European stocks followed a downward trend, mirroring declines in Asian markets, as optimism over China’s recent stimulus pledge waned. The Stoxx Europe 600 index ended an eight-day streak of gains, dragged down by losses in basic resources and consumer products. This shift followed China’s promise of looser policies in 2025, which had initially buoyed market sentiment.
Asian equities also slid, with China’s benchmark stock index erasing most of its early gains. US index futures were slightly lower after the S&P 500 slipped from overbought levels seen earlier in the week.
Traders are now awaiting critical economic data, including the US Consumer Price Index (CPI) report on Wednesday, which will provide key insights ahead of the Federal Reserve’s policy meeting next week. Analysts are particularly focused on inflation trends, as any signs of stagnation could diminish the likelihood of a third consecutive rate cut.
Michael Brown, Senior Research Strategist at Pepperstone Group, highlighted the anticipation surrounding the CPI report: “A quiet docket awaits today, as participants continue to look ahead to tomorrow’s all-important US CPI report. I’d still be a dip buyer of equities, given the continuing bull case of strong earnings growth, solid economic growth, and the ‘Fed put’ backstopping sentiment.”
In the bond market, the US Treasury 10-year yield rose one basis point to 4.21%, while the Bloomberg Dollar Spot Index showed little movement.
Meanwhile, on Thursday, the European Central Bank (ECB) is expected to cut interest rates for the fourth time this year, as economic conditions in the eurozone deteriorate, compounded by political instability in France and Germany.
In China, President Xi Jinping’s Politburo signaled a shift to a “moderately loose” monetary policy for 2025, marking a departure from the “prudent” stance held for nearly 14 years. The move is expected to include further rate cuts aimed at stimulating consumer demand and addressing challenges in the Chinese economy. Fund manager Burns McKinney of NFJ Investment Group emphasized the importance of targeting consumer growth: “If they can do that, then they can really harness a burgeoning and growing middle class in China.”
In market movements, shares in China and Hong Kong retraced some of their earlier gains as investors awaited more details on the stimulus package and reflected on the bullish bets made last week.
Commodities saw mixed results, with gold prices receiving support from China’s central bank adding bullion to its reserves for the first time in seven months, alongside heightened demand for safe-haven assets due to ongoing geopolitical tensions in the Middle East. On the other hand, crude oil prices slipped, as uncertainty in the region continued to weigh on market sentiment.
Key Economic Events This Week:
- US CPI report, Wednesday
- Canada interest rate decision, Wednesday
- ECB rate decision, Thursday
- US initial jobless claims and PPI, Thursday
- Eurozone industrial production data, Friday
Market Moves:
- The Stoxx Europe 600 fell 0.2% as of 8:10 a.m. London time
- US S&P 500 futures were little changed
- Nasdaq 100 futures dropped 0.1%
- Dow Jones Industrial Average futures showed little movement
- The MSCI Asia Pacific Index declined 0.3%
- The MSCI Emerging Markets Index slipped 0.2%
Currency and Commodity Movements:
- The Bloomberg Dollar Spot Index showed little change
- The euro held steady at $1.0547
- The Japanese yen fell 0.3% to 151.71 per dollar
- The offshore yuan rose 0.2% to 7.2532 per dollar
- The British pound remained unchanged at $1.2744
Cryptocurrency Prices:
- Bitcoin rose 0.2% to $97,108.4
- Ether climbed 0.6% to $3,722.21
Bond Yields:
- The yield on 10-year US Treasuries increased one basis point to 4.21%
- Germany’s 10-year yield rose two basis points to 2.14%
- The UK’s 10-year yield advanced three basis points to 4.30%
Commodities:
- Brent crude fell 0.3% to $71.90 per barrel
- Spot gold rose 0.2% to $2,665.27 per ounce
Related topic:
What Are Bond Futures? [Revealed]
