slightly lower, while all three major US benchmarks were poised to advance. Miners outperformed, boosted by the rally in metals.

Treasury yields dipped, but remain higher for the week on concerns about elevated inflation and the prospect of Federal Reserve interest-rate hikes. A dollar gauge was little changed, crude oil slipped and gold held around a two-month high.

Chinese regulators are considering making it easier for builders to access certain funds from presold properties, a step that would help tackle the industry’s liquidity crunch. An index of property developer shares climbed. Separately, Chinese lenders lowered borrowing costs to boost the economy.

The dominant theme for markets remains prospective Fed rate hikes and the possible reduction of its holdings in Treasuries starting later in 2022. The withdrawal of outsized stimulus threatens to inject more volatility across a range of assets. Global stocks have already dropped more than 3 percent this year.

“The focus of the rates market is still very much on the Fed and the anticipated dual-pronged attack of interest rate rises and balance sheet reduction, all of which we would expect to keep uncertainty levels elevated and volatility bubbling along over the coming weeks/months,” Simon Ballard, chief economist at First Abu Dhabi Bank, wrote in a note.

Biden on Fed

PRESIDENT Joe Biden said it’s the Fed’s job to rein in the fastest inflation in decades, and backed the central bank’s plans to scale back stimulus.

He also indicated his $2-trillion economic agenda will have to be broken up, and said he isn’t ready to ease tariffs on China yet. On Russia-ukraine tension, he said he believed Russia will “move in” on Ukraine, adding such a step would hurt President Vladimir Putin “badly.”

In the US, upbeat earnings from companies including Morgan Stanley, Unitedhealth Group Inc. and Procter & Gamble Co. failed to shore up sentiment.

The earnings season so far has been a little bit rocky, and investors need to monitor commentary from companies about price and wage pressures, Rebecca Felton, Riverfront Investment Group senior market strategist, said on Bloomberg Television.

“We do believe stocks can continue to go higher even as the Fed changes policy,” she said, adding corporate profits will still likely beat estimates.