By Chris Prentice and Carolyn Cohn
WASHINGTON/LONDON (Reuters) -Wall Street shares finished broadly lower on Monday, while European stocks rose following five straight weeks of declines and European bond yields soared on speculation of monetary tightening.
Markets are on alert for rate rises in both the euro zone and the United States after the ECB last week was considered to have adopted a more hawkish tone. The United States reported stronger-than-expected jobs and earnings data.
European Central Bank President Christine Lagarde on Monday calmed some of those jitters, saying there were no signs that measurable monetary policy tightening would be required.
Major Wall Street stock indexes were mixed throughout the session on Monday before ending down as markets digested mixed quarterly results from megacaps Amazon.com Inc (NASDAQ:AMZN) and Facebook (NASDAQ:FB) owner Meta Platforms.
The Dow Jones Industrial Average remained unchanged to end at 35,091.13 points, while the S&P 500 lost 0.37% to 4,483.87. The Nasdaq Composite dropped 0.58% to 14,015.67.
Meta shares fell more than 5%, extending losses for the third session after its record plunge last week. Peloton (NASDAQ:PTON) jumped over 20% on media reports of interest from potential buyers including Amazon.
"The market's inability to rally on Friday's strong payroll data, and generally poor stock reactions to Q4 results despite healthy earnings delivery, illustrate the overly bearish market sentiment at the moment," JP Morgan analysts said in a market note.
"However, we see volatility moderating and expect strong equity inflows from systematic investors (e.g. risk parity, volatility targeting), as well as corporate buybacks that are increasing after recent earnings-related blackout periods.
In Europe, shares rose following a multi-week rout as gains in mining stocks and positive earnings outweighed worries of a looming policy tightening cycle and geopolitical tensions.
The pan-European STOXX 600 rose 0.7% after sinking more than 5% this year, following sharp declines in tech stocks as broad inflationary pressures invited hawkish comments from major central banks.
Mining stocks were among the top performers for the day, rising 1.7% after positive comments from major commodity importer China pushed up metal prices.
Britain's FTSE gained 0.76%. After a bumpy ride last week, the MSCI world equities index ended up about 0.4%.
Euro zone bond yields rose, with Germany's 10-year government bond yield, the benchmark of the euro zone, up 2 basis points to 0.22%, its highest level since January 2019. [GVD/EUR]
Italy's 10-year bond yield rose 5.5 bps to 1.814%, after touching a new high since May 2020 at 1.901% as traders positioned for faster-than-expected monetary tightening that would hurt more bonds in the most indebted countries. They gave back some gains as the sell-off slowed.
Italy and Greece continue to have "buffers" in place to protect them from rising borrowing costs and there is a reasonable chance that Greece's credit rating could be upgraded soon, one of S&P Global (NYSE:SPGI)'s top analysts told Reuters on Monday.
"The most dominant thing is still central banks and the tightening we see there, that has led to the volatility," said Matthias Scheiber, global head of portfolio management at Allspring Global Investments.
ECB policymaker Martins Kazaks pushed back against market expectations for a rate hike as soon as July in an interview with Reuters. He said the bank could end its stimulus programme earlier than planned but it was unlikely to raise its main interest rate so quickly.
Klaas Knot, the Dutch Central Bank President and a member of the ECB's governing council, said on Sunday he expects a hike in the fourth quarter of this year.
The benchmark U.S. 10-year Treasury yield retreated, pausing after a jump seen on Friday on the back of stronger-than-expected U.S. data. The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was also down.[US/]
The U.S. January payrolls report on Friday showed annual growth in average hourly earnings climbed to 5.7%, from 4.9%, while payrolls for prior months were revised up by 709,000 to radically change the trend in hiring.
The euro inched down 0.1% by 4:33 p.m. EST, having shot up 2.7% last week in its best performance since early 2020 on the tightening expectations.
The U.S. dollar index edged higher , after shedding 1.8% last week.
U.S. consumer price figures for January are due on Thursday and could show core inflation accelerating to the fastest pace since 1982 at 5.9%.
As a result, markets moved to price in a one-in-three chance the Fed might hike by a full 50 basis points in March and the prospect of rates reaching 1.5% by year end.
Oil prices fell from seven-year highs on Monday as concerns over tight supply were offset by signs of progress in nuclear talks between the United States and Iran, which could lead to the removal of U.S. sanctions on Iranian oil sales. [O/R]
Brent crude settled down 58 cents, or 0.6%, at $92.69 after earlier touching $94, the highest since October 2014.
U.S. crude fell 99 cents, or 1.3%, to settle at $91.32 after touching $92.73.
Elsewhere in commodities, gold climbed to a more than one-week high, supported by inflation worries and lingering geopolitical risks. Spot prices rose 0.73% and U.S. gold futures settled 0.8% higher at $1,821.80.
China returned from the Lunar New Year break with jumps in equities and commodities: the blue-chip CSI300 and Shanghai Composite were up 1.54% and 2%, respectively, and metals and iron ore rallied in Shanghai. [IRONORE/][MET/L]