Equities higher as traders prepare for big week

LONDON — European and American stocks advanced on Monday as markets began a busy week, with the US Federal Reserve (Fed) poised to lift interest rates again and some of the world's biggest companies scheduled to publish their latest earnings reports.

Asian markets ended lower.

The Fed is widely tipped to hike borrowing costs by 0.75 percentage points on Wednesday as it battles soaring inflation.

US second-quarter gross domestic product data are due Thursday, with some observers warning it could show a second successive contraction — which is considered a technical recession.

Investors are also awaiting the release of earnings from business titans Apple, Amazon and Google parent Alphabet.

"Stock markets are modestly in the green, with a fair amount of straw clutching at play once more," said market analyst Craig Erlam at OANDA.

"Earnings not being as bad as feared, the Fed only hiking by 75 basis points and China putting together a plan in the hope of averting the next wave of the property crisis is among the reasons being given for stock markets rising."

"It all seems a bit desperate."

Patrick J. O'Hare at Briefing.com said that bad news has been priced in by investors. 

"Hence, when bad news isn't as bad as expected, it is cheered for being better than feared, whereas good news is just the bee's knees," he said.

Markets were roiled last week when the European Central Bank (ECB) finally began ramping up interest rates to tackle runaway consumer prices in the eurozone.

The ECB had surprised investors on Thursday with a bigger-than-expected rate increase of 0.5 percentage points.

Consumer prices are soaring worldwide after economies reopened from pandemic lockdowns and as the Ukraine war keeps energy prices elevated.

That, in turn, has sparked aggressive rate hikes from major central banks to try and dampen inflationary pressures.

All three main indices on Wall Street ended last week with a loss, ending a three-day rally, following a big data miss on the crucial US services sector.

Fed chiefs have already said their main priority was bringing inflation down from four-decade highs, even at the expense of growth.

"We still see further downside for risky assets as recession fears accumulate and central banks remain committed to fighting inflation at the expense of growth," said Standard Chartered Strategist Eric Robertsen.

Others warned that while inflation could begin to ease, the Fed could still push borrowing costs to around five per cent and was unlikely to lower rates as soon as many traders hope.