Global markets were mixed on Monday, with US futures struggling to provide direction for holiday trading ahead of another busy series of economic data.
Futures linked to the S&P 500 fell 0.1%, as did those linked to the Dow Jones Industrial Average. Contracts tied to the tech-focused Nasdaq-100 added 0.1%. The US stock and government bond markets are closed Monday for Presidents Day.
Chinese markets led global gains, while European indices were subdued.
Data from this week could provide an indication of how stubborn US inflation is likely to remain for the foreseeable future and how economic growth will hold up – two critical questions for investors scrutinizing the outlook for central bank policy and corporate earnings to judge.
“There is a new narrative that we will see a pause in inflation before it falls,” said Edward Park, chief investment officer at British investment firm Brooks Macdonald. “The stickier inflation is, the tougher the Federal Reserve will have to be.”
Stocks may come under pressure from mounting concerns about US rate hikes, said Mark Matthews, chief research for Asia at Julius Baer.
“The market could be prone to a mild panic attack,” said Matthews. Given the strength of the US economy, there are concerns that inflation could decline more slowly than expected, he added.
Two Fed officials last week said they supported a bigger rate hike than the Fed’s quarter-percentage point hike at the central bank meeting in February, and two sets of inflation data also came in hotter than expected. The minutes of that Fed meeting will be released on Wednesday.
S&P Global’s monthly surveys of manufacturing and services sectors around the world are scheduled for Tuesday. And the Commerce Department will release its personal consumer spending price index on Friday — an inflation gauge closely watched by the Fed. Another measure, the consumer price index, showed that annual inflation cooled slightly in January, although the pace of moderation has leveled off.
This week also includes quarterly results from large companies such as Walmart, Home Depot and the Chinese technology giant Alibaba.
In Europe, the pan-continental Stoxx Europe 600 gained 0.2% on Monday.
In Asia, China’s broad CSI 300 index closed 2.5% higher, the 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 left the country’s benchmark interest rates unchanged as the world’s second-largest economy showed more signs of recovery following Covid’s reopening.
In a report on Monday, Goldman Sachs predicted that the MSCI China index will rise 24% from current levels by the end of the year as the country returns to growth. “Covid is now arguably in the rearview mirror in China,” US bank analysts wrote.
Diplomatic tensions between the US and China are rising again, with senior officials from Beijing and Washington exchanging barbs over the crashed Chinese balloon in a tense atmosphere of public speeches and a secret meeting on Saturday.
“It has only become more apparent that those tensions have not subsided,” said Kerry Craig, Melbourne-based global market strategist at JP Morgan Asset Management. “As an investor, you can no longer escape geopolitics these days.”
Nevertheless, Mr. Craig said China’s potential for economic growth, consumption-driven demand and attractive valuations still outweigh lingering geopolitical concerns.
In India, the S&P BSE Sensex Index lost 0.5%, entering negative territory for 2023. companies linked to billionaire Gautam Adani pulled out, with his conglomerate’s flagship Adani Enterprises falling nearly 6%.
Almost a month ago, the American shortseller Hindenburg Research released a report claiming that the Adani Group had manipulated stock prices, among other things. The report sparked a sell-off of more than $100 billion in stocks named Adani. The conglomerate has denied the claims.
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