Stocks, news, flash PMI data, earnings

Shares on the way: Topdanmark rises 3%, Ambu falls 4%

Danish shares were the biggest movers in both directions at Tuesday’s opening.

Insurance company Topdanmark added 3.7% to lead the Stoxx 600 after its fourth-quarter earnings report and dividend proposal, while hospital equipment maker aroma fell 4.6% after SEB cut the stock to “sell” from “hold”.

El-Erian says Fed should hike by 50 basis points, calls smaller hike a ‘mistake’

Inflation has moved from goods to the service sector, says Mohamed El-Erian

Rising inflation may largely be in the past, but a move to a 25 basis point hike at the next Federal Reserve policy meeting is a “mistake,” according to Allianz Chief Economic Adviser Mohamed El-Erian.

“‘I’m in a very, very small camp that thinks they shouldn’t cut down to 25 basis points, they should do 50,'” he told CNBC’s “Squawk Box” on Monday. “They should take advantage of this growth window that we’re in, they should take advantage of where the market is, and they should try to tighten financial conditions because I think we still have an inflation problem.”

Inflation, he said, has shifted from the goods to services sector, but may well rise again if energy prices rise as China reopens.

El-Erian expects inflation to plateau around 4%. This, he said, will put the Fed in a difficult position as to whether to continue crushing the economy to reach 2%, or promise that level in the future and hope that investors can tolerate a steady 3% to 4% nearer term.

“It’s probably the best result,” he said of the latter.

—Samantha Subin

CNBC Pro: Wall Street is excited about Chinese tech — and loves a mega-cap stock

After more than 2 years of regulatory crackdowns and a pandemic-induced crisis, Chinese tech names are back on Wall Street’s radar, with one stock in particular standing out as a top pick for many.

Pro subscribers can read more here.

— Zavier Ong

The Fed is likely to discuss next week when to stop hikes, the Journal report says

Federal Reserve officials next week are all but certain to approve another slowdown in interest rate hikes, while also debating when to stop the hikes altogether, according to a report from the Wall Street Journal.

The rate-setting Federal Open Market Committee is set to meet Jan. 31-Feb. 1, with markets pricing in almost a 100% chance of a quarter-point increase in the central bank’s benchmark interest rate. Most prominently, Fed Governor Christopher Waller said on Friday he sees an increase of 0.25 percentage points as the preferred move for the upcoming meeting.

However, Waller said he doesn’t think the Fed is done tightening yet, and several other central banks have backed that view in recent days.

The Journal report, citing public statements from policymakers, said slowing the pace of increases could provide an opportunity to assess the impact of the increases so far on the economy. A series of rate hikes starting in March 2022 have resulted in increases of 4.25 percentage points.

Market prices currently indicate quarter-point increases at the next two meetings, a period of no action and then up to a half-point reduction by the end of 2023, according to data from the CME Group.

But several officials, including Governor Lael Brainard and New York Fed President John Williams, have used the phrase “stay the course” to describe the future policy path.

– Jeff Cox

European markets: Here are the opening calls

European markets are headed for a positive open on Tuesday ahead of flash PMI (purchasing managers index) data for the eurozone in January.

Britain’s FTSE 100 the index is expected to open 10 points higher at 7,801, Germany’s DAX 18 points higher with 15,122, France’s CAC up 12 points to 7,049 and Italy’s FTSE MIB up 81 points to 25,945, according to data from IG.

There are no major earnings announcements on Tuesday.

—Holly Ellyatt

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