Euronews Business provides a roundup of what to look out for in the markets this week.
ADVERTISEMENTDespite a mixed close in weekly performance, major global stock markets all concluded February on a positive note, buoyed by the tech rally and increasing rate cut expectations from central banks.
Reflecting Wall Street's bullish momentum, the European markets exhibited significant strength, with the Euro Stoxx 50 reaching an all-time high.
March is poised to be a critical month for global market sentiment following the record-breaking performance, as investors eagerly await any hints regarding the rate path from central banks.
This week, market participants will be closely monitoring the European Central Bank's (ECB) rate decision and testimony from the chair of the US Federal Reserve (Fed), Jerome Powell.
Additionally, the Bank of Canada (BOC) is scheduled to conduct its policy meeting. In Asia, China's National People's Congress (NPC) will be eyed as the annual meeting is poised to address key issues such as weak domestic demands and its property crisis.
Key economic data from major economies, including the US non-farm payroll, China's Consumer Price Index (CPI), and Australia’s Gross Domestic Product (GDP), should also be on investors' radar.
Europe
There are doubts about the continuity of the current bullish run in the market unless the ECB signals a dovish stance. Last week, ECB President Christine Lagarde suggested that disinflation would persist but emphasised the need for more evidence before price increases could return to the 2% target level.
The bank is anticipated to maintain the main refinancing rate at 4.5% unchanged and may adopt a less hawkish tone regarding the policy stance. Recent data indicates a decline in inflation in major economies such as Germany, Spain, and France. The Eurozone's preliminary inflation for February dropped to 2.6%, down from 3.8% in the previous month.
The Eurozone will also release the revised fourth-quarter GDP and the final service CPI for February. The GDP growth pointed to economic stagnation in the first read as the regional economy was flat compared with the prior quarter, narrowly avoiding a technical recession, following a negative growth in the third quarter.
In the meantime, the flash CPI for February offered a positive sign as the data returned to expansion for the first time since June 2023. However, any downward reversion may press on sentiment again.
US
Wall Street is seen as a leading indicator for global stock markets, and the ongoing tech-led rally has propelled three benchmark averages to repeatedly refresh their record highs.
This week, Fed Chair Powell is scheduled to testify before key House and Senate committees, marking a pivotal event for the global market. Powell is anticipated to address a re-elevation in inflation for January and potential risks in US banks, which might necessitate an increase in capital requirements. A more hawkish-than-expected stance could disrupt the market rally.
The February non-farm payroll is one of the most influential economic indicators to weigh on the Fed's rate decision. The US labour market remained tight as shown by the job data in January.
The February non-farm payroll is one of the most influential economic indicators to weigh on the Fed's rate decision. The US labour market remained tight as shown by the job data in January.
Consensus expectations suggest a more modest employment growth of 188,000 new jobs in February, with the unemployment rate expected to remain low at 3.7%. This situation tends to exert upward pressure on inflation.
The APAC region
China
A notable trend is that the Chinese stock markets experienced a substantial rebound in February, with the benchmark, the Hang Seng Index up 6% last month. The government's supportive measures seem to be taking effect in bolstering the market sentiment.
However, only a materialised economic improvement can maintain investors' optimism and further lift the regional stock market.
This week, the market's focus will be on China's annual NPC meeting when the government is set to announce more measures to bolster its economic recovery. Being the world's largest consumption country, its policies are critical to driving global market sentiment.
ADVERTISEMENTMoreover, the country is set to release its trade balance and inflation data for February. In 2023, China experienced the first annual decline in exports in seven years, with yearly imports also decreasing by 5.5%, marking the first drop since the pandemic in 2020.
China's encounter with deflation stands in contrast to the inflationary challenges faced by other major economies.
Weakened domestic demand posed a significant challenge for the country due to prolonged Covid lockdowns, as reflected in a fourth consecutive monthly decline in its January Consumer Price Index (CPI) data, down by 0.8% year on year.
The country's consumer price may have returned to growth in February during the Lunar New Year holiday break, potentially fuelling the rebounding momentum in the region. Consensus anticipates inflation to rise by 0.4% in February.
Australia
The Australian stock markets tracked Wall Street's rally, hitting a record high in February. The ASX 200 closed above 7,700 for the first time on record. The Australian stock markets tracked Wall Street's rally, hitting a record high in February.
ADVERTISEMENTThe ASX 200 closed above 7,700 for the first time on record. The latest inflation data came in cooler than expected, strengthening the odds for the Reserve Bank of Australia (RBA) to bring forward its rate-cut cycle.
The country will release its fourth-quarter GDP this week, gauging its economic trajectory. Australia’s economic growth saw a slowdown in the third quarter, up 0.2% sequentially, much cooler than an expected 0.4% increase. "Bad news is good news" as slowing down economic growth may prompt the Reserve Bank to start a rate-cut cycle sooner.
Canada
The Bank of Canada (BOC) is going to hold its policy meeting this week, giving outlooks of the Canadian economy and providing guidance for its further interest rate path.
Spontaneously with other central banks, the BOC paused raising its interest rate for the last four consecutive meetings.
It is widely expected that it will keep the rate on hold at 5% this week, especially as inflation cooled to 2.9% in January from the peak of 8% in 2022.
ADVERTISEMENTHowever, upward pressure persisted in shelter prices and rentals, which may delay the initiation of a rate cut by the BOC.
