Stocks off Record Highs awaiting Earnings, U.S. Data

World stock markets fell off record highs on Monday with investors waiting to see whether U.S. earnings would justify sky-high valuations. What should be strong readings for U.S. inflation and retail sales this week could be tested by a rally in bonds.

Last week, global stocks hit record highs on vaccination programmes and the easing of lockdowns. 

Despite the S&P 500’s new all-time highs, small cap stocks represented by the Russell 2000 small cap index have underperformed  the S&P 500. That was by 8% since peaking on March 12,  Morgan Stanley noted.

Stocks on the Move

After the start of European trading, MSCI’s All Country World Index dipped 0.25%. Since early 2010, the gauge’s price-to-earnings ratio is at its highest level.

On Monday, Nasdaq futures lost 0.1% and S&P 500 futures shed 0.2%.

Investors refrained from making big bets before earnings season, thus European shares eased off record highs.  By 1003 GMT, the pan-European STOXX 600 index slipped 0.2%.

Britain’s FTSE mid 250 index held 0.2% below a record high as shops, pubs, gyms, and salons reopened after being in lockdown for three months.

The UK’s FTSE 100 was down 0.3%, while Germany’s DAX and France’s CAC 40 both traded unchanged. Italy’s FTSE MIB added almost half a percent.

The VIX volatility index, which is also called Wall Street’s “fear gauge”, ticked up to 17.48. Previously, on Friday, it hit its lowest level since March 2020.

Earlier in Asian stocks, Tokyo’s Nikkei dropped 0.6%. South Korean stocks were close to flat.

China’s blue chips fell 1.5% ahead of the release of a series of economic data from its government.

Alibaba Group Holding Ltd shares surged 16%. This came after China imposed a record 18 billion-yuan ($2.75 billion) fine on the e-commerce company.

India’s Nifty 50 to Hit a New 1-Month Low

On Monday, India stocks were lower after the close with losses in the Real Estate, Public Sector Undertakings and Metals sectors leading shares lower.

The Nifty 50 fell 3.53% at the close in NSE, to hit a new 1-month low. The BSE Sensex 30 index dropped 3.44%.

On the India National Stock Exchange, the number of falling stocks exceeded that of the advancing ones by 1580 to 127 and 40 ended unchanged. On the Bombay Stock Exchange, 2395 retreated and 476 advanced, while 168 ended unchanged.