Wall Street set to open Monday with earnings report

REUTERS Brendan McDermid

It's been a turbulent start to the year for world markets with interest rate hikes in the U.S. starting to skim the froth off global equity valuations and leaving investors wondering how long the bull run will continue.

With the earnings season kicking off on Wall Street risk sentiment, the talk of the Federal Reserve turning off the tap on massive stimulus may find some comfort as corporates report double digit profit increases.

For the coming week investors will be spared hawkish speeches from Fed officials now in blackout mode before a policy meeting on January 26.

S&P 500 earnings are expected to have increased 23.1% in the last three months of 2021, and STOXX 600 earnings are expected to be up 48.5%. The bar is high and management teams might find it hard to please markets accustomed to stellar corporate growth.

Shares in most big Wall Street banks fell on disappointing numbers last week, leading to two consecutive weekly losses for the US main equity benchmark SPX Today, as Wall Street is closed for Martin Luther King Day.

In the middle of the day, European index futures pointed to slight gains at the open. In Asia, the central bank cut the borrowing costs of its medium-term loans for the first time since April 2020 to cushion an economic slowdown. Credit Suisse Chairman Antonio Horta-Osorio left the company in the wake of an internal investigation into his personal conduct, raising questions about the lender's new strategy. Its shares went up 2% ahead of the cash market open.

Key developments that should give more direction to markets on Monday: