European and Asian Markets React to Record Wall Street Rally

European stock markets see gains, driven by a tech-driven rally on Wall Street.

European stock markets experienced gains on Monday, buoyed by a record-breaking tech-driven rally on Wall Street before the weekend. Investors, however, remained cautious amid mixed performance in Asian markets.

Oil prices rebounded, recovering from recent losses attributed to simmering tensions in the Middle East. The International Energy Agency’s downward revision of its demand growth forecast also influenced the fluctuating oil market.

The dollar strengthened against the euro but weakened against the yen as market participants deliberated on the future of US interest rates.

Joshua Mahony, Chief Market Analyst at trading firm Scope Markets, highlighted the optimism surrounding US earnings as a driving force behind the rise in European indices. The surge in tech giants such as Apple, Amazon, Nvidia, and Meta on Wall Street contributed to the S&P 500 reaching its first new all-time high since early 2022, fueled by expectations of lower borrowing costs in the coming year.

However, analysts cautioned that market expectations of up to six rate cuts by the Federal Reserve before December might be overly optimistic. Recent data revealed persistent inflation above the central bank’s target and a resilient job market despite borrowing costs at two-decade highs.

Minutes from the Fed’s recent meeting indicated a preference for maintaining tight monetary policy until inflation is deemed under control. San Francisco Fed boss Mary Daly suggested it was too early for a move, while Atlanta Fed chief Raphael Bostic and Chicago counterpart Austan Goolsbee emphasized that decisions hinged on data.

The likelihood of a rate reduction before the end of the first quarter dipped below 50% last week, down from over 80% the previous week, according to Bloomberg News.

In Asia, Tokyo continued its strong start to the year, propelled by a weaker yen and rising Japanese inflation. Traders awaited the Bank of Japan’s policy decision later in the week. Sydney, Taipei, Manila, and Wellington also experienced gains.

Conversely, Shanghai and Hong Kong faced challenges as they grappled with the ongoing weakness in China’s economy and a lack of growth-stimulating measures. The markets remained under pressure as the new year unfolded.

Source:AFP