European Shares Rise, Asian Markets Remain Quiet on Holiday
Shares in Europe saw gains on Monday, while most Asian markets remained closed for holidays. Germany's DAX rose 0.4% to 16,990.02, the CAC 40 in Paris also increased by 0.4% to reach 7,676.03, and Britain's FTSE 100 remained nearly unchanged at 7,570.41. However, futures indicate a flat performance for the S&P 500, while the Dow Jones Industrial Average experienced a slight decline of 0.1%.
In Asia, Australia's S&P/ASX 200 fell 0.4% to 7,614.90, and the Sensex in India lost 0.6% to 71,159.98. The SET in Thailand saw a marginal gain of less than 0.1%, while Jakarta's benchmark index gained 0.9% ahead of an upcoming election scheduled for Wednesday. With mainland Chinese markets closed for the week due to the Lunar New Year holiday and Tokyo's markets closed for a one-day holiday on Monday, there was a lack of significant market-moving news in the region.
This week, investors will be closely following the release of important updates, including consumer inflation expectations from the United States and Japan's GDP growth for the final quarter of 2023. Regarding the U.S. price data and its potential impact on monetary policy, Stephen Innes of SPI Asset Management highlighted that it may not have a significant effect. He mentioned, 'However, the good news is that U.S. inflation probably decreased at the beginning of the year, reinforcing expectations that the Federal Reserve may consider interest rate cuts in the coming months.'
On Friday, the S&P 500 closed above the milestone level of 5,000 for the first time, reaching 5,026.61, and marking its 10th record in less than a month. The Nasdaq composite also jumped 1.2% and came within 0.4% of its all-time high set in 2021, closing at 15,990.66. The Dow Jones Industrial Average, however, slipped 0.1% to 38,749 after setting a record the day prior.
The ongoing rally on Wall Street has been fueled by hopes of cooling inflation leading to potential interest rate cuts by the Federal Reserve. Big Tech stocks exerted strong upward pressure on the market on Friday, with companies like Nvidia, Microsoft, and Amazon leading the charge. Cloudflare, a cloud-services company, also reported stronger profits than analysts expected for its latest quarter, causing its stock to surge by 19.5%. Despite the overall challenging economic environment, the company announced signing its largest new customer and largest renewal ever.
While profits for major companies in the S&P 500 have exceeded expectations for this reporting season, some contrarians warn that optimism may have driven stocks to overvalued levels. Bank of America's contrarian measure, which tracks market sentiment, is leaning more towards a 'sell' indication compared to a 'buy' signal. This measure examines the levels of fear and greed in the market and previously suggested buying in October when fear was notably high.
In other markets, U.S. benchmark crude oil lost 51 cents to $76.33 per barrel on the New York Mercantile Exchange, following a 62 cent gain on Friday. Meanwhile, Brent crude, the international standard, saw a decrease of 52 cents to $81.67 per barrel. The U.S. dollar also experienced a slight decline against the Japanese yen, falling from 149.28 yen to 149.10 yen. Likewise, the euro dipped from $1.0784 to $1.0775.
Overall, as European shares advanced and Asian markets remained quiet due to holidays, investors eagerly await key updates, particularly on U.S. consumer inflation expectations and Japan's GDP growth. While Wall Street continues to rally, concerns about overvaluation persist, prompting caution among some market observers.
