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18 days ago

Global stocks steady at two-year high, focus on inflation data

The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, February 9, 2024.
The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, February 9, 2024. Photo : REUTERS

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European stocks rose on Monday, and world stocks were steady at their highest in more than two years, as investors waited for US inflation data due this week to give clues about when the US Federal Reserve might cut rates.

The S&P 500 rose above 5,000 points for the first time ever last week, boosted by tech stocks, and world equities have risen for three weeks straight, even though US Treasury yields have edged higher recently as investors lower their expectations for how soon the Fed could cut rates.

With most major Asian markets closed for holidays, analysts said they expected a quiet day in markets as traders wait for US inflation data on Tuesday, as well as British inflation data and euro zone GDP on Wednesday.

“We are seeing markets dialling back expectations for rate cuts,” said UBS multi-asset strategist Kiran Ganesh, adding that markets were pricing fewer than five cuts in the US this year, down from six or seven at the start of the year.

“The equity market has remained relatively immune to that because the reason why we’ve seen less interest rate cuts expectations has been down to stronger economic growth which of course is good for equities as well.”

Strong US jobs data earlier in February meant investors reduced expectations for a Fed rate cut at its next meeting, with markets pricing an 84.5 per cent chance of rates remaining unchanged in March.

International Monetary Fund managing director Kristalina Georgieva said on Monday that interest rates would start coming down in leading economies around mid-year.

At 1253 GMT, the MSCI world equity index, which tracks shares in 47 countries, was flat on the day, having touched its highest since January 2022 earlier in the session.

The pan-European STOXX 600 was up 0.3 per cent, having held relatively steady in February but gained 1.4 per cent in January.

London’s FTSE 100 was down 0.1 per cent, and Germany’s DAX was up 0.3 per cent.

But Wall Street futures struggled to gain momentum, with Nasdaq 100 and S&P 500 e-minis little changed , , and Dow Jones futures down 0.1 per cent .

Ganesh said the equity rally was “somewhat concentrated in a few names”, as excitement around artificial intelligence boosts tech stocks.

“I don’t it should come as a surprise if we see some period of consolidation in the next weeks or months,” he said, adding that he was still “very positive” on the AI trend.

The US dollar index was up around 0.2 per cent at 104.15, and the euro was down 0.1 per cent at $1.077, coming down from a 10-day high hit earlier in the session.

The yield on 2-year US Treasuries, which are sensitive to interest rates, was down 4 basis points at 4.457 per cent, retreating from Friday’s peak of 4.499 per cent, which was the highest so far this year.

The Japanese yen, which has weakened as US rate cut expectations have reduced, was a touch stronger against the dollar, at 148.96 per dollar.

Investors have also reduced their expectations for rate cuts by the European Central Bank, after two policymakers said last week that the ECB needs more evidence that inflation is easing before it can cut rates.

Euro zone government bond yields, which rose sharply last week, were a touch lower on Monday, with the benchmark German 10-year yield down by four basis points at 2.338 per cent.

Oil prices were down as investors took profits after last week’s 6 per cent gains.

Gold was a touch lower at $2,021.05 per ounce <XAU=.

Markets in China, Hong Kong, Japan, South Korea, Singapore, Taiwan, Vietnam and Malaysia were closed for holidays.

Mainland China’s financial markets are closed for the Lunar New Year holiday and will resume trade on Monday, Feb 19. Hong Kong trade will resume on Feb 14.

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