Stock market outlook
US stocks≫ Watch the financial results of major companies.
European equities ≫Downward revision of corporate earnings forecasts.
The S&P 500 and the Dow Jones Industrial Average continued to fall, rising in the first half of the week on positive news that the US consumer price index (CPI) grew less than market expectations in November. The US Federal Open Market Committee (FOMC) raised its forecast for the terminal rate, or the final destination point for the policy rate, and the index extended its decline towards the end of the week as concerns grew over the economic downturn associated with continued interest rate hikes.
This week, US Federal Reserve officials will have an opportunity to speak, and if this leads to increased speculation of a prolonged interest rate hike or a drop in interest rate cuts, it will increase recessionary fears. In addition, major logistics, retail and semiconductor companies are scheduled to announce their financial results. If the economic outlook becomes even more uncertain through individual company results and management comments, share prices could weaken further and should be closely monitored.
The Stoxx Europe 600 Index continued to fall sharply. The index reached its highest level since May in the first half of the week on speculation that the pace of interest rate hikes in the US would slow down. Subsequently, the European Central Bank's (ECB) decision to raise interest rates by 50 bps and hints of further rate hikes increased fears of a recession, leading to a significant decline in the second half of the week.
The Stoxx Europe 600 Index's forecast earnings per share (EPS) growth rate for the year ahead has been revised downwards rapidly since September, to 1.4% growth as of 8 September. This suggests that, for the time being, the stock market cannot be expected to rise as a result of increased corporate earnings growth. Against this backdrop, the ECB's clear stance of tightening monetary policy also makes it difficult to foresee an increase in the expected price-to-earnings ratio (PER). European equities are expected to see a heavy upside.