On Monday, stocks recorded early losses before reversing, as investors were hopeful that a batch of second-quarter earnings reports this week would give investor sentiment a boost to offset the indications of an economic slowdown before the two-day policy meeting of the US Federal Reserve.

The start of the week

The financial markets started off the week rather quietly, as the dollar fell, but was still above the two and a half week low, while there was a rise in bond yields. According to a survey that is widely watched, there was a decline in German business morale in July greater than expected. Meanwhile, the largest economy in Europe is heading towards an economic recession because of rising gas shortages and high prices of energy.

On Sunday, Janet Yellen, the Treasury Secretary in the US, said that there was a slowdown in US economic growth, but also said that this did not mean that an economic recession was inevitable. However, data shows that the chances of a downturn are quite high. There was a contraction in the business activity in the US for the first time in almost two years because of rapidly increasing rates and persistently high inflation.

Market analysts said that the global economy’s outlook would remain gloomy for the next few months, as increasing interest rates, concerns about elevated inflation and shortage of gas in Europe are weighing on sentiment. While recession risks are rising, analysts said that investors should not position for just one scenario.

Busy week

Nonetheless, this week is going to be a busy one, as there Big Tech companies, such as Microsoft and Apple will report their earnings, as will European banks. Investors hope that the latest quarter numbers would show that despite the weak outlook of the economy, there is still some profitability.

The gains recorded on Monday come after recent weeks have recorded a rebound, as investors decided to buy back into markets after they have declined rather sharply this year because of fears of more interest rate hiking from central banks, weaker economic growth, and persistently high inflation.

Market analysts said that the morning session had the ‘recession-fear’, but expectations for stronger earnings numbers from some big tech names in the United States had given sentiment a boost.

European performance

Another lift to the mood was news that countries in the European Union are planning on following the bloc’s plan that requires use of less gas because of uncertain supplies from Russia. There was a 0.2% rise in the STOXX 600 index by 1105 GMT and a 0.4% gain was also recorded in the German DAX and a 0.14% rise in the UK’s FTSE index.

Wall Street futures were pointing towards 0.5% gains. Shares in Asia also declined during the day. All eyes are now on the Fed’s monetary policy meeting, which is expected to hike interest rates by 75 basis points and there is a 9% possibility of an increase of 100 basis points.