European stock markets opened higher on Monday, and global stocks held their highest levels in more than two years, while investors are waiting for US inflation data due this week to provide clues as to when the US Federal Reserve may cut rates.
The S&P 500 topped 5,000 points for the first time in its history last week, boosted by technology stocks, and global equities are up for three straight weeks, even as US Treasury yields rose today because investors lowered their expectations about how fast the Federal Reserve could cut rates.
With most major Asian markets closed for the holidays, analysts said they expected a quiet day in the markets as traders await Tuesday’s US inflation data as well as British inflation data. and Eurozone GDP on Wednesday.
“Markets are discounting expectations for rate cuts,” said Kiran Ganesh, multi-asset strategist at UBS, adding that markets are pricing in fewer than five U.S. rate cuts this year, down from six. or seven at the beginning of the year. .
“The equity market remains relatively immune to this, because the reason we see less expectation of interest rate cuts is because of stronger economic growth, which, of course, is also good for the economy.”variable income”.
Strong US job data in early February led investors to lower expectations of a Fed rate cut at its next meeting, with market prices at an 84.5% chance of rates that remain unchanged.
At 0857 GMT, the MSCI global equity index, which tracks stocks in 47 countries, was almost unchanged on the day, having hit its highest since January 2022 earlier in the session.
The pan-European STOXX 600 index rose 0.3% after remaining relatively stable in February but gaining 1.4% in January. London’s FTSE 100 was little changed, and Germany’s DAX rose 0.2%.
According to Ganesh, the equity rally is concentrated in a few stocks, as enthusiasm around artificial intelligence boosts technology stocks.
“I wouldn’t be surprised to see a period of consolidation in the coming weeks or months,” he said, adding that he remains “very optimistic” about the artificial intelligence trend.
The dollar index was up about 0.1% at 104.130, and the euro was slightly lower at $1.0774 after hitting a 10-day high earlier in the session.
The Japanese yen, which weakened as expectations of a US rate cut faded, was firm at 149.190 per dollar.
Investors also lowered their expectations for rate cuts from the European Central Bank after two policymakers said last week that the ECB needed more evidence that inflation was slowing before it could cut rates. rates.
Euro zone government bond yields, which rose sharply last week, fell slightly on Monday, with the German 10-year benchmark yield falling one basis point to 2.373%.
Oil prices fell after Israel said it had “ended” a series of attacks in southern Gaza, slightly easing concerns about supplies from the Middle East.
Crude oil futures Brent They were down 0.5% at $81.82 a barrel, and West Texas Intermediate crude futures were down 0.5% at $76.46 a barrel.
Gold fell slightly to $2,022.6 an ounce.
Markets in China, Hong Kong, Japan, South Korea, Singapore, Taiwan, Vietnam, and Malaysia remain closed for holidays.
Financial markets in mainland China are closed for the Lunar New Year holiday and will resume trading on Monday, February 19. Trading in Hong Kong will resume on February 14.