US stock futures subdued ahead of fresh round of corporate earnings

European stocks and Wall Street stock futures were subdued on Monday as investors braced for the start of another US corporate earnings season against an increasingly gloomy economic backdrop.

The regional Stoxx Europe 600 ranged between small gains and losses, while London’s FTSE 100 fell 0.3 percent. Futures contracts, which track the S&P 500, were broadly stable ahead of the New York opening bell.

Those moves followed a sell-off on Wall Street in the previous session, with the S&P closing up 2.8 percent on Friday after a jobs report indicated continued strong job growth.

Such data has been scrutinized in recent months for signs of how aggressively the US Federal Reserve will hike interest rates, with signs of continued resilience in the labor market fueling expectations of tighter monetary policy.

Monday’s subdued activity in stock markets was also preceded by a flurry of third-quarter corporate earnings announcements, with Wall Street banks poised to lead the way.

Investors will be scrutinizing company financial statements for signs of stress from persistently high inflation and rising borrowing costs, with growing concerns this year that central banks will push interest rates into recession – putting even more pressure on companies in many sectors .

New US inflation data on Thursday will also shed light on the effectiveness of the Fed’s tightening efforts so far, after the central bank hiked rates by an extra-large 0.75 percentage point in three consecutive meetings. A Reuters survey put the consumer price index for the world’s largest economy at 8.1 percent in September, compared with 8.3 percent in August.

The US Treasury market was closed for a holiday on Monday. UK government bonds across all maturities came under renewed pressure even after the Bank of England announced measures to ease the burden on UK pension funds, including raising limits on purchases under its emergency purchase program for government bonds.

The central bank stepped in to ease volatile trading in gilts after Westminster’s ‘mini’ budget last month triggered historic price swings in debt – particularly longer-dated bonds. But the initiative should end on Friday.

The 10-year UK government bond yield rose 0.16 percentage points to 4.4 percent on Monday, while the 30-year yield – which was the initial focus of BoE intervention – rose 0.21 percentage points to 4.8 percent gained weight

“There is a lot of attention being paid to the fact that government bond purchases will actually end at the end of this week,” said Antoine Bouvet, rates strategist at ING. “The underlying concern is that the pension fund setup has not been used much — there is concern that there may be further sales once the purchases are complete.”

Trade in Asia was thin as Japan, South Korea and Taiwan were closed for public holidays. But Hong Kong’s Hang Seng slipped nearly 3 percent and China’s mainland CSI 300 fell 2.2 percent, dragged down by declines in chipmakers.

Last week, Washington introduced new export controls to limit Beijing’s plans for technological self-sufficiency by restricting the sale of semiconductors made with US technology unless the sellers get an export license. U.S. chipmakers were also under pressure during Friday’s trading session after industry giant Advanced Micro Devices cut its sales estimate.

Additional reporting by Hudson Lockett in Hong Kong US stock futures subdued ahead of fresh round of corporate earnings

Adam Bradshaw

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