Global stocks held steady on Monday as markets braced for a busy week ahead, with U.S. markets closed for a holiday. Chinese equities saw a slight decline after the country’s central bank surprised investors by skipping an anticipated rate cut. The MSCI world stock index also dipped slightly in European trading. This year, the index has fallen about 0.35% following a 20% rally in 2023. China’s CSI 300 index dropped to its lowest level since 2019 but ended the day 0.1% lower, as investors digested the central bank’s decision to leave its medium-term policy rate unchanged.
Investors are preparing for an eventful week, with significant economic data releases scheduled, including Chinese fourth-quarter growth, UK inflation, and U.S. retail sales, all due on Wednesday. Market participants will also pay close attention to central bank officials, especially the Federal Reserve’s Christopher Waller, who is known for his dovish stance. On the other hand, European stock markets experienced a dip, with the STOXX 600 index down 0.3% due to a rise in euro zone bond yields, making stocks less appealing.
Traders are anticipating rate cuts from the Federal Reserve this year, with an 80% probability of cuts starting in March, according to money market pricing. However, recent data on U.S. labor and CPI inflation figures, both showing stronger performance than expected, has led to a disconnection between rate expectations and economic indicators. Some market participants believe that the Fed may need to deliver strong statements to temper the excessive bets on rate cuts.
While U.S. markets were closed, futures for the S&P 500 edged 0.1% lower, and trading in Treasury bonds remained closed as well. Germany’s benchmark 10-year bond yield rose approximately 6 basis points to 2.2% after the European Central Bank’s chief economist warned against too fast of a rate cut, suggesting it may hamper economic goals.
Meanwhile, Japanese stocks continued to perform well, with the Nikkei 225 index reaching a new 34-year high above 36,000. The market has been supported by a decrease in the yen’s value and declining U.S. bond yields in recent days.
As the 54th World Economic Forum meeting commences this week in Davos, Switzerland, global politics will be in focus for world leaders and executives. However, financial markets showed limited reaction to Taiwan’s ruling Democratic Progressive Party’s victory over the weekend, a result that didn’t please Beijing.
Furthermore, concerns remain about a potential escalation of the Middle East conflict. In the United States, the Republican Iowa caucus is expected to take place in freezing conditions later today. Oil prices have received some support from disruptions in shipping within the Red Sea. However, doubts about this year’s oil demand have limited the rally, causing Brent crude oil to decrease by 1% to $77.54 a barrel.
Throughout the day, the euro remained stable at $1.095, while the dollar index steadied around 102.5.
In conclusion, global stocks started the week on a steady note, with U.S. markets closed and Chinese equities experiencing a slight decline after the central bank’s decision not to lower rates. Investors are preparing for important economic data releases and closely monitoring central bank officials’ remarks. European stocks dipped due to rising bond yields, Japan’s market continued its upward trajectory, and global political developments will be in focus at the World Economic Forum meeting in Davos. Oil prices received some support, but concerns about demand persist.
