During a subdued trading session, both stocks and U.S. equity futures maintained stability as investors eagerly awaited fresh catalysts following a week where the S&P 500 hit record highs, while European equities narrowly missed reaching that milestone.
S&P 500 futures saw a slight uptick of 0.2%, while Nasdaq 100 contracts rose by 0.3%, with U.S. cash markets closed for the President’s Day holiday.
All eyes are now on the upcoming earnings report from Nvidia Corp. on Wednesday, expected to provide a new direction for equities and serve as a significant indicator of the global economy’s strength.
In Europe, the Stoxx Europe 600 remained relatively unchanged after a notable 1.4% surge in the previous week, bringing it within proximity of its January 2021 high.
Basic resources stocks experienced a decline due to a drop in iron ore prices, while the technology sector lagged. Conversely, defensive sectors like telecoms and healthcare showed gains.
Notable movers in the European market included AstraZeneca PLC, climbing over 3% following positive trial data for its Tagrisso drug, and German arms manufacturer Rheinmetall AG, which advanced up to 4% after announcing a new plant in Ukraine. Banco Santander SA also saw a rise after announcing a share buyback.
Despite a Treasury sell-off earlier in the month driven by robust economic data and hawkish comments from policymakers, global stocks remained largely unaffected. Mixed earnings reports, geopolitical tensions in the Middle East, and disruptions in Red Sea shipping continue to pose risks to profit outlooks.
Mohit Kumar, Chief Economist for Europe at Jefferies International Ltd., expressed confidence that equities will end the year higher than current levels but cautioned against expecting a straightforward trajectory. He anticipates a short-term pullback, which could provide better opportunities to establish long positions.
Market sentiment indicates reduced expectations of rate cuts, with swaps pricing around 90 basis points of Federal Reserve rate cuts in 2024, down from over 150 basis points at the start of February.
JPMorgan Asset Management suggests that U.S. stocks are priced for perfection, adjusting to the possibility of delayed and less significant rate cuts.
This week, traders will closely monitor European inflation data and earnings reports from Nvidia, BHP Group Ltd, and Rio Tinto Plc. Ongoing conflicts in the Middle East continue, with negotiations for a cease-fire and the release of hostages showing limited progress.
Bond markets remained quiet due to the U.S. holiday, with no cash trading of Treasuries. On Friday, two-year yields rose by seven basis points to 4.65% following a significant jump in the producer price index. Meanwhile, the U.S. dollar weakened against most Group-of-10 peers.
In the Asia-Pacific region, shares edged upwards, and China’s CSI 300 Index rebounded on the first day of trading after the Lunar New Year break.
Despite initial challenges, robust travel and tourism data indicated increased consumption, fostering expectations for further policy support in China’s monetary and fiscal space.
Commodities experienced mixed movements, with oil prices declining from a three-week high amid lingering concerns over the demand outlook, while gold maintained a two-day gain.
Iron ore prices slumped following five consecutive days of gains, influenced by concerns about China’s economy despite positive travel and tourism indicators.
