In a subdued trading session, stocks and U.S. equity futures remained steady as investors awaited new catalysts following a week where the S&P 500 achieved record highs, while European equities narrowly missed that milestone.
S&P 500 futures inched up by 0.2%, and Nasdaq 100 contracts rose by 0.3%, with U.S. cash markets closed for the President's Day holiday. The upcoming earnings report from Nvidia Corp. on Wednesday is anticipated to offer fresh direction for equities, serving as a key indicator of the global economy's strength.
The Stoxx Europe 600 showed little change after a 1.4% surge in the previous week that brought it within four points of its January 2021 high. Basic resources stocks declined due to a fall in iron ore prices, while the technology sector underperformed. Defensive sectors such as telecoms and healthcare posted gains.
Individual movers in Europe included AstraZeneca PLC, climbing over 3% after positive trial data for its Tagrisso drug, and German arms manufacturer Rheinmetall AG, which advanced up to 4% following the announcement of a new plant in Ukraine. Banco Santander SA rose after initiating a share buyback.
Global stocks have yet to react to the Treasury sell-off this month, prompted by strong economic data and hawkish comments from policymakers. Mixed earnings reports, geopolitical tensions in the Middle East, and disruptions in Red Sea shipping pose additional risks to profit outlooks.
Mohit Kumar, Chief Economist for Europe at Jefferies International Ltd., stated, "Our base case remains that equities will end the year higher than current levels, but we do not expect it to be a straight path." He anticipates a short-term pullback, providing better levels to reset long positions.
Market sentiment indicates a reduced expectation of rate cuts, with swaps pricing about 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 U.S. stocks are priced for perfection, with the market adjusting to delayed and less significant rate cuts.
Traders will closely watch European inflation data and earnings reports from Nvidia, BHP Group Ltd, and Rio Tinto Plc this week. Ongoing conflicts in the Middle East may continue, as negotiations for a cease-fire and the release of hostages have not progressed as hoped.
Bond markets were quiet due to the U.S. holiday, with no cash trading of Treasuries. On Friday, two-year yields rose seven basis points to 4.65% after a significant jump in the producer price index. The U.S. dollar weakened against most Group-of-10 peers.
In Asia-Pacific, shares edged upwards, and China's CSI 300 Index rebounded on the first day of trading after the Lunar New Year break. Despite early struggles, buoyant travel and tourism data suggested increased consumption, prompting expectations for further policy support in China's monetary and fiscal space.
Commodities saw oil prices decline from a three-week high amid lingering concerns over the demand outlook, while gold maintained a two-day gain. Iron ore prices slumped after five days of gains, influenced by worries about China's economy despite positive travel and tourism indicators.
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