The global stock market has been on a steady rise over the past few weeks, with European stocks opening higher on Monday and world equities reaching their highest levels in more than two years. Investors are eagerly awaiting U.S. inflation data scheduled for release later this week, as it is expected to provide insights into the U.S. Federal Reserve’s plans regarding interest rate cuts. Although U.S. Treasury yields have recently increased, market analysts believe that the equity market remains relatively strong due to solid economic growth, especially in the tech industry.
Market sentiment has changed recently, with investors now dialing back their expectations for rate cuts. According to UBS multi-asset strategist Kiran Ganesh, markets are now pricing in fewer than five rate cuts in the U.S. this year, down from the initial six or seven at the beginning of 2022. This shift in expectations can be attributed to robust economic growth, which has positively influenced equity markets. Strong U.S. jobs data from February has also led to a reduced likelihood of a rate cut during the next Fed meeting, with a market probability of 84.5% for rates to remain unchanged in March.
The MSCI world equity index, which tracks shares from 47 countries, remained flat during the trading session, having reached its highest levels since January 2022 earlier in the day. The pan-European STOXX 600 saw a 0.3% increase, with a consistent performance in February following a 1.4% gain in January. The FTSE 100 in London and Germany’s DAX remained relatively unchanged, while experts predicted a potential period of consolidation in the coming weeks or months due to the concentration of the equity rally in a few names, driven by excitement around artificial intelligence and its positive impact on tech stocks.
The U.S. dollar index edged up by approximately 0.1% to 104.130, while the euro experienced a slight decrease to $1.0774 from a previous 10-day high earlier in the session. The Japanese yen, which had weakened as a result of reduced U.S. rate cut expectations, remained steady at 149.190 per dollar. Investors have also adjusted their predictions for rate cuts by the European Central Bank (ECB) after two ECB policymakers stated that the bank required more evidence of inflation easing before implementing rate cuts.
Oil prices experienced a decline after Israel announced the conclusion of a series of strikes in southern Gaza, easing concerns about the supply of oil from the Middle East. Brent crude futures dropped by 0.5% to $81.82 per barrel, and West Texas Intermediate crude futures fell by the same percentage to $76.46 per barrel. Gold prices, on the other hand, remained relatively stable with a slight decrease to $2,022.6 per ounce XAU=.
As most major Asian markets were closed for holidays, a relatively quiet day in the global market was expected. Investors are eagerly awaiting U.S. inflation data, British inflation figures, and euro zone GDP later in the week to gain further insight into the future of global equities. Despite a decrease in rate cut expectations, the equity market remains resilient due to strong economic growth, particularly fueled by advancements in artificial intelligence. Nevertheless, market experts predict a potential period of consolidation in the coming weeks or months as the market recalibrates. The global stock market remains unpredictable, influenced by various factors, including geopolitical events and policy decisions by central banks.
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