Global markets were mixed on Monday, with U.S. futures struggling for the direction of holiday trading ahead of another round of busy economic data.
Futures tied to the S&P 500 edged down 0.1%, as did those tied to the Dow Jones Industrial Average. Contracts linked to the technology-focused Nasdaq-100 added 0.1%. US stock and government bond markets are closed on Monday to mark Presidents Day.
Chinese markets led the global gains, while European indices were subdued.
This week’s data could give an indication of whether US inflation is stable in the near future and whether economic growth is holding up – two crucial questions for investors as they try to assess the policy outlook. the central bank and corporate profits.
“There’s this new narrative that we’ll see a pause in inflation before it comes down,” said Edward Park, chief investment officer at UK investment firm Brooks Macdonald. “The more rigid the inflation, the tougher the Federal Reserve will have to be.”
Stocks could be weighed down by growing worries about U.S. rate hikes, said Mark Matthews, head of Asia research at Julius Baer.
“The market could be sensitive to a small panic attack,” Mr. Matthews said. Given the strength of the U.S. economy, the concern is that inflation could decline at a slower pace than expected, he added.
Last week, two Fed officials said they backed a larger rate hike at the central bank’s February meeting than the quarter-percentage-point hike implemented by the Fed, and two sets of inflation data were also hotter than expected. The minutes of this Fed meeting are expected to be released on Wednesday.
S&P Global’s monthly surveys of the manufacturing and services sectors around the world are due on Tuesday. And the Commerce Department will release its Personal Consumption Expenditures Price Index on Friday, a gauge of inflation closely watched by the Fed. Another measure, the consumer price index, showed that annual inflation fell slightly in January, although the pace of moderation stabilized.
This week will also bring quarterly results from major companies such as Walmart, Home Depot and Chinese tech giant Alibaba.
In Europe, the pancontinental Stoxx Europe 600 index gained 0.2% on Monday.
In Asia, China’s broad CSI 300 index closed up 2.5%, its biggest one-day gain this year. The Shanghai Composite Index gained 2.1% and the Hong Kong Hang Seng Index rose 0.8%.
The gains came after China’s central bank said lenders had kept the country’s benchmark lending rates unchanged, as the world’s second-largest economy showed more signs of recovery from its Covid reopening.
In a report on Monday, Goldman Sachs expects the MSCI China index to rise 24% from current levels by the end of the year as the country returns to growth. “Covid is arguably in the rearview mirror now in China,” wrote analysts at the US bank.
Diplomatic tensions between the United States and China are rising again, with top officials in Beijing and Washington trading barbs over the downed Chinese balloon amid tense public speeches and a secret meeting on Saturday.
“It’s just become more apparent that those tensions haven’t gone away,” said Kerry Craig, Melbourne-based global market strategist at JP Morgan Asset Management. “You just can’t walk away from geopolitics as an investor these days.”
Still, Craig said China’s economic growth potential, consumer-driven demand and attractive valuations still outweigh lingering geopolitical concerns.
In India, the S&P BSE Sensex index lost 0.5%, putting it in negative territory for 2023. Shares of most businesses linked to billionaire Gautam Adani fell, with his conglomerate flagship Adani Enterprises falling nearly 6%.
Nearly a month ago, US short seller Hindenburg Research released a report alleging that the Adani Group had, among other things, manipulated stock prices. The report sparked a sale of more than $100 billion in shares bearing Adani’s name. The conglomerate denied the allegations.
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