Market update: Investors cautious ahead of BoJ and Eurogroup meetings

Wall Street edged higher last Friday (Dow Jones +0.4%; S&P 500 +0.3%) capping a third consecutive week of gains and taking US equities to some of their highest levels for five years. The fourth quarter earnings season was a tailwind as shares in bank Morgan Stanley rose nearly 8% after beating consensus earnings estimates – good results from Goldman Sachs and JP Morgan Chase had come earlier in the week. In macroeconomic news investors were reassured by data that showed China's economy had grown 7.9% in the fourth quarter, providing evidence that it was recovering from its former slowdown. Market momentum was, however, held back by nervousness about political deals that must be struck on federal borrowing before the US breaches its statutory debt limit or ‘debt ceiling’.

Overnight, the yen rebounded from its lowest level versus the dollar since June 2010, and Japan’s Nikkei 225 Stock Average ended down 1.5%; investors have been taking profits ahead of the Bank of Japan’s (BoJ) two-day policy meeting, which is expected to result in further asset buying. In Europe, stock markets have opened cautiously (FTSE Eurofirst +0.1%; FTSE 100 +0.2%) given the BoJ meeting and as eurozone finance ministers (the Eurogroup) convene in Brussels. US markets are closed today in observation of Martin Luther King Day.