Markets struggle before central bank rate decisions

Investors are bracing for interest rate decisions by the Federal Reserve, Bank of England and European Central Bank this week. ©AFP

New York (AFP) - Stock markets wavered on Monday with central banks set to lift interest rates again later this week, as policymakers battle high inflation.

Wall Street retreated with the tech-heavy Nasdaq Composite Index shedding two percent, and Paris and Frankfurt both gave up 0.2 percent at the European close.

London added 0.3 percent, however, while Shanghai and Tokyo also finished higher as mainland Chinese markets reopened from holidays.

The US Federal Reserve is forecast Wednesday to lift interest rates by just 25 basis points, down from a half-point hike last month, which followed four straight 75 basis point increases.

The Bank of England and the European Central Bank are set to unveil their policy decisions one day after, with more hikes on the radar.

"Stocks were on the back foot...as attention shifts to this week's vital Federal Reserve meeting, as well as supporting acts in the shape of ECB and BoE," said Markets.com analyst Neil Wilson.

For Chris Beauchamp, chief market analyst at online trading platform IG, "the new week has seen stock markets struggle to make headway, as investors fret about the hectic days to come."

Recession fear

The central bank meetings come as a string of recent data suggests last year's monetary tightening campaign by policymakers is beginning to kick in, with price rises starting to slow from multi-decade highs.

Michael Hewson, chief market analyst at CMC Markets, said "trading (is) likely to remain subdued until this week's central bank meetings are out of the way."

There is trepidation on trading floors that economies could still slip into recession, while a mixed earnings season so far has raised concern about company profits.

Official data showed that the economies of Germany and Sweden unexpectedly shrank in the last quarter of 2022.

In London on Monday, Ryanair made record third-quarter profits on soaring bookings but shares in gambling firm 888 tanked 27 percent after chief executive Itai Pazner resigned amid news of a probe into Middle East operations.

The company added in a statement that it has suspended VIP activities in the region pending the outcome of its internal investigation.

"Gambling stocks are under enough regulatory scrutiny as it is without inviting reasons for further attention and yet that's exactly what 888 has done," said AJ Bell investment director Russ Mould.

The economic agenda also includes quarterly results from tech heavyweights such as Apple and Amazon, as well as from industrial companies including ExxonMobil and General Motors.

Earnings have generally topped expectations so far, but investors have been troubled by downbeat forecasts by many companies, said Hugh Johnson of Hugh Johnson Economics.