Global Market Update: Inflation Worries and Earnings Season Impact

Worldwide markets saw a dip on Monday. Investors, a bit cautious about possible interest rate increases, are keeping a close eye on upcoming U.S. inflation data and a season of companies sharing how well they're doing – which needs to be pretty good to make sense of high prices.

There's also talk about troubles in the Red Sea causing shipping costs to go up in Europe, and the conflict between Israel and Hamas making folks worried it might spread to Lebanon.

In Europe, stocks related to oil and gas fell by 1.8%, mainly because the price of crude oil dropped. That happened after Saudi Arabia, a big oil exporter, cut prices a lot, and the OPEC group increased oil production.

Speaking of oil, the overall prices went down by more than 2%, thanks to Saudi Arabia cutting prices and OPEC producing more oil. This balanced out concerns about tensions rising in the Middle East.

But not all is gloomy. Over in the U.S., leaders agreed on a big spending deal worth $1.6 trillion to avoid part of the government shutting down.

Things looked promising in Asian trading, but MSCI's big index of stocks dropped nearly 1%, following a 2.5% fall last week. European stocks weren't doing great either, going down a bit more due to not-so-exciting energy stocks. The whole European stock scene, called STOXX 600, ended up 0.3% down, adding to a 0.5% fall last week. U.S. stock futures hinted at a not-so-strong start on Monday.

Japan's market was closed for a holiday, and Chinese big stocks lost 1.1%, hitting almost the lowest in five years.

The big topic on everyone's mind is when and how much the U.S. will lower interest rates. A money expert at INVICO Asset Management, Bruno Schneller, thinks there might be a rate cut in May because prices aren't going up too fast. But with confusing signals from inflation data, experts think the government might wait until then.

Recent data showed that in December, U.S. companies hired more people than expected, making folks think maybe the government won't lower interest rates quickly. But another survey said that in December, companies in the U.S. weren't doing so well, pointing to a weaker economy.

Last week, the S&P 500, a big U.S. stock index, lost 1.5%. That's a break from a winning streak that lasted nine weeks, the longest in a long time. After going up by 24% last year, now the prices look a bit too high, so people are watching closely during this reporting season.

Major banks like JPMorgan Chase and Citigroup will start sharing their results on Friday, and everyone's hoping they'll be good. People who make predictions think that overall, profits for big U.S. companies went up by 3% from last year. Goldman Sachs, a big money company, thinks it might be even more.

People are guessing that there might be around 136 basis points of interest rate cuts in the U.S. next year, more than what the government thought. There's a good chance this could start as soon as March, depending on what happens with inflation data on Thursday.

Experts think prices will go up by 0.2% in December for important stuff, but the yearly inflation rate will go down to 3.8%, the lowest since 2021. When the U.S. government will cut rates depends on the numbers they see in upcoming economic data.

This week, at least four people from the government will talk about what they think will happen, with John Williams from the New York Fed likely having the most say. China and Tokyo will also share their inflation data this week, and folks are hoping to see signs that things are getting better in China.

In money markets, the dollar went down a bit against the yen, and the euro stayed about the same. Gold, a precious metal, lost a bit of value, going down 0.9% to $2,028 an ounce.

Also Read: Global Markets Finish Strong in 2023: Record Highs and Positive Trends