World stocks waver as investors catch central bank jitters

World stocks stumbled and bond yields edged lower on Tuesday as hotter than anticipated European inflation numbers jangled investor nerves ahead of a slew of earnings reports, central bank meetings, and key U.S. economic data.

Investors broadly expect the US Federal Reserve to raise interest rates by 25 basis points (bps) on Wednesday. Interest rate announcements are also due on Thursday from the Bank of England and the European Central Bank - and both are expected to hike rates by 50 bps. read more

Meanwhile, more than 100 S&P 500 companies, including Apple (AAPL.O), Amazon.com (AMZN.O) and Google parent Alphabet (GOOGL.O), are expected to report results this week, which also includes the release of closely watched US employment numbers.

Tuesday sees the release of fourth-quarter labour costs, while Friday brings the all-important January non-farm payrolls report.

“Reality is setting in,” said Bruno Schneller, a managing director at INVICO Asset Management in Zurich.

Equity markets may have factored in the end of central bank rate hikes, but they do not yet reflect the potential hit to earnings from a slowing economy, Schneller said.

“Recent corporate results, especially 2023 guidance, indicate a negative outlook leading us to maintain a reduced position in equities,” he said.

“In the shorter term, there doesn’t appear to be an obvious safe haven for investors,” said Schneller.

European shares dropped on Tuesday, dented by healthcare stocks, with the pan-regional Euro Stoxx 50 futures index down 0.6%, German DAX futures falling 0.5% and FTSE futures 0.6% lower. U.S. stock futures, the S&P 500 e-minis, were down 0.3%.

In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) fell 1.4%. The index is up over 8% so far this month. Japan’s Nikkei stock index and Australian shares traded slightly down.

Data on Tuesday showed China’s manufacturing activity swung back to growth in January but the country’s blue-chip CSI 300 index (.CSI300) still lost 1.1%. read more

US stock futures fell, pointing to a lower open for the benchmark indices following Monday’s losses.

At the end of the Fed’s two-day policy meeting on Wednesday, investors will be glued to Chair Jerome Powell’s news conference for clues on whether the rate-hiking cycle may be coming to a close, and for signs of how long rates could stay elevated.

Markets will also grapple with a flood of US economic data.

“It’s a big week for both central banks and US equities, with ... some of the household names due to make earnings announcements that will provide a micro overview of the macro economy,” ANZ analysts said in a note.

“Risk appetite could be vulnerable to a correction,” they said.

US Treasury yields edged lower ahead of the central bank meetings and economic data, with the benchmark 10-year note last down 3 basis points at 3.524% .