European equities surged on Monday while global stocks maintained stability, reaching levels not seen in over two years. Investor attention turned towards upcoming U.S. inflation figures, anticipated to offer insights into the Federal Reserve’s potential rate adjustments.
Last week, the S&P 500 breached the historic 5,000-point mark, primarily fueled by the tech sector. Despite a recent uptick in U.S. Treasury yields, signaling tempered expectations for imminent Fed rate cuts, world equities continued their upward trajectory for the third consecutive week.
With major Asian markets shuttered for holiday observances, market analysts predicted subdued activity as traders awaited pivotal U.S. inflation data scheduled for release on Tuesday. Additionally, attention is drawn to forthcoming British inflation statistics and euro zone GDP figures on Wednesday.
Following robust U.S. employment data earlier in February, market sentiment shifted, diminishing prospects for a Fed rate cut at the upcoming meeting. Currently, markets are pricing in an 84.5% probability of unchanged rates in March.
Managing Director of the International Monetary Fund, Kristalina Georgieva, remarked on Monday that interest rates are poised to decline across leading economies around mid-year.
As of 1253 GMT, the MSCI world equity index, encompassing shares from 47 nations, remained flat for the day, after reaching its peak since January 2022 earlier in the session.
The STOXX 600, representing European equities, exhibited a 0.3% increase, sustaining its relative stability in February, following a 1.4% rise in January.
The FTSE 100 in London dipped marginally by 0.1%, contrasting with a 0.3% uptick in Germany’s DAX.
On Wall Street, futures struggled for momentum, with Nasdaq 100 and S&P 500 e-minis showing minimal change, while Dow Jones futures declined by 0.1%.
The U.S. dollar index edged up approximately 0.2% to 104.15, as the euro dipped 0.1% to $1.077 from a 10-day high earlier in the day.
The 2-year U.S. Treasury yield, sensitive to interest rate fluctuations, retreated by 4 basis points to 4.457%, stepping back from Friday’s peak.
Although the Japanese yen has weakened amid reduced U.S. rate cut expectations, it saw a slight strengthening against the dollar, reaching 148.96 per dollar.
Expectations for rate cuts by the European Central Bank have also been tempered, following remarks from two policymakers last week who suggested the need for further evidence of inflation easing before considering rate adjustments.
Euro zone government bond yields, which experienced a sharp rise last week, slightly receded on Monday, with the benchmark German 10-year yield down by four basis points at 2.338%.
Profit-taking ensued in oil markets, resulting in a decrease after last week’s 6% gains.
Gold prices softened slightly to $2,021.05 per ounce.
Notably, financial markets in China, Hong Kong, Japan, South Korea, Singapore, Taiwan, Vietnam, and Malaysia were closed for holidays, with mainland China and Hong Kong scheduled to resume trade on February 19th and 14th, respectively.
