A gauge of global equities stalled after its best start to a year in a generation as investors assessed whether the rally has gone too far given the outlook for inflation, growth and earnings. European stocks rose.

The MSCI ACWI Index was little changed after posting the biggest advance for the first two weeks in data going back to 1988. Futures on the S&P 500 and Nasdaq 100 indexes fell at least 0.2 per cent each. The dollar snapped a three-day losing streak. U.S. spot markets were closed for a holiday. European stocks were boosted by gains in real estate companies.

While inflation in the U.S. appears to have peaked, aggressive policy tightening by the Federal Reserve and other central banks risks pushing the global economy into a recession that could hurt corporate profits. The World Bank last week added to the gloomy outlook, warning of “one of the sharpest slowdowns we have seen in the past five decades.” 

“It’s been quite a frantic start to the year so investors may be capitalizing on the opportunity to catch their breath,” Craig Erlam, a senior market analyst at Oanda Europe Ltd., wrote in a note. “The question now is whether earnings season will enhance that new sense of hope or spoil the party before it really gets going. A bad earnings season could undermine hopes of a soft landing that looks more possible now than it has for many months.”

Earnings will be a key catalyst this week as traders assess whether companies were able to navigate headwinds including higher interest rates. The busy period will also be punctuated by corporate earnings, including Wall Street heavyweights Goldman Sachs Group Inc. and Morgan Stanley.

Several Fed officials will be speaking this week, providing more clues on their policy priorities. The World Economic Forum’s annual meeting kicks off in Davos, Switzerland, with speakers there including European Central Bank President Christine Lagarde and the International Monetary Fund’s Kristalina Georgieva.

Meanwhile, Japanese markets continued to be driven by speculation of a shift in monetary policy, with the Topix index trading lower as the yen’s rebound weighed on exporters.

Investors are on guard for another surprise from the Bank of Japan when it sets policy on Wednesday. The yen strengthened to levels last seen in May and Japan’s benchmark 10-year bond yield pushed above the top of the BOJ’s ceiling for a second day.

Bitcoin fluctuated between gains and losses Monday, following a rebound over the weekend, when it surged amid optimism that it may have bottomed.

Key events this week:

• Earnings this week are scheduled to include: Charles Schwab, Discover Financial, Goldman Sachs, HDFC Bank, Interactive Brokers, Investor AB, Morgan Stanley, Netflix, Procter & Gamble, Prologis, State Street
• World Economic Forum’s kicks off in Davos, Monday
• U.S. markets closed for Martin Luther King Jr. Day, Monday
• China retail sales, industrial production, GDP, Tuesday
• U.S. Empire State manufacturing survey, Tuesday
• Fed’s John Williams to speak, Tuesday
• Eurozone CPI, Wednesday
• U.S. retail sales, PPI, industrial production, business inventories, MBA mortgage applications, cross-border investment, Wednesday
• Bank of Japan rate decision, Wednesday
• Federal Reserve releases Beige Book, Wednesday
• Fed speakers include Raphael Bostic, Lorie Logan and Patrick Harker, Wednesday
• U.S. housing starts, initial jobless claims, Philadelphia Fed index, Thursday
• ECB account of its December policy meeting and President Christine Lagarde on a panel in Davos, Thursday
• Fed speakers include Susan Collins and John Williams, Thursday
• Japan CPI, Friday
• China loan prime rates, Friday
• U.S. existing home sales, Friday
• IMF’s Kristalina Georgieva and ECB’s Lagarde speak in Davos, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures fell 0.2 per cent as of 3:47 p.m. New York time
• The Stoxx Europe 600 rose 0.5 per cent
• The Nasdaq 100 rose 0.7 per cent
• Futures on the Dow Jones Industrial Average fell 0.1 per cent
• The MSCI World index was little changed
• Nasdaq 100 futures fell 0.4 per cent
• The MSCI Asia Pacific Index fell 0.3 per cent
• The MSCI Emerging Markets Index was little changed

Currencies

• The Bloomberg Dollar Spot Index rose 0.2 per cent
• The euro fell 0.1 per cent to US$1.0819
• The British pound fell 0.3 per cent to US$1.2195
• The Japanese yen fell 0.5 per cent to 128.53 per dollar
• The offshore yuan fell 0.5 per cent to 6.7462 per dollar

Cryptocurrencies

• Bitcoin rose 1.8 per cent to US$21,289.8
• Ether rose 2.3 per cent to US$1,587.95

Bonds

• The yield on 10-year Treasuries was little changed at 3.50 per cent
• Germany’s 10-year yield was little changed at 2.17 per cent
• Britain’s 10-year yield advanced two basis points to 3.38 per cent

Commodities

• West Texas Intermediate crude fell 1.3 per cent to US$78.85 a barrel
• Gold futures fell 0.2 per cent to US$1,918.30 an ounce