Stocks sink, investors eye earnings, data

Shares in Alibaba Group rose 16 per cent after China imposed a record fine on the e-commerce giant.
Shares in Alibaba Group rose 16 per cent after China imposed a record fine on the e-commerce giant.

Global stock markets have sunk as investors wait to see whether US earnings would justify sky-high valuations, while a rally in bonds could be tested by what should be strong readings for US inflation and retail sales this week.

MSCI's All Country World Index, which tracks stocks across 49 countries, was down 0.25 per cent after the start of European trading, off Friday's record high.

European shares eased as investors held off from making big bets before earnings season. The pan-European STOXX 600 index was down 0.3 per cent by 0813 GMT.

Britain's domestically focused FTSE mid 250 index slipped 0.6 per cent, but held below a record high as shops, pubs, gyms and hairdressers re-opened after three months of coronavirus lockdown.

The UK's more export-oriented FTSE 100 fell 0.9 per cent, Germany's DAX slipped 0.1 per cent and France's CAC 40 fell 0.2 per cent. Italy's FTSE MIB was the sole gainer, up 0.05 per cent.

The VIX volatility index, also known as Wall Street's 'fear gauge', ticked slightly higher to 17.44, having on Friday hit its lowest level since March 2020.

"The drop indicates that investor sentiment is improving amid a perception of receding market risk," strategists at BCA Research said in a note to clients.

"This progress is in line with other market developments: the S&P 500 is forging all-time highs and Treasury bond yields have been climbing since August, buoyed by the improving economic outlook."

Earlier in Asia, Tokyo's Nikkei edged down 0.6 per cent. South Korean stocks were near flat.

The Nifty 50 index slid 2.4 per cent as India overtook Brazil to become the country with the second-most COVID-19 cases.

Chinese blue chips lost 1.5 per cent before a series of economic figures from the country.

Shares in Alibaba Group Holding Ltd rose 16 per cent after China imposed a record 18 billion-yuan ($A3.61 billion) fine on the e-commerce giant.

More than a third of the stock is held by US investors, and it makes up more than eight per cent of the MSCI EM index.

Nasdaq futures slipped 0.1 per cent on Monday. S&P 500 futures fell 0.2 per cent.

Growth and tech stocks saw something of a revival last week as US 10-year Treasury yields retreated to 1.65 per cent , from a 14-month top of 1.776 per cent. Over the weekend, Federal Reserve Chair Jerome Powell said the economy was about to start growing faster, though the coronavirus remained a threat.

"Recent economic data from the US has reinforced the reflation narrative, with the strongest ISM Services survey since 1997 and positive signals from the labour market," Mark Haefele, chief investment officer at UBS Global Wealth Management, said.

"We also expect a pickup in European growth as vaccination programs ramp up. Still, as pent-up demand meets supply constraints, a pickup in inflation could well unsettle investors."

US banks open first-quarter-earnings season this week with Goldman Sachs, JPMorgan and Wells Fargo scheduled to report on Wednesday.

Analysts expect profits for S&P 500 firms to show a 25 per cent jump from a year earlier, according to Refinitiv IBES data. That would be the strongest performance for the quarter since 2018.

The pullback in yields was enough to see the US dollar come off the boil last week. It was last trading at 92.254 against a basket of currencies, down from a peak of 93.439.

It was lower against the yen at 109.39. The euro was holding at $US1.1879 and above its recent trough of $US1.1702.

Gold prices were idling at $US1,737 an ounce, having failed to sustain a top of $1,758 last week.

Australian Associated Press