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Markets

Stocks dip on caution before Fed, earnings

  • World shares down 0.2%.
  • US indices lower in early trading.
  • Fed meeting, tech earnings in focus.
  • Copper prices climb towards record.
  • Dollar steadies, up from multi-week lows.
Published April 27, 2021

NEW YORK/MILAN: Shares eased from record peaks on Tuesday as optimism about a global economic recovery was dented by caution before a policy decision by the Federal Reserve and earnings updates from a number of blue-chip companies.

MSCI's gauge of stocks across the globe shed 0.20%.

The world index has risen 9% so far this year, underpinned by expectations that rising COVID-19 vaccination rates will allow more economies to recover and give a big boost to company profits.

Earnings in Europe are expected to have risen 61% in the first quarter, while US profits are seen up more than 31%, according to the latest Refinitiv IBES estimates.

Many investors, however, stayed on the sidelines ahead of the Fed meeting that ends on Wednesday, when the US central bank is expected to confirm that it will maintain its easy monetary policy to bolster the economy.

One area of concern was India, which is struggling with surging coronavirus infections that have overwhelmed its healthcare system.

Markets were also awaiting results from US tech heavyweights Microsoft and Alphabet later on Tuesday. Companies that represent about 40% of the S&P 500's market capitalization report from Tuesday through Thursday.

"There are yet to be any real punctures in the global risk balloon at the moment," wrote Deutsche Bank strategist Jim Reid. "We'll have to wait and see if these upcoming events might throw this off course."

Some analysts say the recent rally has made stocks vulnerable to profit taking, given lofty valuations and high expectations going into the reporting season.

Wall Street opened lower.

The Dow Jones Industrial Average fell 62.33 points, or 0.18%, to 33,919.24, the S&P 500 lost 5.06 points, or 0.12%, to 4,182.56 and the Nasdaq Composite dropped 27.75 points, or 0.2%, to 14,111.03.

In Europe, bank results grabbed the attention. Strong earnings sent shares in Europe's biggest bank by assets HSBC up 3.3%, while UBS fell 2.6% after a surprise hit linked to the collapse of hedge fund Archegos.

Oil rebounded as optimism ahead of a meeting of producer group OPEC+ to discuss output policy offset concern that India's coronavirus crisis could dent a recovery in fuel demand.

US crude recently rose 0.82% to $62.42 per barrel and Brent was at $66.04, up 0.59% on the day.

The dollar hovered near multi-week lows versus major peers but moves were narrow as traders avoided taking out big positions before a bond auction and the Fed meeting.

The dollar index rose 0.036%, with the euro down 0.04% to $1.2078.

"Nobody really believes that the Fed will change its forward guidance, but just in case, investors appear to be loading up on US dollar as a hedge," said OANDA analyst Jeffrey Halley.

Bond traders were closely watching an auction of $62-billion of seven-year US Treasuries later on Tuesday.

The Treasury saw very weak demand at a seven-year debt auction in February, which sparked a brutal global selloff. The notes also saw tepid, although improved, demand in March.

Benchmark 10-year notes last fell 6/32 in price to yield 1.5915%, from 1.57% late on Monday.

Bitcoin rose 1% to $54,636. The world's most popular cryptocurrency soared nearly 10% on Monday, after five straight days of losses, on reports that JPMorgan Chase is planning to offer a managed Bitcoin fund.

Bitcoin had slumped almost a fifth from an all-time high hit this month.

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